Business

Rise of the small boxes

FRISCO, Texas — They are one of the most lucrative sectors in the retail industry, generating billions of dollars in sales, and arguably are the most underpublicized: the kiosks and carts that dot the aisles of big shopping malls, selling everything from candles to computers.

These freestanding merchants are tremendously popular — Tillie Martinez says she sometimes has customers lining up 10 and 12 deep to buy her personalized Christmas ornaments at Stonebriar Centre mall north of Dallas. And while she sells just a few months a year, she has a loyal following.

“The fun part is getting the repeat business from someone who last year bought something for their baby’s first Christmas,” she said.

Carts and kiosks are a thriving industry, bringing in an estimated $10 billion in annual sales for the merchants and landlords, more than triple that of 10 years ago, industry analysts said.

Marshal Cohen, senior industry analyst at NPD Group Inc., a market research company based in Port Washington, N.Y., said the kiosks are changing mall dynamics.

“Kiosks are a huge opportunity for the mall, the entrepreneur and the individual consumer. It removes one of biggest barriers and that’s the entrance and walls to the stores,” he said.

“The mall owners tell you they are trying to enhance the consumers’ shopping, but they are trying to maximize square footage as best they can, no question about it,” he said.

The kiosk concept relies on nostalgia for some of their appeal, allowing shoppers to revisit long-gone marketplaces where push cart merchants sold their wares, spending time face-to-face with each customer. But behind the sentiment is solid business strategy — some of the merchants are small businesses looking to expand or try out new ideas, while others are Fortune 500 companies looking to strengthen their foothold in a national market.

Some kiosks and carts are operated throughout the year, but at this time of the year, there’s a population explosion of these merchants at malls. Hickory Farms, the Maumee, Ohio-based company known for its sausages and cheese, goes from one year-round store to 542 kiosks plus another 176 stores for the holidays.

Martinez opened her 4-foot-by-6-foot cart in October — one month earlier than last year — and is running it seven days a week until Christmas. She relies on her SUV for office and inventory space, while her cart is stocked with items priced from $9.95 to $21.95. Through November, she was $6,000 ahead of last year’s pace.

For Austin-based Despair Inc., which posted $4 million in online sales of posters and calendars with pessimistic sayings, the carts are a source of additional revenue and exposure. Co-founders Lawrence Kersten, and brothers Jef and Justin Sewell agreed to have their father Doug Sewell start a separate company, the Sewell Group, to oversee the cart business.

Now in its first year in malls, the company opened three carts in San Antonio malls and four in Dallas centers.

“We also know there are people who were finding our product in a mall that weren’t finding us online,” Kersten said.

Dell Inc., the world’s largest PC maker, was sold on the idea of kiosks after it first tested locations in late 2001. Customers can look at and test Dell’s latest offerings and deals, then place an order for delivery.

First, the Austin company opened two, one each in Tennessee and Texas. This year, Dell said it has expanded its kiosk business by 58 percent, going from 85 locations in 11 states to 145 locations in 20.

Mall operators make most of their money from kiosk and cart rentals during November and December, collecting up to three times more monthly lease fees than during any of the first 10 months. Eight-week holiday leasing ranges from $5,000 to $25,000, depending on the market, said Patricia Norins, retail consultant who publishes a specialty retail magazine in Hanover, Mass.

“These carts are moving the needle to the mall’s bottom line,” she said. “For a while it was some nice extra money. Now, there is a lot of pressure to grow that business.”

Each year, malls look to bring in new cart and kiosk merchants, but must be selective in what businesses set up shop. Those that complement rather than compete head-to-head with existing stores generally are a mall’s first choice. They want the familiar items as well as those fad-driven choices like the 10-foot long zipper that, when zipped, becomes a pocketbook.

“When something is hip or hot, you might see it first in the common areas before it hits the larger inline stores,” said Melinda Holland, senior vice president for business development for General Growth Properties Inc., owner of Stonebriar Centre.

Sometimes that item goes bust, however. Just ask Martinez who tried selling fuzzy slippers during the winter of 1999. She was left donating more than $20,000 worth of the shoes to charity.



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