The World's Largest Resource for the Cart, Kiosk, and Temporary Retail Industry

Summer 2001 Common Areas Go Upscale

It’s something of a quiet evolution, but hardly invisible. Malls have been courting upscale specialty retail for their common areas for some time. As malls have grown more sophisticated, so has cart-and-kiosk specialty retail… and as consumers have grown hungry for unique merchandise of quality, common-area retailers meet the demand by offering a greater array of high-end merchandise.

Still, many people (including some retailers) tend to think common-area merchants sell mainly lower-quality, low-end (under $20) merchandise—primarily impulse items that catch the eye and capture the imagination, like silver jewelry, watches, children’s and toys, bonsai, and products like Chop-Chop and Magic Pens. And these products are strong sellers. But upscale items such as handcrafted jewelry, mouth-blown glass and other art objects created by independent artisans have been sold from carts and kiosks for some time. Perhaps they went unnoticed because high-end objet d’arts may be less eye-catching to casual passers-by than are all the assorted baubles and gadgets. But they were there, primarily in upscale centers and/or centers with an upscale demographic.

Upping the ante

High-end products find their way into common areas because leasing managers want unique items that contribute to a strong merchandise mix. Obviously, they don’t want common-area merchants to offer what consumers can find in just about any department store or in-line. The mall has an ongoing demand for one-of-a-kind items that are more artistic and higher-priced—$50 and up—than mass-produced or imported goods. And the mall goes after them, because it means the mall gets dynamic, upscale additions to the merchandise mix, and can attract the well-heeled customers who value—and pay for—that uniqueness and quality.

So with the right demographic, upscale additions to the common area, including nationals like Coach Leather’s kiosks, can and do sell well on carts and kiosks. In short, the upscale items warrant the higher prices, and succeed in drawing customers who will pay those prices. And while there might not be the 200-300 percent markup that specialty retailers want, the profit per item is much stronger.

R-e-s-p-e-c-t

Despite the fact that upscale carts and kiosks have existed for some time, the perception of the common area as low-end persisted. But the advent of two new business models in recent years contributed to changing the perception of cart and kiosk retail. Metabolife and the cell phone industry came to the mall and helped the common area get respect. Metabolife, the diet-supplement company, started its retail distribution in 1998—and put it in malls on carts and kiosks. The breakthrough wasn’t price: at $40 it was still within the “tolerance” range of common-area pricing. The breakthrough came by way of advertising. Because some of their distributors came from national chains like McDonald’s, business decisions were made from a different perspective. One of those decisions was its marketing strategy: they advertised on national TV and local radio—not just the product but the carts, too. Their “Visit our cart at the mall” ads instantly gave common-area retailing the legitimacy it had lacked, making it hard for anyone—consumers, some leasing managers and even other retailers—to dismiss specialty retail carts and kiosks as a “street fair in a mall.” Instead, the common area and its retailers now commanded greater respect as desirable entities of consequence.

High-tech effect

imageThe second turning point came with the arrival of affordable phone technology. “Mobile,” “cellular,” “wireless”—call it what you will, these phone-service retailers broke through the “perception barrier” for service uses, and changed the way service businesses sell from carts and kiosks. These retailers consider their common-area units as important outlets for marketing and selling their brands and services. In a given market, companies like Sprint and AT&T and phone-service “resellers” vigorously compete for space in specialty-retail programs in demographically desirable mall locations (each company has its own criteria). And the rents they pay for them sometimes equal or exceed rents for their storefront spaces.

Another factor: Because these are national companies with advertising, marketing and design elements created by top agencies, their carts and kiosks introduced a level of professionalism and pizazz to displays, signage and selling techniques not seen in the common area before they arrived. Their approach paid off, and raised the bar on common-area specialty retail.

California chic

As a result, shopping malls, lifestyle centers and entertainment centers in upscale areas, both suburban and urban, are signing more upscale specialty retailers than ever for their common-area programs, and looking for more.

