How To Break Into America's Malls
Reema Khan, founder of s.h.a.p.e.s. Brow Bar, got her first big break when a leasing agent allowed her to set up a cart at a local Chicago mall on a trial basis. Following a slow start, her business, which specializes in the traditional Indian technique of eyebrow threading, took off, and it is now generating $14 million a year in revenue.
As Khan discovered, getting your service or product into a mall isn’t easy. To get the inside story on how the process really works, we talked to Michael Anderson, assistant vice president of leasing development for the Santa Monica-based mall operator Macerich. With 95 malls, Macerich is one of the largest owners of regional and community shopping centers in the United States.
Immpreneur: Can you give us an overview of the process involved in working with a leasing agent?
Anderson: It all starts with the initial contact, of course. They either get in touch with us or we contact them through prospecting. Usually, we'll set up a meeting during which we'll discuss their product or service and concept, including their goals and plans. We have an application process which helps us review their business, and tells us how much experience they have, what their expectations are, and how we can help them. You see, we have all different kinds of prospects with different levels of knowledge of the retail world, from the mom-and-pop to the highly experienced. We may find someone has a great concept but no idea how to implement it, and we can guide them through the process.
My department is for short-term leasing, which is anything 12 months or less. That can include carts and kiosks or what we call “inline”, which is a regular storefront.
The demographics of a particular mall are very important. Some products do better in high-end malls, some do better in low-end places.
Immpreneur: Who should the entrepreneur contact?
Anderson: They can go through a regional person, like myself, or they can contact a local mall. We have a leasing development manager at each mall who leases the properties. I tend to deal more with people interested in multiple locations. For those prospects, It’s easier to talk to me, because I have a sense of the whole region vs. talking to five or six different leasing agents. However, if it’s your first time looking for space in a mall, it might be best to go to an individual leasing development manager.
Ultimately, it depends on your long-term goals. Some mom-and-pops want to open up in every one of our malls. Sometimes it makes sense to talk to me and realistically see what the opportunities are in each mall. Or sometimes people don’t know which is the right property to start with. We own quite a few malls and they differ in terms of their target customer and demographic. Still, I always get the local leasing agent involved. That person is most familiar with their mall and which locations are available.
The demographics of a particular mall are very important too. I always find out the retailer’s target customer. Some products do better in high-end malls, some do better in low-end places. Every mall has its own personality. Everyone wants to be in the high-end malls but sometimes it’s not right for the product.
Immpreneur: Do leasing agents see everyone who contacts them?
Anderson: For the most part, we try to contact every person who phones us. At the very least, we have a phone conversation to find out a little bit about them. Are they really serious, or do they just want information? The initial contact is usually a phone call to find out their plans and goals, and, most importantly, if they really do have a product or concept. Still, we really do like to meet with everyone. You never know when the next great product is out there.
Immpreneur: How should entrepreneurs prepare for their meeting?
Anderson: We like to see anything that can help us better understand what they’re trying to accomplish. The more they bring, the quicker the deal gets done. And we know how much guidance they’ll need.
* We like to see the product. If there are pictures, we like to see those.
* We like to see a business plan; it tells us whether they have realistic expectations.
* We like to see their sales.
• Their estimate of labor costs.
* Overview of their experience.
* Their merchandising plan, how they’re going to set up their kiosk or store.
If you’re a new retailer, you may not know what your costs are going to be. We want to understand how much you’ve projected for labor, your cost of goods.
It’s helpful if you’ve been selling in a mall already. But its not necessarily true all the time. We have an application all our prospective tenants fill out, basically a short version of a business plan. It outlines cost of goods, your product, your retail experience, labor costs, sales projections. If they’ve never done a business plan, this can help guide them.
You’ll usually start with a cart or kiosk. But that depends on the product. If you want to open a clothing store, a cart or kiosk won’t work well. We’ve had first-time retailers open up in an inline store and be extremely successful.
Immpreneur: Do you ask prospective retailers to make changes?
Anderson: The initial meeting is a fact-finding meeting. If the person doesn’t know anything about retailing, we can guide them and tell them this is what you’re going to need going forward, come back when you have more specific information about anything from sales to labor costs. There are many times when we’ve asked a retailer to come back again. It could be we already have enough products like theirs in our malls. Maybe they want to sell sunglasses and we already have successful retailers handling sunglasses. In that case, we might ask them to come back with a different concept. Or maybe they have unrealistic sales goals, planning for a monthly sales volume that we know, based on our experience with current tenants, won’t happen. In that case, we'd ask them to review their business plan, and then come back to see us. Sometimes there's an issue with merchandising — the look and feel of the cart or kiosk. When you’re operating a cart or kiosk you have a short time to attract customers. If they don’t have a good merchandising plan, we may have them come back with a different one.
