The Bread Bin in High Street has been converted into two units which will be rented out on a short-term basis to traders.
Owner Sarah Smith is closing her business at the end of the year and hopes dividing the shop will stop it from remaining vacant for long periods.
She said: “A boarded-up shop doesn’t look good on the high street so we thought we would give traders the opportunity to try out their ideas at a very competitive rate with little commitment.
“It will be nice to have something a little bit different and it might encourage people to come into the town more. It is a very popular concept in London and there are a lot of pop-up shops around the Christmas period.”
The units will be available to rent for a minimum of two weeks and Miss Smith has submitted a planning application so they can be used for a wide variety of purposes.
She has already received several bookings and the smaller unit has been booked by a barber for six months from November 5. Miss Smith, who has run the Bread Bin for six years, will continue to sell drinks and cakes until December but says the time is right to move on.
“There is just not enough footfall in the town,” she said. “The cost of running the business is rising and we are a cheap product so we need a high turnover to make any money.
“It is a shame but we have put almost every bit of profit into the shop and we have to call it a day. It is better to close down than to go under.”
Miss Smith, of Spring Lane, said she believed the high street had been suffering “a slow, painful death” for some time.
“There is nobody coming into the town,” she said. “It is not easy to park and there is less and less here so people are coming less often, particularly as we are close to towns like Henley, Wallingford, Thame and Oxford, which have a lot to offer.”
Councillor Ian Hill, chairman of Watlington Parish Council, said: “I am very pleased that somebody is trying to do something different and bring more choice into the town.
“I was concerned about the shop sitting empty because that wouldn’t do the town or the owner any good so to have something that will attract interest and hopefully bring new people to the town is a good idea.” Cllr Hill suggested that there could be a pop-up shop aimed at visitors.
Penny Cole, of the Chiltern Partnership, said she had “absolutely no problem” with the concept.
In a letter to South Oxfordshire District Council, she said: “Anything that keeps high streets trading is good and sometimes changes are very necessary.”
Simon Jones, chairman of Watlington Business Association and director of auctioneers Jones & Jacob, said: “We don’t want empty shops but the success of the pop-up shops will depend on what pops up, how long it stays and so on and so forth.”
The district council is expected to make a decision by November 25.