Retailiatory strike: don't let the big boxes win without a fight. There's plenty of room for start-ups to make their mark in retail

Entrepreneur, Dec, 2002 by Chris Penttila

In a world dominated by big-box retailers, its easy to like David battling Gohhath if you want to start indepdendent retail business. "Why bother?" you think "I'll only get crushed." But your small size could save your business these days. "[Many big boxes] aren't as invincible as they once seemed. They've gotten so big and bloated," says Bob Phibbs, a Long Beach, California, small-business retail consultant and author of You Can Compete! The Retail Doctor's Tools to Doubling Your Sales (RDP). Another plus; Consumer spending and retail have remained strong through the economic ups and downs. Retail sales in 2001 totaled about $3.5 trillion, according to the U.S. Census Bureau, which compiles retail statistics.

Shopping to day is about time and convenience, says Tom Boxton, president and CEO of The Buxton Company, a retail market research firm in Fort Worth, Texas, that represents more than 500 clients, includig FexEx, Kiko's and Pier 1 Imports, "Successful retailers are focusing on lifestyles," he says.

Look around and you'll see retail being integrated everywhere from hospitals and revitalized downtown districts to new mails and trendy urban mixed-use centers that provide a sense of community by combining retail shops with residential and office space in compact acreage. There are already more than 400 mixed-use developments around the country, and the number of these projects on more than 15 acres that were under construction or completed increased 37 percent last year, according to New Urban News, a publication that covers planning and development trends.

The costs of establishing a permanent retail location, however, can be steep. You may spend up to $100,000 or more, with leases spanning from three to 10 years. Carts, kiosks and temporary space can be an easier way to get a foot in the door with a lot less risk. The upfront investment for a kiosk or a cart can range from $2,000 to $10,000, according to Patricia Norms, publisher of Specialty Retail Report, a quarterly trade publication for specialty retailers. Today, carts and kiosks are a $10 billion industry.

Flexibility is another advantage. License agreements for carts and kiosks are shorter and are usually renewed every month up to one year depending on the location. This arrangement makes it easy for entrepreneurs to "come in, try it out for a month, and if their product isn't working, they can shift to a new product line or close up shop and move to a new location," Norins says.

Here are a few entrepreneurs who used a single kiosk location as their launching pad into permanent space--and growing retail success.

Bag a Winner: Corda-Roy's Originals Inc.

Byron Young, 33,is founder and president of Corda-Roys Originals Inc., a 4-year-old Gainesville, Florida, company that makes high-end corduroy beanbags that convert into futonlike beds. His products sell for $79 to $379.

But in 1998, Young was a fledgling entrepreneur sewing beanbags in his garage. "I literally started with a few sewing machines and a table," he says. The idea for a corduroy beanbag came to him while he was driving around Gainesville in his favorite corduroy jacket. For some reason, beanbags flashed through his mind. Why not put the two together?

"It hit me in about 15 seconds that no one had jumped on the idea yet," he says. "Corduroy just seemed natural to me. It's nice and soft and kind of retro."

The idea that his beanbags could also be a bed occurred to him when some friends stayed over and he didn't have anywhere for them to sleep. He pulled out the soft, futonlike core of one of his beanbags as a makeshift bed for the night. "They woke up the next morning and thought it was the greatest thing since sliced bread," he says.

Young knew he was on to something, and things started to happen quickly. Before long, he was sewing up to five beanbags per day, selling them from his house and through a few local stores. Despite his lack of retail experience, he rented a location on the edge of a Gainesville highway. It turned out to be a bad decision. "Maybe five people came in all day long," he says. "The rent was cheap, but it was cheap for a reason." On the upside, he noticed that four out of five people who came into the store ended up buying a beanbag. "I thought if these numbers hold true, we should be able to make it in the mall," Young says.

But he didn't know anything about mall retailing. All he knew was that his start-up funds were very limited. "I wanted the least expensive space in the mall," he says. "I wasn't even sure if I could handle the monthly payment on a kiosk, much less an in-line store."

He approached the manager of Gainesville's upscale Oaks Mall near the University of Florida campus about opening a kiosk. For Young, it was n affordable option with a much shorter lease than an in-line store, which would have required him to pay $3,500 per month in rent plus utilities and sign a minimum three-year lease. The two struck a deal. "I think he just felt sorry for me," Young laughs.

He spent $2,500 to open his first kiosk in 2000. Soon, Young was taking orders for more beanbags than he could possibly make by himself. With help from investor and partner John Gasser, 48, Corda-Roy's Originals has now grown to include 50 employees and two in-line stores in Florida, one in North Carolina and one in South Carolina. The company also has 12 kiosks dispersed throughout those three states, as well as in Indiana, Ohio and Tennessee. Company sales in 2001 were just under $2 million, and Young projects $3 million in sales by the end of the year.