Summer 2007 There’s No Business Like Snow Business!
In 2003, Joseph and Sigal Sherman needed “an in” to the world of specialty retail. They knew they wanted to launch a cart business, but they needed a fresh new product to get their venture off the ground. “Here in Los Angeles, it’s a pretty competitive market—the malls are filled year-round—so the only way for us to penetrate the market was with a product that was brand-new, something that nobody had,” Joseph recalls.
Fortunately, having previously worked for a wholesaler who had a big presence in the specialty retail arena, he was able to purchase from them a new-to-the-market children’s toy that could be easily demonstrated cart-side. Aware that demonstration products were some of the highest-grossing products sold from carts, the Shermans recognized the toy’s potential and their window of opportunity—their “in.”
They opened five carts in the southern California region over the summer and fall of 2003, staying close to their L.A. home base so they could oversee their managers. By the time the holidays arrived, they had prime locations already up and running and were the only retailers with a hot new toy that shoppers seemed drawn to when they saw it demonstrated.
The season went “very well,” Joseph says. Mall leasing managers loved having an eye-catching, entertaining demonstration product in their centers, and sales were strong. More importantly, as they had hoped, “After we had that first successful year, it was easier to expand in our second year with additional concepts because the mall managers already knew us.”
Landing sales year-round
With a successful holiday season behind them, they started off 2004 with the company’s first significant expansion. They steadily worked to open more than a dozen locations, mainly in upscale centers in the southern California region. Two were toy carts, but with mass retailers now getting hold of their debut product, Cart Planet needed to diversify, so the rest of the carts were a mix of health and beauty concepts such as Dead Sea products and herbal heat packs.
They were pleased with how their second year was shaping up—but every day they kept their eyes open for that next hot product nobody else had to give them the “foot in the door” opportunity they had in their first season.
Taking stock of their initial success, Joseph and Sigal knew a few things for sure. First, counter to the strategy employed by many specialty retail entrepreneurs, they didn’t want to operate Cart Planet locations only during the peak holiday selling season. “It’s a big project to open dozens and dozens of carts in one month, bring in all the employees, train them and then shut down everything two months later,” Joseph explains. “It’s a business concept we thought about, and it’s possible, but it’s not what we wanted to do. We wanted to develop a year-round approach that we can easily expand on during the holidays.”
They also wanted to maximize their profit potential within each center by operating multiple locations in each mall. “If we go into a mall and operate two to three concepts in that mall year-round, our manager’s already there, storage is there, relationships with the mall are already developed,” he says. “To add an additional cart there for Christmas is not a stretch.”
As they continued to refine their operations, they focused on developing “a permanent tenant mindset,” Joseph says. That mindset included a salesperson dress code that went well beyond what the malls required—which not only pleased mall management but helped develop the high level of professionalism they wanted their company to project. Intense employee training centered on delivering superior customer service and understanding the psychology of how shoppers make their buying decisions. Products were backed with lifetime guarantees that went beyond what manufacturers typically offered. Over time, the permanent mindset took hold at Cart Planet, and that evolution was paying off in steadily growing sales.
Finding the next big thing
Then sure enough, one day Sigal noticed an obscure product on a science museum shelf: Snow Powder, a nondescript synthetic polymer that “erupts into snow”—cold to the touch—when water is added. Sensing that her kids might enjoy some instant snow in balmy L.A., she brought home a box of Snow Powder and let the kids have at it. Within minutes, they were shouting for their dad to come outside to watch as they added water to the powder and screamed in delight as it grew to more than 100 times its original size.
“Within a second, I saw the [Snow Powder] carts—how they were going to be designed, how the packages of Snow Powder would be demonstrated—hundreds of carts nationwide,” Joseph remembers. Contacting the manufacturer’s representative, he laid out his vision for getting Snow Powder off the shelves of science stores and onto carts nationwide where the product could really get noticed and rack up the sales. Unfamiliar with the cart industry, the rep nevertheless gave them the chance to test their idea.
They opened four carts in the L.A. area for the 2004 holidays. By the end of December, they had more than $320,000 in sales, combined. Clearly, Snow Powder had not only passed its first retail test, but showed big potential.
As the buzz started to build about Snow Powder among those in the industry, the Shermans started getting calls from mall managers who wanted a Snow Powder cart in their centers, as well as independent owner/operators who wanted to open their own Snow Powder locations. Having secured the worldwide retail rights from the manufacturers rep, it was tempting to go national with dozens of owner/operators, but “following the 2004 campaign, we felt we had to learn the Snow product more,” Joseph says modestly. “We sold it in 2004, but only for about two months and we thought our results could be better.”
