When Curvel Baptiste launched the discount retail space Juxster in 2010, he had no desire to build a traditional storefront. “A lot of stores were closing,†he says. Instead, he would e-mail potential customers about upcoming sales on his website, so they wouldn’t have to “spend hours wandering around trying to find a particular product.†Juxster is a members-only e-commerce site that sells street, skate, and surf apparel.
Baptiste is not alone. According to a new report by Forrester Research and Shop.org, e-commerce sites continue to snag customers from brick-and-mortar stores, with online retailers having an average growth rate of 28% during 2010. Entrepreneurs are also shunning permanent storefronts for temporary establishments such as kiosks, pushcarts, and other short-term in-line venues. In fact, the temporary retail market is responsible for $8 billion in sales in 2010 and rose 14% in the first two quarters of 2011 over the year before, according to Patricia Norins, publisher of Specialty Retail Report, which looks at temporary retailers and provides resources for finding supplies, suppliers, and locations.
The U.S. retail vacancy rate is at 7%, according to CoStar Group Inc., offering entrepreneurs the opportunity to take advantage of a weak real estate market and the short-term rental trend. The national average annual cost of renting a 6,000-square-foot retail space in a strip center is $16.27 per square foot or $97,620 per year, compared to paying around $10 to $250 a day for booth rental at a flea market or a little more than $1,000 to house a pop-up shop for four weeks.
Success stories like eBay and Amazon prove business owners can do without a traditional store if they have a strong Web presence. Likewise, portable storefronts such as food trucks and flea markets are a great form of marketing since they go where the customers are, says Norins.
Here are five ways retailers can reach customers without making a long-term rental commitment and how some savvy business owners have made alternative storefronts pay off.
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1. Pop-up Shops: Embracing a Short-term Approach
The concept of pop-up shops: physical stores that retailers inhabit on a short-term basis, such as 30, 60, or 90 days. Some entrepreneurs use pop-up shops to test potential brick-and-mortar locations. Others, such as Juxster’s Baptiste, use them to occasionally connect face-to-face with their primary online clientele. Pop-up shops can be used to introduce consumers to a retailer’s brand, as well as create a sense of urgency among consumers.
To alert potential customers to upcoming pop-up shops, Baptiste sends e-mails to current customers, luring them with new products, low prices, and other incentives to check out the location. He also passes out fliers to attract local passersby.
Finding the right location has been one of Baptiste’s greatest challenges. “I do a lot of ground work, scouting out spots that no one’s paying attention to,†Baptiste says. He also approaches potential landlords with an abundance of cash since many are more likely to do business if you can pay the entire amount upfront, he adds.
Though pop-up shops demand a lot of effort for a little bit of time, in terms of stock and moving inventory, they can increase brand awareness and net impressive sales. “We’ve done anywhere from $1,000 to $1,500 in a day, [whereas] we’ve paid $1,300 in rent for the entire month,†Baptiste says.
Pop-up shops aren’t anything new, but the sluggish economy has given them a boost. “When we’re in good strong economic times, it is much more challenging to get a great location at a reasonable price,†says Norins. “But right now there are tons of location opportunities, and prices have come down.†As a result, many landlords looking to fill vacancies are willing to agree to short-term leases just to get someone in the door, giving business owners a golden opportunity.
2. Etsy and eBay: Pushing Online Marketplaces
There are countless stories of entrepreneurs starting on eBay and turning their hobbies into multimillion-dollar businesses. Some 25 million global eBay sellers accounted for nearly $62 billion in total sales volume in 2010. Sellers can list up to 50 items per month in the site’s auction format for free, or pay between $15.95 and $299.95 per month in subscription fees for online stores. With any of these options, sellers pay a commission for each sale.
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A venue ideal for sellers of handmade crafts, vintage items, and supplies is Etsy. With more than 11 million members and 800,000 active shops, Etsy sellers sold more than $357 million in merchandise in the first nine months of 2011. Etsy sellers pay 20 cents for every item listed and 3.5% of each sale made in exchange for a unique Web address to house their virtual marketplace.
