Revved-Up Retail

Big Bucks, Small Footprint

In 2004, Richard Marston, 32, and his business partner, Gerel Ransfer, 43, took over a Southern California Color Me Beautiful kiosk with a $5,000 investment and confidence that the makeup would sell if marketed properly. A little more than two years later, Marston--who handles the day-to-day operations of the business--now has two kiosks and more than 2,000 customers, 40 percent of whom are regulars.

What sets Marston apart from many kiosk owners is his willingness to approach customers and actively demonstrate his products. He also operates his kiosks year-round, while most other kiosk owners only operate during the busy two-month holiday season, when 80 percent of kiosk sales occur.

"Opening a cart [or kiosk] is a fabu-lous way to get started and open your first business," says Patricia Norins, author of the Ultimate Guide to Specialty Retail: How to Start a Cart, Kiosk or Store, and publisher of the industry's trade journal, Specialty Retail Report. "It's low risk, and you're not locked into a long-term lease," since carts and kiosks are typically rented on a month-to-month basis.

The only major downside is the long hours--kiosks must be open whenever the mall is. Twelve-hour days are typical, although Marston works 16--from 5 a.m. to midnight most days. To staff his two locations, he has eight employees.

The upside, of course, is the money. Norins has seen kiosks make as much as $15,000 during non-holiday months, while the eight weeks of the holiday season have generated more than $120,000 for some businesses.

Marston's business is beating those numbers. In 2005, his two kiosks generated $350,000, and he projects sales of $500,000 in 2006.

As with other retail businesses, find-ing a product or industry you love is critical. According to Norins, products that typically sell the best in a cart or kiosk are personalized, such as ornaments or gifts, and easy to demonstrate, such as makeup or toys. They should also offer at least a 300 percent markup, she says.

Once you've decided what you want to sell, find a mall with a cart or kiosk available--the mall specialty-leasing manager can fill you in. But before committing to a space, check the traffic figures and the demographic profile of the mall's typical customer. Make sure it matches your target audience.

Finally, line up part-time help. The more you staff your kiosk yourself, the lower your expenses will be, but you'll want to have a backup plan in case you become ill or need a break.

Get Started Now
Why invest in an expensive retail storefront with a lengthy lease when you can have all the benefits and few of the risks of a retail business with fast and easy formats, like an online store, direct sales or kiosks? The sales potential is there, minus the hefty upfront cost. In as little as a weekend, you can be ready to retail.

The Cost of Doing Business
Just how much cash does it take to open a retail business the smart and easy way?

It takes money to make money, as the old saying goes, but fortunately, these types of retail businesses don't take a lot. Be prepared for these standard fees:

  • eBay store: eBay makes money by charging fees to list items, ranging from 25 cents to $4.80, depending on the starting value of the auction. If the item sells, eBay takes an additional 5.25 percent of the selling price for items up to $25. Items sold for more than $25 have an additional 2.75 percent commission charged for the value between $25.01 and $1,000, and 1.5 percent on top of that if the value is over $1,000.
  • Amazon store: Amazon charges a 6 percent to 15 percent commission, depending on the type of product, plus a 99 cent transaction fee, and a closing fee that ranges from 65 cents for music to $1.23 for books, or 45 cents plus 5 cents per pound for larger items such as electronics or sports equipment. However, Pro Merchants don't pay transaction fees.
  • Direct sales: You collect payments from customers and use that money to pay the wholesale cost of the company's merchandise, keeping the difference for yourself.
  • Cart or kiosk: As an independent retailer, you pay the wholesale price of the merchandise and set your own prices on the products. You must also lease the kiosk from the mall at which you sell.

Where to Start?
Before you begin your business, you'll need to square away these details.

Unlike traditional retail stores, smart and easy retail businesses can be set up quickly, with little risk and few resources required. Here's the lowdown on what you'll need to get started:

  • Online store: Inventory, regular access to a computer, and shipping supplies, which you can get for free if you use U.S. Priority mail
  • Direct sales: The initial investment, which can be as little as $100, and a phone
  • Cart or kiosk: A monthly lease, which can cost anywhere between $800 and $2,000, as well as your inventory and a cash register
Marcia Layton Turner writes regularly about small-business issues and is author of the award-winning book The Unofficial Guide to Starting a Small Business.
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Marcia Layton Turner's work has appeared in Woman's day, Health and Black Enterprise. She is based in Pittsford, N.Y.

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This article was originally published in the June 2006 print edition of Entrepreneur's StartUps with the headline: Revved-Up Retail.

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