Century City Shopping Center (Urban Retail Properties) is a perfect example. Located between Beverly Hills and Santa Monica, the center caters to customers with an average household income of $80,000 a year. These shoppers aren’t just upscale—many of them are Hollywood celebrities who shop, dine and (yes) go to the movies here. This outdoor center has Bloomingdale’s, Macy’s and Tiffany & Co., the world-renowned jeweler, among their permanent stores. Karen Miller, senior specialty leasing manager, looks for products that are primarily unique, higher-end fashion items.

Two of the center’s RMUs—Paris-Lolo France and Pashmina by Tina—were chosen because they were luxury fashion uses for the center’s Tiffany wing. “Since Century City Shopping Center is a high-end shopping environment generating more than $600 per square foot, we wanted to create an area of RMUs that fit the center’s tenant mix,” says Miller. “Pashmina by Tina and Paris-Lolo France have been a great fit in the area by Tiffany & Co., Max Mara, J. Crew and Kenneth Cole. They have performed extremely well, and have added to our overall merchandising mix. The Paris-Lolo France cart, in the center for a little more than six months, offers silk sweaters and accessories imported directly from France, with an average price of $50. Pashmina by Tina sells the extremely popular shawls and scarves made of pashmina, a type of cashmere blended with silk. They come in an array of colors at an average price of $80. Both of these carts add not just to the center’s revenues but also to its ambience, thanks to custom-designed, custom-built displays.

The Brea Mall (Simon Property Group) has I Dream of Shoes as an example of the upward shift. The brainchild of Betty Chen, I Dream of Shoes is a unique innovation: fashionable women’s shoes of quality are custom-made at the cart, selling at $65-$85 a pair. The customer chooses from two styles and three colors of wood soles, and selects material (including fabrics like silk and satin) for the uppers from sample books. An hour or so later, the customer’s made-to-measure shoes are ready. Chen opened at this center this past March because she wanted a higher-end regional mall to test the concept. Chen intends to expand into other centers with a large population of female customers 25-40 years old with even greater disposable income.

Also in southern California is Fashion Island, an outdoor festival marketplace shopping center in Newport Beach. This center’s high-end clientele combines with resort tourists, and has anchors that include top-end Neiman Marcus and Bloomingdale’s. One of the unique uses in this center is Norman Oaks Studio, a wall unit in the common area since February 2000. Owned and operated by artist In Sung Ok, it specializes in custom portraits in oil reproduced from photographs. He paints onsite, drawing crowds to his location, and generating additional business. The portraits start at $350, not a deterrent to this center’s high-income customer.

Back East

imageCopley Place (Urban Retail Properties), which takes its name from Boston’s Copley Square, is highly selective in accepting merchandise and retailers for its common-area program. Anchored by Neiman Marcus and Tiffany, this center has an affluent urban clientele, plus heavy office-worker traffic during the week. With only five custom RMUs, Dave Brown, regional director of specialty leasing, looks for categories that blend with the center’s anchors. “Because we’re an upscale property, we try to find tenants who complement our upscale in-line tenants… ones who have an upscale product mix of their own,” says Brown. A perfect example is Be Jeweled, in Copley Place since 1998, with its high-end hair accessories, fashion jewelry and other accessories. One of its hottest items: the $400 jeweled cell-phone case, first popularized by film stars who sported them at the Academy Awards.

Also at Copley Place is Dried Flowershop.com, which sells dried flowers from an RMU in a new way. They combine their flower arrangements with other products, with prices ranging from $50 to $500. In fact, this unique presentation plan, and the prices it commands, was the key to being accepted into this very select program.

Not far from Boston, the Natick Mall (Irvine Spectrum) is home to a retailer selling the Bose “Wave” radio—at $400 and up—from a kiosk. Also in Natick’s common area will be Luciderm. New to specialty retail, Luciderm is an up-market acne-treatment kit that will retail for $49.99. Lee Eckholm, specialty leasing manager, says this product would be accepted into the Natick Mall program because of its quality. (The national roll-out date hadn’t been announced.) Another of Eckholm’s tenants is DM Designs, a high-end jewelry concept that uses semi-precious stones mixed with sterling silver. Prices for the jewelry, which can be custom-made at the cart, exceed $100.

