URL: http://www.entrepreneur.com/magazine/entrepreneursstartupsmagazine/2004/may/70596.html

Kiosks may be no larger than an in-line store's window, but that hasn't prevented entrepreneurs from making the best out of a small situation. Also referred to as specialty retail stores and carts, these 40-square-foot stores reflect today's trends, offering items ranging from beauty products to East Asian hermit crabs. Currently valued at $10 billion, the kiosk industry offers appealing low-risk opportunities. However, to determine profitable ways to use this limited space, you should first consider what today's consumers really want.

Blasts From the Past

Categories including nostalgia, affordable luxury, home décor and inspiration will attract customers to kiosks across the country this year, predicts Heather Davis, president of Specialty Retail Stores Inc., a kiosk-concept seller in Salt Lake City. Home to concepts such as HairDiamond, Halloween FX and Waikiki Crab Co., Specialty Retail Stores makes a business out of staying abreast of current trends.

As consumers search for comfort in the familiar, items such as vintage prints, furniture, jewelry and ladylike handbags will become popular. Even retro candy is making a comeback. The National Confectioners Association reports that nostalgic candy is an expanding niche in the U.S. candy market. "Every time the economy suffers, customers are drawn to items that remind them of the good old days," says Davis. "What's old is new again."

Home improvement is in vogue, too. Though kiosks may be small in size, they aren't too small to capitalize on the trend with popular home décor items. Tropical, artist-inspired and gold will be emerging themes, according to Davis; while Americana collectibles, safari and Asian themes are on the decline.

What Goes Up Tends to Come Down

As new trends emerge, others fade. Most notable is the detrimental impact that discount retailers are having on industries such as the toy and candle markets. Competing against discounters who are able to buy in bulk and offer similar products at lower prices, independent kiosk operators are having difficulty keeping up. Says Davis, "You can't sell an item that the mass market can beat by half the price."

Davis also cautions against starting a kiosk for body jewelry or Italian charms, which have become outdated and require large amounts of inventory.

Making a Lasting Impression

Trendy concepts are helpful in bringing about a kiosk's initial success, but it's only with continual improvements to the kiosk and alterations to the inventory that you can create long-term success. "A big mistake that new entrepreneurs [make] all the time is to open up with a hot product and expect it to be hot forever," says Davis. With the exception of certain categories such as health and beauty, most trends will last about six to 18 months.

A surprising example of a trendy but enduring concept is hermit crabs. Operators of these kiosks have kept customers coming back for more by adding heaters, fountains and elaborate crab homes to their product lines.

Davis also stresses the importance of transforming the buying process into an experience. "It has to be more than picking up a [hermit crab] and putting it in a bag," she says. "Customers have to feel they're part of the process. There has to be an emotional [side to the] purchase."

Popular trends and concepts may change with the ebb and flow of customers, but as long as kiosk owners are ready to move with the current, they can stay afloat. "We are willing to re-invent ourselves," says Davis. "We're willing to sell hair [products] one day and hermit crabs the next."