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Shop til' you Pop: Amazon's Electric Avenue

27 June 2019. Published by Simon Edwards, Partner and Rachael Ellis, Associate and Lucy Baughan, Trainee Solicitor

Amazon is opening 10 pop-up shops in the UK, as a platform for over 100 small online brands to start selling via bricks and mortar. The pilot will run throughout the UK for around a year, with each pop-up opening for between six to eight weeks.

Amazon has pushed to increase its physical retail presence over the past few years;

  • 2015 - launches high street book stores, Amazon Books, in Seattle
  • 2016 – launches Amazon Go, its automated grocery stores, in the US
  • 2017 - acquires Whole Foods

Like Amazon, more and more online-focused brands are moving into bricks and mortar. Amazon calls this its "clicks and bricks" strategy. Analysts suggest brands are recognising that shoppers won't exclusively shop online or in-store and that most "marry the best of both worlds". A physical space will give the brand the chance for consumers to engage with them in a whole new way.  

In May, eBay launched a pop-up shop to help evaluate how physical stores can influence online sales. Previous studies have indicated that the effects are positive; when a brand opens a new physical store, its web traffic also increases. Similarly, though, web traffic decreases with store closures.

Of course, Amazon isn't short of online traffic and the move is positioned, in part, as one aimed at helping to boost the UK highstreet. Amazon will provide the UK government with access to the results of its pilot to help the government spearhead new strategies. It is no surprise that Amazon seems minded to work with the government on the issue as the government has previously indicated a willingness to target large online retailers to 'level the playing field'. See the once-proposed 'platform tax'.  

The pop-up model offers smaller online brands a unique bricks and mortar opportunity: a ready-to-go physical infrastructure/fit-out, a high-profile platform to attract traffic (when the 'host' is someone like Amazon) and limited or no need for the brand to deal direct with landlords. A regular change in brands should keep the locations exciting and brands will no doubt look to up the excitement with experiential elements like interactive/digital displays and new service offerings; a number of brands are starting to do rentals and in-store advisory or co-working spaces.

From a legal perspective, the turnover in brands and shifting use of the retail space bring their own challenges:

  • hosts like Amazon will need flexibility in their contract terms with the brands, particularly if they are a fledging or start-up or if the host wants to be able to readily change the space/move direction;
  • landlords may need to provide more flexible terms to accommodate brands, especially if they want to fill empty spaces left as a result of the high street downturn. Special licences or approvals may be needed for certain space uses (like a bar) or longer opening times, for example; and
  • if the host is providing back-end networks and fit-out, it will need to think about how this is dealt with in the contract with the brand, particularly in relation to the apportionment of liability.

As more brands look to maximise the value in combining an online and physical presence, we expect to see more online giants entering the high street, offering new physical platforms but with the challenge of creating workable legal frameworks.