Merchandising is probably the biggest obstacle for prospective retailers. People don’t really understand how important the look of that cart is to attract customers. Some people know what looks good, they just don’t know how to fix it. But we can help them figure it out. We have merchandisers we work with that can help, and we have examples we can show them of successful carts from tentants in our malls that market similar products and looks.
Immpreneur: Are there any common mistakes that are made?
Anderson: Not knowing your business. Not knowing who your target customer is. If you don’t know who you’re targeting, it’s tough for us to help you, or to determine which mall you should be in. Another common mistake is having unrealistic expectations, thinking they’re going to make hundreds of thousands of dollars in sales a month when we know from experience that won’t happen. Basic mistakes like these tell us they may not have a good understanding of what the retail world is all about.
Immpreneur: What happens after you accept a new tenant?
Anderson: It depends on whether they're going to be in a cart or a kiosk. There are a couple of key differences between selling something in a cart or a kiosk. A cart is usually a mall-owned
merchandising unit that the mall owner leases to the retailer. A kiosk is a larger footprint that the retailer brings to the mall.
If the retailer is going to set up a cart, we’ll discuss the terms—how long they want to be in the mall, when they want to open, the rent, the location, the merchandising plan. After that, it’s a pretty quick process. We like to walk the mall with the prospective retailer and have them visit the mall on different hours on different days, so they have a really good understanding of the traffic, which are the busier times, and what their labor needs will be.
A kiosk is a whole different process. We go through an approval process of the physical unit. We like to see a schematic drawing, among other materials. We have specific design standards for each property.
Immpreneur: What do you like to see in terms of plans for the design?
Anderson: We like to have a visual merchandising plan before we sign a lease agreement. We like to know what the kiosk or cart is going to look like.
Our visual merchandising criteria includes the amount of signage, the fixtures, and how it‘s set up. We want to approve everything to ensure the unit is up to the standards of the mall. With a cart or kiosk, as I said, the retailer has a short period of time to catch the customer’s attention. When a customer walks into a shopping center, one of the first things they'll see is a cart or kiosk, so it's got to be a good representation of the center.
If any changes need to be made, we’ll make it clear. If it’s the fixtures, we can show them pictures of better options. We may suggest different colors. We can even help them with the size of the font in their signage. No detail is too small.
Two things can really help a retailer be successful. One is having enough capital...second is customer service. If you have great customer service and a great product, customers will come to you.
Immpreneur: How long can people expect it to take before they can set up shop?
Anderson: It depends on the retailer and they're level of experience. We’ve had retailers we’ve met with on a Monday and signed a lease and had them set up by Friday. It also depends on the product. If it’s a new retailer who hasn’t been able to order the product, it may take a few weeks or a month. Bottom line: It can be a couple of days or a couple of months.
Immpreneur: Are there any guidelines for how long it takes before you start making money?
Anderson: There‘s no rule of thumb. Sometimes retailer bring in products I'd be willing to bet will be the next best thing and then it’s a complete flop. Other times, something I wasn’t totally sold on have become huge successes.
Whether you get off to fast start or a slow one, there are two things can really help a retailer be successful. One is having enough capital. Meaning, if you have a great product, you’ll have enough money to buy more product and keep the business growing. Or you may be in a slow period or need time to build awareness, so you need capital to maintain business over high and low times.
Second is customer service. If you have great customer service and a great product, customers will come to you. That’s really important for retailers to know. If you want returning business, you want a lot of word-of-mouth from customers. You’ve got to make your customers happy, because they will do the marketing for you if you have good service.
There are a lot of immigrants in our malls. One went from selling hot dogs on the corner to having nine permanent stores in different malls. So, there’s a lot of room for immigrant retailers to grow.
Immpreneur: What else should people know about merchandising considerations?
Anderson: You might have different merchandising approaches in different malls. For example, in Phoenix we have some malls where the customers are 90% Hispanic. The retailers that know how to cater to the Hispanic customer are doing a tremendous amount of business.
A little over two years ago, we opened a 70,000 square foot space at our Desert Sky Mall, which attracts a largely Hispanic population. Now, 260 individuals have 10 by 10 foot booths. They give new retailers and mom-and-pops a way to enter the retail business.
There are a lot of immigrants. One used to sell hot dogs on the corner. Now she has nine permanent stores in different malls in the city, where she sells smoothies, desserts and other food. There’s a lot of room for immigrant retailers to grow.