The low startup costs are what prompted graphic designer Dana Osborne-Biggs of Smyrna, Georgia, to use Etsy to set up an online boutique and sell one of her handmade handbags on the site back in 2006. It sold within 24 hours, prompting her to expand her boutique, Urban Heirlooms.
The 46-year-old Osborne-Biggs scours flea markets, thrift stores, and yard sales for fabrics, and uses new leather to create handbags, cuffs, and her signature item: a wallet that uses an antique skeleton key as a clasp. Since 2006, Osborne-Biggs has sold more than 1,200 items, earning up to $27,000Â annually and is projected to make $5,000 to $6,000 more for 2011.
One of the entrepreneur’s challenges in pushing her products was conveying their high quality, because customers couldn’t feel the fabric themselves. So she went online, including to Etsy forums, to read up on photography. “I’ve seen people take photos that obviously came from their cell phones; they don’t look professional,†she says.
As her photos improved and more people caught on to the novelty of the products, images from Urban Heirlooms were run more frequently on the Etsy home page. In July of 2010, Osborne-Biggs left her graphic design job, with the support of her husband, to focus on her Etsy store full time.
3. Food Trucks: Dining Transcends Destination
Barbara “Sky†Burrell is no stranger to the restaurant business, having owned Sky’s Gourmet Tacos in Los Angeles for the last 19 years. But when she decided to expand in 2010, she didn’t want to open another restaurant in a struggling economy. So she spent more than $100,000 to purchase a diesel truck and retrofit it with brand new kitchen equipment. This way, her soul-inspired Mexican food brand could serve customers within a 70-mile radius. “We knew the truck would not only pick up business on the street, but it would bring new business to the restaurant,†she says.
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Sky’s Gourmet Tacos lets customers know where the truck will be each day via Twitter. Burrell also cashes in on events, with customers guaranteeing $1,000 in sales to reserve the food truck for weddings and corporate affairs.
But the ability to travel comes at a cost. A truck will cost roughly $40,000 refurbished or $100,000 or more to retrofit a new one. In addition, specific licenses and permits are required for each municipality the food truck travels to, and can cost around $1,000 to $1,500 for each locality. It’s worth it, says Burrell, if the truck schedules multiple trips to each venue per month. “You have to be consistent when going into that particular space or it doesn’t pay off.â€
The food truck generated about $100,000 last year. Not only has it contributed 30% more to the company’s bottom line since 2010, but Burrell received an extra jolt of publicity when she appeared on the Food Network’s Great Food Truck Race in the fall of 2011. “Now, we’re not just a destination,†she says. “We make the destination.â€
The growing demand for food trucks is one of the biggest success stories in the restaurant industry. According to a 2011 survey from the National Restaurant Association, nearly 60% of Americans said they would visit a food truck offered by their favorite restaurant, up from 47% in 2010.
4. Flash Sales Sites: Maximizing Daily Deals
Twin brothers Shane and Shawn Ward, owners of footwear design company Shane&Shawn, were flying high until the recession hit in late 2008. “Literally month over month from September to October, our sales dropped about 35%,†says 39-year-old Shawn. When sales continued to fall at their New York boutique and wholesalers
started ordering fewer products, “we knew we needed to cut our overhead,†he adds. In February 2009, the duo closed their store–saving the company more than $100,000 per year in rent–and focused their efforts online.
They explored e-commerce and a marketing strategy of featuring their merchandise on flash sale sites, which host temporary sales of designer merchandise at discounted prices. Sites such as BeyondtheRack.com and Shoe buy.com might feature Shane&Shawn products for two or three days. As with pop-up shops, the temporary nature creates a sense of urgency with the buyer, and the discounted prices often provide further motivation.
