The Mall Kiosk Business Part 2 of 2

For those of you who missed part one, here's a link to it here

So now all three of our stores are up and running and we’re doing great at my store…the other two stores are slowly coming along but not doing quite as well as my (the original kiosk).

October is quickly becomes a “hope to break even month” because of the fact that we’re still getting out products from domestic wholesalers rather than from overseas. This cuts our profit for now but isn’t a huge deal because by November 15^th our shipment from China will be here and we can start making real money.

Then we get hit with Bomb #1

Around the end of October, Costco decides to play the role of evil corporate bully and begins to offer their equivalent of our hottest selling product for $69.99. That is a HUGE hit considering we’re selling them for $139.99 and can’t keep them in stock. What makes that worse is that our price on that product is $50 per unit from our domestic wholesaler. Me and the managers of the three other kiosks a little war room strategy session and decide to match any price that a customer brings up to us. This stops the bleeding a little bit but we are already seeing a small decrease in demand. I can’t tell if that’s because of the product being sold by a mass retailer or because if people are just waiting for Christmas. Oh well, I say, Once my China products get in I can match that price and still be getting 350% margin on that product. It may not make me rich this year but it’s still very profitable.

Here’s Bomb # 2

Ok, remember the helpful Chinese guy (I literally never knew his name) from part 1 ? Well, we hit a little snag at the end of October. Apparently, the demand for these poker chips is so high that the factory is a little backed up and I might not get my order until November 21^st instead of November 15^th as we had agreed upon originally. This makes me very uncomfortable but what could I do?? I already given the guy a 5k deposit on a 25k order and plus it was way too late in the game to try to find another supplier overseas so I have no choice but to wait it out. [another little side note about the kiosk business, when you get into it, leasing people will try to sell you on how great November/December are and how that’s where you make all your money for the year. What that’s really code for is; ‘We know you’re gonna do well in December so we’re gonna screw you on rent for November.’ November looks just like October and September right up until black Thursday (the day after thanksgiving) but that still isn’t enough to justify the rent almost TRIPPLING for those two months.]

And just as it appears the smoke has cleared and we’ve assessed our casualties, here comes Bomb 2.5:

The friendly, helpful, Chinese man (who by the way, is becoming much less friendly and very less helpful by the day) calls me on November 1^st and happily tells me that my order is done and that they are ready to ship. All he needs is the remaining 20k for the order. Great I say. All I need to see is the samples that we stipulated in our contract we signed so I can be assured that the quality is up to par with what I’m currently selling. He assures me that it is and asks me to trust him. I tell him that I can’t trust him on a HUGE investment and that I need to see some samples or there’s no deal. He gets very angry and takes this as an insult even though our contract (apparently, based on my situation and others I’ve read about since, Asian business deals are thought of more along the lines of a handshake deal…they aren’t legalistic like western culture’s are) clearly states that a sample must be provided by the factory for quality assurance in order for the balance to be paid by myself. Whatever, the last worry on my mind right now is hurting his feelings. Sure enough, three days later my worst fears are realized; I get three sets of poker chips in via priority mail and the quality is completely ridiculous!! The stripes on the side of the chips don’t even line up properly. And I don’t mean there off just a few millimeters or something, they are literally on opposite sides of each other!!

I tell him of my displeasure with the samples. This doesn’t go over with the Chinese Man too well. To top it off the he is now telling me that because I requested samples instead of allowing the factory to ship on Nov 1^st when the product was completed, I’m now looking at a Dec 12^th delivery date. I’m at a loss for words. My whole little entrepreneurial world was crumbling before my eyes. My dreams of walking into work wearing casual Friday clothing on a Monday and mooning my entire department were quickly fleeting. I have not choice to but to tell him it’s a no deal. He threatens to keep the five thousand dollars I put down as a deposit on my order. I again cite the contract and three months (and several conversations with my credit card company’s legal department) later I get the money refunded back on my credit card. Whoop-ee.

So now everything has done a complete 180 and I’m getting very depressed about my little venture. Not being one to wallow in my misery, I quickly have to develop a backup plan. It’s now mid November. I definitely cannot afford to be paying $50 a unit to my domestic wholesaler for the remainder of the year especially with Costco and Sam’s selling the SAME thing for $70 a pop (by the way, to this day, I have never entered one of those places again….I’m convinced they are destroying small business in this country). It’s too late to make a big order to china and have it arrive in time for the holiday rush. So my only option is to find a domestic wholesaler who’s cheaper. I eventually find a guy out in California who can sell to me at $34 a pop which is not bad. It allows us to get at least 200% margin when we match the Costco price.

So the net-net is this; I lost money on the two kiosks that I opened with my buddies (as a 50/50 partner in each) and I barely broke even in my kiosk which is almost miraculous when you look at what I went through to do that. But here’s the good part…the part where I tell you what I learned from this so that if you ever open a business similar to mine you won’t make the same mistakes I did.

· In retail, ALWAYS have a backup supplier for whatever it is you’re selling. Not sometimes. Not most of the times. ALWAYS. If you can’t find a backup supplier, don’t do it. If you do, don’t expect to have ANY stability because your business can easily be crippled with one little snag.

· The smaller the product, the better. One of the biggest obstacles I had was keeping my cart stocked with these huge poker chip cases. The most our cart would hold is about 40 but we could go through 60 in a day which created many logistical problems for us. The bigger side of this is that if you’re getting your product from china, the shipping is significantly reduced and cheapened if 300 units can be sent priority mail.

· If Wal-Mart, Sam's, or Costco can/will/do sell it, it's probably not profitable. There are of course exceptions to this rule but not many, at least when it comes to brick and mortar retail environments.

· If you're gonna import stuff from china, go over EVERY scenario ahead of time. Trust me; you'll thank me if you do this. If you have to, hire someone who is bilingual (that you trust) to look out for your interests. Doing business with China is very profitable but you can lose your ass very fast.

Lastly, I want your feedback. You have no idea how many countless hours of sleep I’ve lost wondering what I could have done differently, what strategic move that was obvious did I ignore?? Please, no ‘know-it-all’ comments. You guys don’t help anything succeed or grow other than your own egos. Obviously hindsight is 20/20 but with that in mind, what did I miss?? Any good natured feedback would be greatly appreciated.

bg