One company with considerable experience in the common area is also going upscale. Joseph K & Company, creator of Santa’s Pen, has developed Initials, a year-round concept with a higher price point. The Initials product line combines home décor with personalization, thereby filling a merchandise gap in most common-area programs. Products include growth charts, vanity mirrors and sets, wall shelves and wall clocks, all of which can be personalized, and customers have a wide choice of letters and characters. The first Initials cart opened this May at The Mall at Steamtown (Scranton, PA), and expects an average sale of $50. Future owner-operator carts will open in other upscale malls that have strong children’s business.

Services, please

All kinds of service businesses have caught on to the benefits of common areas in the right centers. And mall management has caught on to the benefits of having them there.

Carnival Cruise Lines has custom-designed units in The Parks at Arlington, Stonebriar Centre, and The Woodlands shopping centers in Texas (General Growth Properties). Carnival markets and sells their cruise packages from these attractive units.

Marriott’s Newport Coast Villas, a time-share property in Newport Beach, CA, has been using a cart at nearby Fashion Island since September. They use the cart to showcase the new vacation villas and to recreate the Newport Beach experience. Also at the cart are brochures for Spa Pacifica, the spa resort being built with the villas. Stephanie Nelson, marketing manager of Marriott’s Newport Coast Villas, says they chose Fashion Island not only for its proximity to the property, but because of Fashion Island’s impressive customer demographic. As an incentive and a tie-in, Marriott gives prospects a $100 Fashion Island gift certificate as a thank-you for previewing the Newport Coast Villas. The success of this cart led the company to open a second one, this time at Irvine Spectrum Center, a retail-entertainment center in Irvine, CA.

Less fun-oriented than cruises or time-share resorts but also in tremendous demand, LASIK eye surgery is also finding its way into the common area—not the surgery itself, but “satellite” locations of eye doctors who perform this popular vision-correction procedure. A presence in the common area makes information about LASIK much more accessible. Dr. Glenn A. Kawesch, who has offices in Beverly Hills and La Jolla, opened carts at Westfield America’s North County Fair Mall (Escondido) and Santa Monica Place. His carts don’t “sell” LASIK per se—they merely expand the visibility of Dr. Kawesch’s LASIK practice. “I believe what [higher-end] specialty leasing brings into a good mall is diversity,” says Vicki L. Loomis, Westfield’s specialty leasing manager. “It’s something the consumer doesn’t expect to find in a mall, like the ‘frosting on a cake,’ the something extra. It shows the consumer that any high-end product or service doesn’t necessarily have to be found [only] in the yellow pages.” Whether seriously interested or just curious, shoppers already in the mall can pick up a brochure, ask questions, even schedule a visit. And being in the common area is especially effective in reaching people for whom going to a doctor’s office just for information is inconvenient or even intimidating. Instead, they have a friendly, informal, immediate alternative—a kiosk at the mall.

Time-sharing, cruise vacations, LASIK surgery are all services that can cost thousands of dollars. Are shoppers ready and willing to spend that kind of money at a cart or kiosk in a mall? Probably not; and certainly not on impulse. But business like these are counting on people to visit, explore, investigate—in effect, shop—at these mall locations and then commit to a purchase soon after, usually at another venue (such as a sales center or doctor’s office). These businesses are also counting on mall customers to have no preconceived ideas of what “should” and “shouldn’t” be sold from common-area units. In fact, the argument has been made that this isn’t even specialty retail. But of course it is. Services like these, regardless of price point, are in many ways no different from the high-end products that are being sold on carts and kiosks.

As common-area programs continue to become more sophisticated, an increasing number and variety of high-end businesses like these will move into them, to take advantage of the trend and the traffic. As the common area becomes more sophisticated, so do the customers. And as it grows, so do the dollars they spend there.


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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