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Summer 2000 Turn to Tourism

Pier 39, San Francisco. Walt Disney World, Orlando. Navy Pier, Chicago. South Street Seaport, New York. Fanueil Hall, Boston. The top activity for tourists is shopping, making cash registers ring at these and many more tourist attractions, resorts and entertainment centers all across America. As a specialty retailer, you know there are opportunities in these locations, and new “retail-tainment” centers are opening all over. The question is, how do you maximize the potential for profits these places offer? And how do you avoid the pitfalls of operating in a new and unusual environment?

Getting in

Just as you may be considering opening at one of these high-traffic locations, so is your competition. As a result, getting accepted into one of these programs can be extremely competitive. To succeed, be sure your application is complete, including pictures of your existing locations and reference letters from other specialty leasing managers. If you have a new or innovative product, you might also send a sample to attract the leasing manager’s attention. In any case, it’s essential to follow up with a phone call and try to make an appointment to show your merchandise. Then at the meeting, be professional, and be prepared: have a thorough knowledge of the location, the customer and, of course, your product. Be ready to explain what makes your product unique, and what it adds to their customers’ experience.

Spend time at the center and get acquainted with the other merchants. Watch who the customers are, when they shop, and what they buy. Not only do you need to believe in your product—you also need to be convincing as to why it should be a part of the specialty retail program at this particular location. Remember, program managers at these centers get many applications from merchants whose products already exist there—just about everyone wants to sell sunglasses or silver, so don’t expect those items to be welcome.

Do the homework

Now the real work begins. Doing business at these locations takes more than buying a cash register and stocking up—it takes homework and legwork. Do some research to determine the type of tourism at that location. Is it seasonal, or year-round? Are they mostly families, or couples? Foreign visitors, or locals? Upscale, or mid-range? Along with these demographics, the location itself can help you determine the right type of merchandise, presentation and time of year to begin your business.

Remember that being prepared also means realizing that these locations have their own special challenges. Many of them are outdoors, which can be a difficult adjustment to make if your business has always been in an indoor mall. Just as you should spend time at the site to determine the product you will sell, you should also spend time there to experience the weather. Realize that being outside is more than dealing with weather-related traffic flow: it can mean standing in the sun and heat, wind or cold, and sometimes even rain! So make sure that you and your employees are prepared to work in less than ideal circumstances. And be sure to evaluate the merchandise you expect to sell, to be sure it won’t be damaged by exposure.

Another challenge is the longer hours that are usually required. Locations like Universal Studios CityWalk often have weekend hours past midnight, and the later hours are often the busiest. This means you have to hire employees who are willing and able to stay late. (In many states, this prohibits hiring high school students.) Consider an incentive program for the “late shift” or for employees who stay open later than scheduled hours to take advantage of higher traffic. By the way, depending on the location, you may benefit from having a multi-lingual staff , although you may have to pay higher wages for them.

Be prepared to pay higher than average rents for these prime locations, and perhaps even “key” money, a non-refundable deposit due to the high demand for space. Some centers will require an even higher percent of sales in overage rent than the typical mall does. But if your product is right for that center, the higher rents and overage will be offset by higher volume sales.

No matter how experienced a specialty retailer you are, certain considerations in this type of location need special treatment. One of them is cash handling, so you need to plan for it. For example, change will be harder to come by in the middle of an extremely well-populated location like Pier 39, so preparing for day-to-day operations is important. In addition, these locations often see very high cash flow, which necessitates mid-day bank deposits. And you will likely need a higher cash drawer than you need in a mall. While we’re on the subject, make the security and safety of your employees a priority.

The right product

Determining which product to sell is critical. The typical mall product is not necessarily the most profitable with the tourist-customer. Merchandise that is easily identified with that location helps create the desire to purchase, so that the tourist can remember the visit. Wally Riza, who operates four carts at CityWalk, summed it up in one word: “cool.” He says tourists look for the cool, hip product from that area to take home. In California, that means the cool Los Angeles look. But serving that tourist market may mean missing the needs and desires of local customers who visit the location.

Interactive or demonstration products are typically the best-selling items in high-traffic common areas. Products like Blopens™, Magic Pens™ and Wacky Wax™ are usually successes at tourist locations because they represent something fun and memorable to take home. It’s important to stay on top of trends and offer the latest “must-haves.” So whatever products you choose, continually make adjustments to the merchandise mix.

Price is often a factor in tourists’ purchases. Many locations are family-oriented entertainment venues with high prices (e.g., Walt Disney World), which means there’s little left over for impulse buys. So it’s important to have a range of prices to accommodate all budgets. Evaluate the other retail and food and beverage locations to see which price points will work in your location. Remember that branded items (like Disney) will command higher prices than non-branded items.

Another important factor is the customer’s ability to carry a purchase easily, or pack it to take home. Therefore, large, perishable or breakable items may not be good choices for your product mix. Offering shipping is not only a value-added service: it may also help you increase your sales.

Show and sell

The key to sales success at tourist destinations, as it is in malls, is visual presentation. More than ever, it’s important to plan and implement a truly unique display for your product. In most of these places, visual stimulation is already extreme—larger-than-life product representations, neon signage, video walls, dramatic storefronts and much more all compete for tourists’ attention—and dollars. It’s not hard to see that it’s all the more difficult to attract them to one small RMU in the midst of that environment. To up your chances, create dramatic, eye-catching displays that make a bold statement. Always make your product the focal point, and use large props and graphics.

Since most of these centers are outdoors, the durability of the visual display is crucial. The display should protect your product from wind, rain and sun. Your display must also be able to store a maximum amount of product, and on-site storage will probably be at a premium, if it’s available at all. The answer is a custom-built display, which will prove to be a worthwhile investment in undamaged product and increased sales.

Presentation also happens after the sale. Follow through the purchase with a gift box or bag that has the location clearly marked, so that customers will remember where they made the purchase. Tourists buy souvenirs and gifts to take back home, and a strong selling feature is an easily identifiable logo on the box or bag. (They often keep these as souvenirs, too.)

Does all of this sound exciting? For specialty retailers, opening and operating in a tourist-oriented “retail-tainment” center can be extremely profitable. When an RMU is well run and carries “cool” or otherwise desirable product, sales can be remarkably high. So it’s worth it to consider taking advantage of these hot locations to grow your business. It’s an opportunity to sell merchandise to the widest possible market, a chance to meet people from all over, and it’s fun. After all, you’ve set up shop in a tourism hot spot!

Deborah Kravitz

Deborah S. Kravitz is a partner in Provenzano Resources, Inc, (PRI) a retail real estate consulting firm providing specialty leasing programs, management, leasing, training seminars, and retail development for shopping centers, lifestyle and entertainment venues, airports and retailers. PRI owns and manages the high profile Third Street Promenade Specialty Retail Program, redeveloped in winter of 2005.

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