When to Consider Selling a
Product With Thinner Margins
Dear Friend,
I was really surprised at the number of emails I
received in response to to my last update about
MARGINS on cart or kiosk products!
If you missed it, here is a link to it:
http://www.kioskexpert.com/red-flag-051706.htm
***
One of the emails I received was from Max James,
CEO and President of American Kiosk Management.
Max is one of the true 'SUPERSTARS' in the cart and
kiosk industry. His company owns and operates
OVER 370 locations cart locations.
According to his email, they hit over $120 MM in
sales last year, and expect to exceed $160 MM this
year!
Max's carts sell a product to help prevent acne. It's
a nationally branded product that is advertise on TV
via infomercial.
Here's what Max had to say:
'I don't necessarily disagree with you, but there are
exceptions.'
'We are not opposed to picking the RIGHT product
lines at 'keystone' IF the volume is there.'
Just as a reminder, a 'keystone' margin means you
pay 50% of the retail price for your inventory.
i.e. You buy it for $25, and sell it for $50.
With MOST cart or kiosk products its very
DIFFICULT to be profitable if you have to pay
anything CLOSE to a keystone margin.
***
'.....if the VOLUME is there.'
When you find a product with 'thin' margins, it
should raise a 'red flag'.
But avoiding a product with lower margins is NOT
a hard and fast RULE.
As Max pointed out, there ARE exceptions.
***
When would you consider a product with
'thinner' margins?
One exception can be when you are selling a
product that offers higher sales VOLUMES.
We see stores like Target and Wal-Mart buy an
item for $6, and sell it for $8....or even LESS.
They make up for the lack of margin through
sales VOLUME.
They do so much in sales volume that they can
survive and THRIVE on razor thin margins.
***
Of course NO cart does the kind of sales volumes
that THOSE huge retailers do.
But there ARE cart and kiosk products that CAN
generate higher sales volumes - and can survive
with thinner margins.
One subscriber to my newsletter sells a unique
brand of footwear in a kiosk.
Even though she has to pay almost 50% for her
inventory, she sells enough (over $40K per month)
that it is worth her while.
Another cart in the Mall of America sells a unique
kind of expensive body jewelry.
Even though this customized jewelry costs them
MORE than 50% to make, they generate enough
sales volume to make the concept is profitable.
***
In Max's case, his carts sell a system to prevent acne
that is advertised on TV via infomercial.
Those infomercials help create brand recognition
of the product, help 'pre-sell' prospective customers
on the product, and help drive sales volume.
With 370+ carts and over 120MM in sales, it looks
like its working for him.
***
It CAN BE worthwhile to keep your eye out
for these exceptions.
Who knows? Maybe YOUR exception will be
the NEXT 100 Million Dollar idea!
However until then, look to sell cart and kiosk
products with healthy margins.
***
And be profitable!
Brady Flower
P.S. Where do you find cart and kiosk products
with healthy margins?
Specialty Retail Report magazine.
Click here to subscribe:
http://www.kioskexpert.com/srr.htm