By the time the summer of 2005 arrived and specialty retailers started solidifying their plans for the holiday selling season, the buzz about Snow Powder had gotten louder. “The market was begging to buy the [Snow Powder] product from us,” Joseph recalls. “But we refused. We just said no. We wanted to learn it more and understand it, then release it in 2006.”
“We decided to focus on opening two carts for the holiday season, to perfect our operations,” he says. The carts, in The Grove and Simi Valley Town Center, brought in a combined $346,000. The Grove grossed $223,720, and a favorite company photo from the season shows Joseph handing The Grove leasing manager and mall manager an oversized overage check for $16,000.
Shopper response was “overwhelming,” Joseph says. “Everything worked, everything fell into place. Unlike in 2004, when it was our first season selling Snow, in 2005 we came in with a running start. We also opened one cart earlier, in mid-October, and that gave us a real edge” to tweak the product demonstration before the holiday rush hit full bore. When it did hit, the demonstrations would routinely draw huge crowds.
Even local news stations sent their reporters to cover Snow Powder. “There are a million products at the average mall, and they’d come to interview us,” Joseph says. “One newscaster even said, ‘I have here the must-buy product for the holidays!’ and then she did an on-air demonstration.” The coverage was great for sales. “Customers would see the news stories and drive for hours to come buy a box of Snow Powder.” To Joseph and Sigal it seemed like their new product was fast becoming a cultural snowball rolling down hill, gaining size and speed with every passing day.
Selling to owner/operators
By 2006, they were ready to take their company to the next level. They’d already built Cart Planet up to be a formidable specialty retail player in the southern California region, with more than two dozen year-round carts and holiday Snow Powder locations.
And yet, with a string of successes piling up, Joseph says, “When we’d approach mall leasing managers for a Snow Powder location, most of them still probably believed the numbers might be hype. They just didn’t expect us to be that successful. They wanted us in because of the entertainment factor, but they didn’t believe the numbers—until they got the overage check.”
In 2006, Cart Planet opened Snow Powder to 50 owner/operators. But the interest in the concept that now had a proven retail track record was so enthusiastic that the Shermans found themselves fielding 80-100 calls a day even as the holidays got underway. Some calls were from operators who’d opted to purchase a new Snow Powder knockoff making the scene and then regretted their choice when they received “a chemical-smelling mushy mess,” Joseph says. “We tried to help them out as much as possible, since they’d invested so much of their money and many already had locations.” The Shermans ordered another 20 tons of Snow Powder and set up a packaging and distribution hub to get product out the door to new owner/operators quickly. By the time they hit the cut-off switch, they were up to 150 owner/operators and the holiday selling season was in full swing. Cart Planet operated six Snow Powder carts of its own, in addition to 20 health-and-beauty locations, which they were finding easier and easier to expand now that leasing managers had heard of the company’s track record.
“The pattern is that we operate a Snow Powder location, it’s very successful—overwhelmingly successful on the entertainment side—and the following year we get the locations that we want for our year-round concepts and repeating Snow Powder locations. There’s a developer who’s opening a center in 2008 and they said, ‘Just let us know what you want to do.’” Those kinds of opportunities don’t appear every day in the specialty retail market, he says. They come from years of refining operations, racking up solid sales and simply having the right product at the right time.
Now that Snow Powder has taken off, the offers are coming in worldwide, from entrepreneurs who want to operate carts in US malls from coast to coast, north to south, as well as dozens of retailers from overseas.
“We’re getting calls from people all over the world because [Snow Powder] has been seen now,” Joseph says. What originally started out as a novelty for areas like L.A. that have snow-envy during the holiday season has now expanded to sell well in northern areas where real snow is around for months. “Last year we had a few operators up north who did very well on the premise that Snow Powder is an indoor item for decorating. Even if you have snow outside, you can’t bring it indoors to decorate your tree with it.”
Again the calls are streaming in from potential owner/operators. “So far this year we’ve already fielded more calls from people who want to operate carts up north for the 2007 holidays than we received during all of 2006. We’re getting a pretty good vibe.”
For 2007 Cart Planet is hoping to have about 200 Snow Powder owner/operators, and a half-dozen or so of their own company-operated carts, plus more than two dozen of the health-and-beauty related carts.
Going forward, “We’re looking at every market, everywhere,” Joseph says. “But what’s happening now is the world is looking for us. There were enough carts last year that people saw it and talked to their colleagues, and now a lot of people know about us worldwide. I’m not going to discount the US market—half of what the world buys is being bought in the US. This is the biggest retail market and this year there will be more Snow Powder sold here than anywhere else, by a huge margin. But I believe that worldwide we can probably do 25 to 50 percent of what we’ll do here in the domestic market, which is great.”
There’s no doubt, he adds, that “Snow Powder is going global—and it’s taking us along for the ride.”
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