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“It’s a good way to expand our consumer base online because we’re reaching out to their buyers,†says Shawn. Flash sites have also alleviated some inventory problems. With traditional sales agreements, you ship products to retailers, they take in the goods, and if the goods don’t sell, the retailers ship the products back to you, he explains. “So you have to carry some of that inventory you didn’t plan on and now you have to move it or put it on sale to get rid of it.†With flash sales, the Wards only ship products once they are sold, avoiding inventory pileup.
The twins use social media and online advertising to attract more people to their website. “When you have a brick-and-mortar store you’re going to get the walk-by traffic. When you’re a website, people have to find you,†explains Shawn.
Their efforts are paying off. After revenues dropped 40% in 2009, and an additional 5% in 2010, the company can now credit its online strategy with its turnaround. “We’re on a pace to grow our business 30% over last year,†Shawn says. “We’re seeing a lot of growth.â€
5. Flea Markets: Bringing Retail To the Community
While flea markets are a great place to score deals on hard-to-find items, they can also be lucrative venues for entrepreneurs looking to build a brand. Just ask Todd Jones, owner of New York-based donut-making company Cuzin’s Duzin. The 52-year-old businessman made $100,000 in 2010, selling his sweet treats in these community-oriented venues.
The biggest selling point of flea markets is their flexibility, Jones says. “If one location doesn’t work out, I can change up and go someplace else.†But their temporary nature presents another challenge: introducing a product to a new audience with each change of location. To entice new flea market patrons, Jones gives out free donuts whenever he sets up a new shop. He also ensures that he is consistent with his branding so past customers can easily recognize Cuzin’s Duzin brand and signage. “Our colors have been the same since we started and people see me in my hat and my chef coat,†he says. “People expect a certain experience.â€
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Since July of 2011, Jones has been selling his donuts from Dekalb Market, a flea market in downtown Brooklyn, New York, where small businesses sell from salvaged shipping containers for $50 to $75 per day. The market is open seven days a week from 8:00 a.m. to 10:00 p.m.
The portable nature of flea market venues also makes it easy for Jones to take his show on the road wherever there’s a demand. “I do weddings, corporate events, and even the bar mitzvah circuit,†he says.
Jones has been in the donut-making business for some 37 years, including a previous career stint at Dunkin’ Donuts. He says the idea to do miniature donuts provided a unique twist that differentiated him from his former employers. “We are going to be the White Castle of the donut industry.â€Â
GETTING STARTED
Ready to open an alternative storefront? Here are some tips for getting the ball rolling.
Pop-Up Shops:
You can set up shop in a vacant warehouse, storefront in the mall, or some other shopping center and negotiate a short-term lease. With high vacancy rates, landlords will be more agreeable. The PopUpInsider.com is one source for matching retailers with landlords as well as providing how-to info. You also can find spaces for lease or sublease, and commercial real estate brokers at CommercialSource.com.
Online Marketplaces: Before making your first sale, take the time to read all of the FAQs and tips on Etsy’s site. Check out Etsy.com/Forums and the “Open a Shop†section in Etsy.com/Help/Topics. Aspiring eBay sellers should read The Official eBay Bible by Jim Griffith.
Food Trucks:
A truck will cost around $40,000 to $100,000, depending on if you buy it refurbished or new. But first find out whether food trucks are legal in your city or if there’s a cap on the number of food trucks allowed. Like traditional restaurants, food truck operators need to have certain permits and licenses, and to pass safety inspections. Learn more from the National Restaurant Association at www.restaurant.org.
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Flash Sales:
To find a flash site oppor-tunity, contact venues such as MyHabit.com (founded by Amazon.com) and BeyondtheRack.com just as you would if you were trying to have your products distributed at a traditional retail outlet. Flash sales are most effective as a tool to deliver a unique customer experience. The idea of purchasing limited sales items is what drives consumers to such sites.
Flea Markets:
Locate a flea market to sell your wares at www.keysfleamarket.com, www.findaflea market.com, or www.americanfleas.com.
You can learn more about the industry at the National Flea Market Association’s website, www.fleamarkets.org. Also, download the Kindle e-book How to Make Money Like A Pro Selling At Flea Markets and Swap Meets by Allen Farlow.