A new generation of specialty carts and kiosks is generating big revenues in small spaces.
Back when giant televisions and stereo systems were at the top of shoppers' must-have lists, electronics chains shelled out millions of dollars for big-box stores manned by oodles of employees. But these days a kiosk staffed with just one person can rake in huge amounts of cash by selling tiny gizmos and accessories. After all, when powerful computers are small enough to put in a pair of eyeglasses - as with the much anticipated Google Glass, the head-mounted device set to go on sale in 2014-who needs all that shelf space? "Size doesn't matter anymore," said Don Gregor, national vice president at Canada's Aurora Realty Consultants. "lt's profitability."

And according to the pros, the powerful punch of smaller spaces is just one of many factors contributing to the ongoing vibrancy of specialty leasing in today's technology-driven, post-recession economy. With their high traffic, low overhead and short-term leases, carts and kiosks are a perfect way for entrepreneurs to test new concepts and otherwise respond creatively to the ever-shifting marketplace, observers say. Thanks to technology, even mainstays of the business are managing
to make more money, Gregor says. "Look at the T-shirt kiosks - they've been around at every mall for 20 or 30 years," he said. "But they no longer print up the T-shirts in advance, except for the ones on display. Now they have a computer, so people can press a button and create their own shirts using hundred of customizable designs. Blank shirts are the only thing in the actual booth--no inventory and no wastage."

And though kiosks hawking cellphone accessories have been around nearly as long, the continual release of new-model gizmos keeps stir ring demand for chargers, cases and more, particularly among status-conscious young people. "Some of the cart people do incredible number,"Gregor said. "We have a client that does cellular-phone faces. You might think, 'Why would anyone be in the cellular-phone face business?' But if you look at a little tiny piece of plastic that I molded, colored and with some bedazzled jewelry on it kids are buying these things for $25 or $30 bucks each. The profit margin is so incredible that effective sales per square foot of some of the cart operators would rival that of any of the major international brands."

But technology is not the only innovative force in the world of specialty leasing. Landlords’ leasing teams, for one, are scouring local markers to find new categories of colorful and compelling specialty leasing concepts. Carts and kiosks with a retro focus are a prime example. "Sometimes it's actual vintage furniture where the operators will repurpose things," said Michael J. Anderson, assistant vice president of leasing development at Macerich. "Other times it's things like vintage or reproduction clothing. The e types of stores are really popping up in urban shopping areas, and so now we' re adding them to our centers."

Macerich leveraged both the "buy local" trend and the strategic advantages of smaller spaces when it created The
Union, an alternative retail concept that opened last year at Biltmore Fashion Park, in Phoenix. The idea was to give shoppers a mix of 18 distinctive boutiques, some of which were as small as 200 square feet. The roster of kiosk like tenants now includes businesses that may be found along any city street in d1e world: newsstands, flower sellers, gift shops and clothiers among them. "We basically took a 7,000-square-foot empty shell and created a group of individual stores," Anderson said. "It's a great concept. Some of these tenants have other stores wid1in the city, but they're all local retailers and entrepreneurs."

Meanwhile, many of the same trends that are making an impact elsewhere in the retail universe - such as the rise of medical and service-oriented tenants, or the growing popularity of the franchise model among entrepreneurs- are equally visible in specialty leasing, observers say. Health care spending will rise by about $600 billion over the next three years alone, according to CBRE. Little wonder that leasing teams, including those responsible for carts, kiosks and temporary in line spaces, are doing more deals with medical-related users. "With key parts of Obamacare coming to fruition in 2014, we are seeing a lot of the health care companies want to have a presence in our centers," Anderson said. "They want to explain the process to the consumer, face-to-face."

Branding is also hugely important to health care companies and other non-traditional users these days- especially in those markers where they happen to be locked in battle for market share with one or two competitors. Leasing carts and kiosks gives these tenants the ability to accomplish two goals at once: making money by selling in high-traffic parts of the mall, and boosting their brands against those of their rivals, says Jeffrey L. Gregerson, vice president of specialty retail at CBL &amp; Associates Properties. He cites the trend of colleges and universities that hoist their banners at the mall. "There are a lot more adults going back to school, especially after the recess ion, and we arc now finding that more colleges want to advertise to our shoppers," Gregerson said. "They see this as a great way to go after prospective students." Doing kiosk deals with the likes of d1iropractors, masseurs, manicurists and gel-nail artists also holds the promise of driving traffic to the center, he says. After all, shoppers cannot enjoy much real-world services by touch screen.

Malls are also benefiting from greater interest in kiosks on the part of entrepreneurs hard-pressed for startup funds, observers say. Amid the volatility in retail in recent years, many of these business people are keen on buying established franchises rather than creating their own concepts, Gregerson says. In Canada particularly, hardworking immigrants tend to see a lot of upside to operating mall kiosks. "These are smart people who are looking to advance," Gregerson said. "Instead of driving a cab or opening a restaurant, many of them might want to buy their way into a small franchise system, which often is a kiosk style of business." And while nicer kiosks can cost upwards of $40,000, entrepreneurs who work with the Canadian Franchise Association typically can obtain $150,000 small-business loans. "This is another driving factor toward small-style retail operations here," Gregerson said.

Specialty leasing professionals also see plenty of room for future growth. Burlington Coat Factory, Harry &amp; David and Toys 'R' Us, to name a few, have experimented with temporary spaces in the mall. But other national retailers could reap strategic advantages by ramping up the visibility of their products in mall common areas, Gregerson says. "What better way to test something than to take it out of your inline store, or even a department store, and bring it out into the middle of the mall?" he said. "You can see how people respond to the product." And on this score, established chains enjoy clear advantages over kiosk startups. "If shoppers are seeing you for the first time, then you really have to find a hook, because you need to give them a reason to say, 'I will rake a chance and buy your product,' " Gregerson said. "A permanent, national tenant like Macy's already has the advantage of brand-name recognition; customers are comfortable with the brand and feel that it will be a high-quality product."

In other words, in today's era of omni-channel retail- the notion that products should be sold anywhere and everywhere shoppers want to buy them, not just in typical storefronts- carts and kiosk could be seen as an untapped channel for a host of products and companies.

And when it comes to the future of mailer retail spaces, U.S. landlords may be able to learn a thing or two from what retailers and developers in China, the Philippines, South Korea and other places are already doing, says Peter Burgoyne, creative director at New York City-based ~ a global branding and retail consulting firm. One mall owner in the Philippines is working with CBX to create kiosk locations for well-known restaurants at a new mall, Burgoyne says. The goal is to help the mall bolster its brand with local shoppers and add to the overall atmosphere. Likewise, South Korean department store Shinsegae makes especially creative use of carts, kiosks and other small-scale retail spaces, he says. "Shinsegae has lots of island spaces and kiosks throughout the building- areas for [product] launch, visual merchandising, events," he said. "They call these 'spice' locations. These kiosks in the store aren't static- it could be a large area for sunglasses and accessories one day, an ice-cream smoothie bar the next. The point is to have something exciting and new all the time. This creates energy. The architecture can be pretty adventurous, too."

By contrast, U.S. developers sometimes have relatively li near groupings of similar-looking kiosks. When they redevelop their properties or build new wings, U.S. mall owners might consider taking some alternative approaches to the placement and design of such small-scale retail spaces, Burgoyne says. "Make these kiosks destinations in their own right, because they are almost as important as the [in-line retail] brands," he said. "They can add to the total experience of going to the mall"