Small Space, Big Business

Kiosks and carts allow retailers to test new waters, with a modicum of space and a minimum of risk.

By Eliza Gallo -- Gifts & Decorative Accessories, 11/1/2000

As a retailer, you probably tend to think of a store as a thing with a front door, walls, and a sturdy permanent presence. But there are gift stores that operate in spaces smaller than your storeroom, in areas that you might never have noticed. There, in mall concourses, airports, theme parks, resort areas, museums, casinos, zoos, and colleges, enterprising retailers are doing business from kiosks and pushcarts.

The Lure of the Cart

Carts and kiosks have a number of advantages that can make them a positive addition to a retailer's business, whether they are operated on a seasonal or year-round basis. "During the Christmas season, if you're in a mall and you're selling a hot product, you're going to make a lot of money," said Maria Scarfone, associate publisher of kiosk trade magazine the Specialty Retail Report. "The advantage is that you don't have a three-year lease; so you can go in and do well, and if the merchandise stops selling after the holiday, you can pull out. You can try new products this way." Unlike retailers with permanent stores, cart and kiosk retailers don't have to invest a lot of money in inventory and fixtures. Scarfone noted, "You're not going to lose a whole lot if you bomb." Jeffrey Morris, president of Columbus, Ohio-based cart and kiosk producer All A Cart Manufacturing Inc., added: "It's a fast, inexpensive way to expand..Compared with the construction costs involved in either taking a storefront and converting, or putting up a freestanding building, it's a fraction of the cost."

Janet Mayer, chairman of Winterset, Iowa-based manufacturer Merchandising Frontiers Inc., pointed out that kiosks offer a low-cost way to test new locations or boost seasonal sales. She noted that a cart or kiosk can be used to set up an "intercept point," drawing in customers who would not ordinarily see the retailer's merchandise. Mayer added that these mini stores are well suited to wares that are small or require one-on-one sales presentation. A kiosk can also be used to fill a need in a marketplace, to showcase a seasonal product during its peak selling period, or to do a special promotion linked with the permanent store. Frank Blumer, CEO of Los Angeles-based kiosk retailer and wholesaler American Home Products, noted, "Another main point is that you don't have to have so many employees."

How much does a retailer stand to gain by opening a cart or kiosk? Obviously, gross income varies according to the season, the venue, and, of course, the product being sold. However, Scarfone offered, "I can certainly say that, during the Christmas season, $150,000 is not unusual." Blumer, whose company at one time had 60 kiosks but now maintains just one (at Universal CityWalk in Universal City), commented: "For someone who's very knowledgeable and does a very conscientious job, the average income would be between $100,000 and $250,000. For someone that's not., you could lose money. I will say this, though: It's pretty hard to lose money."

The Price of Entry

Of course, while they are less expensive than full-on stores, kiosks and carts are not free. How much they cost depends on how they are obtained. Most retailers lease their carts or kiosks from the mall centers. According to Scarfone, a mall might charge a monthly rent of anywhere from $400 to $2,000, depending on the location and size of the cart or kiosk. Blumer said that most malls charge a monthly rent plus 15 percent of the kiosk's gross sales. The amount of the monthly rent is likely to vary according to the time of year. "Most malls have one rate January through October, and then November and December they have a much, much higher rate," Blumer noted. He conservatively estimated the average rent for January through October at $1,500 per month, and the average rent for November and December at anywhere from $10,000 to $20,000 for two months.

Other retailers obtain their carts through companies that offer "turnkey packages"; this term encompasses a variety of different options, including straight franchise operations, owner-operator arrangements, and deals that offer the retailer wholesale product with a bit of merchandising advice on the side. Since the distinctions between the different types of deals can be very subtle, it's best to investigate each option thoroughly, consulting a lawyer or financial advisor if possible. The costs for turnkey packages also vary widely.

In some cases, retailers do purchase their own carts or kiosks, without going through a turnkey company or a mall. However, those carts and kiosks must still be approved by the management of the venue. "Typically, if a retailer supplies his or her own unit, it must conform to the center's design criteria for kiosks," explained Mayer. Pending the mall's approval, a retailer can select from an infinite variety of models, both prefabricated and custom-built-everything from an old-fashioned wooden pushcart to an elegant kiosk with glass display cases to a kiosk shaped like a New York taxicab. Jerry Rosenthal, president of Jahabow Industries in Owensville, Missouri, said that his company's retail kiosks range in price from $10,000 to $50,000, with an average price range of $15,000 to $30,000. Most of the Jahabow kiosks have a basic rectangular "bullpen" configuration, although each one is different. "I would say they're all custom-designed, because there's a unique requirement by every retailer," Rosenthal said. Merchandising Frontiers' wagon-wheeled pushcarts start at $4,800, its retail merchandising units (kiosks without a walk-in area) go for $8,000 to $12,000, and its walk-in kiosks go up from there. All A Cart Manufacturing's kiosks are all custom-built to the client's specifications, and range in price from $3,000 to $30,000.

According to Scarfone, the cart and kiosk business is accelerating: "They're just everywhere that leasing people can fit them now, because they're just so profitable, not only for the centers that they're in, but also for the retailers." She said that, at the moment, the top merchandise categories for carts and kiosks are: calendars, which "are huge during the Christmas season"; sterling silver items; candles; and teen and tween merchandise, which "is very big now."

Whatever product you decide to carry, it's important to approach the kiosk business with an informed mind and a solid business plan. "It's not the hardest thing to do in the world, but you have to do your research," Scarfone advised. "You can't just go up to a mall manager and say, 'I want to sell jewelry at a cart,' and expect him to hand you a cart. You definitely have to do your homework."