Mall Kiosk - Common Usage

Common Usage

Most commonly, mall proprietors and operators of commercial real-estate make RMUs available for short term lease to mall retailers. This is the preferred method of generating mall income and commercialisation, due to the often low price point of the retailers in comparison to larger, unit-occupying retailers. In the UK, leases are largely available on three-month rolling contract, often through commercialisation specialists who broker the rental lease on behalf of the landlord of the space and/or the RMU.

Alternatively, kiosks can be operated under longer leases of up to ten years, which is considered more appropriate due to the expense of these units (which often start at $20,000 and are capable of exceeding $100,000) to manufacture to specific and customized needs.

RMUs are usually supplied by the property owner and licensed rather than leased, with much looser language allowing the property owner to revoke operational rights overnight or relocate the unit within the center upon notice. Kiosks are also available under the same conditions and may even be supplied by the property owner when they have been abandoned by former tenants; occasionally these units are built specific to a property and supplied by the property owner. Rents vary by market conditions and mall traffic. Generally they begin at $1000/month and can exceed $10,000 a month in the best of malls. Holiday rents are generally term rents that encompass both November and December with a combined sales breakpoint for the holiday term on short-term agreements or annual sales breakpoints on permanent agreements. These holiday rents are often three to four times non-holiday rents for each of these two months. Property owners benefit from this rent structure by capturing all rent prior to the peak sales period, yet soften the full impact of what is a very unbalanced sales window by splitting the considerable rent increases into a two-month period. While it is possible to rent spaces for a month or even a weekend, it is highly inadvisable as almost all businesses require an incubation period.

Due to the high visibility of these units, which are most often located in the common areas of malls, these businesses can often gain a relatively trackable monthly sales figure after a three or four-month trial. Many other benefits exist, such as the low overhead, small inventories, and low or non-existent CAM, tax, utility, and marketing fees, as compared to their in-line storefront counterparts, which can often have fees equal to or in excess of the rents themselves.

The primary key to success in a kiosk or RMU is product margin. Most kiosk and cart products average three hundred percent mark-up or better. This is quite different from the traditional "keystone" (doubling) of product costs, which is normally found in an in-line store with thousands of SKUs and higher transaction totals. These retail options provide some of the best opportunity for start-up small businesses and can lead to multi-million dollar nationwide operations garnering exclusive rights deals with entire REITs and regional developers. As a general rule, most successful kiosk businesses are centered around a single product or product category.

They are considered part of the specialty retail industry, which is worth over $12 billion annually. Retail spending has remained strong through the economic ups and downs (according to the U.S.Census Bureau totaled about $3.58 trillion in 2002). The placement guarantees high foot traffic from shoppers, offering opportunities for impulse sales. Many carts are franchised, which provides more support for new entrepreneurs. Leases or rents are often monthly, but may range in length from a weekend to a year. The short leases allow larger retailers to test the market temporarily before committing to a location, and lower costs for new business owners.

The costs of running a cart vary by season (with rents ranging from $4000 and up per month during the holiday season, depending on the locations), and license agreements are short and usually renewed every month up to one year. The rent during the winter holiday season usually is the highest. Initial costs are lower because the smaller space requires less product to fill. Retailers also have the option of changing products with the season or to match trends.

The first mall kiosk opened in Boston's Faneuil Hall in 1976.

Read more about this topic:  Mall Kiosk

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