Online brands tap customer data to create pop-up shops

Online brands tap customer data to create pop-up shops
When Maria Peevey opened a pop-up shop for her women’s-apparel company two years ago, she put it right where her potential customers liked to shop, and she stocked it with exactly the products they liked to buy.

She could do all that because her company, the Reset, is a digitally native retailer — one without a permanent physical outlet. As an online shop, it collects tons of data about shoppers, which Ms. Peevey scrutinized and then leveraged in opening her pop-up, or temporary real-world store that often stays open only for several months. Other businesses may keep them open for only weeks or days.

Ms. Peevey used a combination of data, including ZIP Codes and sales data, to determine which section of San Francisco was the most popular with shoppers. She analyzed sales data of top-performing styles, colors and complete outfits to know what to put on the shelves—more luxe wool midlength coats, pullover sweaters and silk collar tops, for instance.

In all, Ms. Peevey opened five pop-ups last year and six in 2019. Depending on lease agreements, the pop-ups lasted anywhere from four to 12 months.

“As a digitally native brand,” Ms. Peevey says, “data drives everything we do.” The numbers game It is a strategy spreading quickly across digitally native, also known as online-first, brands. As they look to broaden their customer base with pop-ups, they are using the data they get from customers—age, location and purchasing history, for instance—to focus their efforts and give themselves the best shot at strong sales.

The plunge into data-driven pop-ups comes while both digitally native brands and pop-ups are seeing strong growth and many established real-world retailers are struggling with higher operating costs and declining sales.

Digitally native brands pulled in an estimated $27.1 billion in revenue this year, compared with $22.6 billion in 2018, according to Forrester, and represent 4% of all online sales. Meanwhile, analysts say pop-ups are becoming an increasingly important part of the $3.8 trillion U.S. retail scene.

Pop-up shops are “absolutely” a force to be reckoned with among less nimble, larger brands, says Marshal Cohen, chief industry analyst at NPD Group, because they allow brands to experiment with concepts quickly and build closer connections to customers with personalized service.

“This is going to be an integral part of the future,” he says. And in this environment, “digitally native brands have the advantage about having a keen sense of their consumer base, with a keen focus on connectivity.”

While many real-world retailers also collect and analyze lots of data about their customers, digitally native brands can take special advantage of that information. Because they aren’t encumbered by permanent bricks-and-mortar operations, they can use customer data to figure out the best time and place to set up a real-world presence—and then close within a few days or weeks before losing profitability.

For instance, digitally native brands are able to focus their shops on groups as precisely as “women over 40 in certain Chicago neighborhoods [who] spend the most on high-end cat food,” says Jessica Valenzuela, co-founder of GoGoGuest, which helps retailers track and analyze customer information.

Unlike regular real-world stores, these pop-up operators don’t have to worry about appealing to a wide audience to maximize revenue and cover their overhead—or be concerned that the demographics or tastes of an area will change, wrecking their sales. The shops are built to appeal to a narrow audience for a short window of time, and along the way introduce more customers to the brand and gather more information about their likes and dislikes. All of which, in theory, helps boost the brand’s main sales outlet: its website. Listening to customers When Leesa, an online mattress retailer in Virginia Beach, Va., launched its first pop-up in 2014, the decision was heavily influenced by customer data. The company ran polls asking questions such as, “What are your barriers to purchase today?” and discovered that 55% of customers wanted to try a mattress in-store before purchasing—hence the need for a real-world store.

The choice of location—New York City, home to many of the company’s customers— was also data driven, as were other features of the store. Customers were telling Leesa online that they wanted more of a social component to their shopping, so the company committed to donating one mattress to homeless shelters for every 10 sold at the pop-up, among other things. The store also featured art that was created by homeless people.

Meanwhile, as with many other digitally native retailers, Leesa gathered data from the pop-up to hone its web operation. After the company tested a few different mattress covers in the pop-up, for instance, customers told in-store employees and reported in online surveys that they wanted a cover with more organic material. So, Leesa introduced a cover online, as well as the real-world store, made of merino wool and recycled water bottles. (The company also made the pop-up, Dream Gallery, permanent after a few months.)

Data was also crucial to Pet Plate, a digitally native brand of homemade dog foods, which participated in a pop-up in New York last year. It chose to take part in the event—called Dogville—after learning New York was its second-largest market, and that new customers were most likely to discover the brand at a pop-up. The organizers of Dogville, meanwhile, checked social media each day of the event to adjust their own special offerings on-site: Dogville co-founder and CEO Matana LePlae had a hunch that the agility course—including a tube, ramps and hurdles—wouldn’t be as popular when the trainer wasn’t on-site. But she found that people posted “a lot around the agility course,” and her company decided to leave it up full time.

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Like Leesa, businesses at the pop-up used data to tweak offerings. Pet Plate introduced a chicken-apple-sausage bite at the pop-up, and it was such a hit that the company started offering it online, says CEO Gertrude Allen.

The result of the efforts at Dogville: Websites owned by Dogville’s partners saw a surge in the rate at which visitors bought a product, in some cases by 250%, Ms. LePlae says.
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