Opening a Mall Store: 8 Major Lessons
In June 2018, Paddle North opened a new retail store at the Mall of America. We're now a little over 100 days into operation and have learned a lot. The learning curve was big, as this was our first "official" retail outlet within the walls of a traditional mall environment.
Here are a few of our major takeaways:
1. Test before signing a long contract
Prior to opening our store at MOA, we had done a handful of short-term kiosk locations at other malls. We know that getting our products in front of people positively impacts sales, but still had reservations and were uncomfortable with a traditional 3-5 year retail space contract.
We approached the Mall and learned something cool. They sometimes have fully ready retail spaces that are in-between long term contracts, and are anxious to fill them on a short-term basis.
For example, our current space has a corporate mall customer lined up to take over in early 2019. When we approached the mall in February of 2018, they were open to leasing the space to us without a long term commitment. We originally signed on for three months, and were so encouraged by the results that we extended for the balance of 2018.
The upside: We were able to "prove" that our store concept is profitable with limited risk.
The downside: We'd like to continue our mall presence, but are now in a space that already has commitment for 2019. Time to look for another spot!
2. There's a thing called "break point" in most mall contracts, and it needs to be looked at carefully
Break point was a new concept to us, but it seems to be standard practice within mall operations. Each mall has their own formula to calculate break points, which is an agreed upon total sales number. Once sales revenue reaches or goes beyond the break point, you pay the mall a percentage of sales in addition to monthly rent.
It is very important to get this number right. A low break point with a high percentage can significantly reduce profit potential. Since we have a higher dollar/lower profit product line (often $1000+ transactions), the standard Mall of America break point formula wasn't great for our business model.
It's very important to come to a mutually beneficial agreement that maintains profitability for your business, while still making it worthwhile for the mall to have you as a tenant.
While a break point may seem like an overly negative part of mall agreements, being tied together in success can be beneficial. The more we sell, the more money both organizations make, which provides more incentive to the mall staff to help ensure the store prospers.
We have seen this from the MOA team. Their visual merchandising and PR staff has supported us in many ways. From lending us mannequins and store props, to providing guidance and best practice examples - we have had nothing but positive interactions and enjoy the generous support the mall provides.
3. Be open to change
Our shop has changed a lot in the first 100 days and will continue to evolve as we push into the coming Holiday season. It's critical to be open-minded to feedback and embrace change.
We originally drafted a mock-up of what we envisioned the store to look like, but when we were finally handed the keys and moved everything inside, our final product changed significantly.
Some fixtures that we spent a lot of time custom building didn't really make sense for the space. We simplified, redesigned, and replaced many of them completely.
The front window display has changed about a dozen times. We are always watching customers reactions, what brings them into the shop, and what captures attention. We then adjust accordingly.
4. Inventory planning is harder than anticipated
We had (and HAVE) major inventory struggles. As of writing this article, we are currently out of stock on at least 50% of our T-shirt sizes, and even some of our board models. We're learning, but constant growth means constantly being out of certain products as we catch up. Estimating the right levels of inventory with sales projections while keeping a watchful eye on cash flow is like playing a high-risk investment game.
The mall is far from our only sales channel, but we significantly underestimated it. In August, we participated in the Minnesota and Wisconsin State Fairs, and these events also required A LOT of inventory. Strong sales in those locations put us on back-order for many weeks at MOA throughout several product lines.
There is nothing more frustrating than going through all the work of opening a store and not having enough inventory to support it. Unfortunately, we've lost a significant amount of sales through lacking inventory on hand.
Seems like an easy fix, right? Well, it's complex and hindsight is always 20/20. The cash required to open the store already put us in an uncomfortable position, and the lingering question "What if it flops?" was very much in the forefront of our minds.
5. The right staff will make or break the store
We were fortunate to find a group of people willing to stamp their name on our store and provide exceptional customer experiences.
At the start of every interview, we stressed the importance of trust and integrity with our staff. We consider it non-negotiable. Our entire team came from referrals of friends, family and other employees. Having character recommendations really helps our hiring process.
Having trusted employees means cash transactions won't end up "short-changed" in the register. It means that store patrons get treated the right way during every single interaction, and no time is wasted.
Day-to-day operational processes can be trained, but being a person of integrity cannot.
6. Get organized and build processes early
For the first few months, we did not have a clear plan on how to clean the floors, organize the back room, throw out garbage, logically stock inventory, re-apply price tags, etc. Things grew chaotic very quickly.
And that's OK.
Some of it was through poor planning, but some was also learned through experience. After 100 days in, we have much better organization, a Shop-Vac and a Swiffer! Whoever is closing now has a checklist of items to go through before locking up.
Many aspects of our business operate this way - shoot first, ask questions later. However, it's very important not to "sleep" on process improvement side. It's easy to get in routines and set a standard below expectation, but much harder to pursue improvement. As we grow, this continues to become more important.
This drives us back to point #5: The right employees will make or break the store. Hire people that want to drive advancement. Put people in place that can see what needs to be done, and actually do it. We can't stress this enough.
7. Consistent traffic is fun and addicting
We are officially addicted to running a store. It will be hard to shut the doors down at the end of the year, but we are super excited to start the search for our next space, using what we've learned here.
The mall's traffic has changed our business in a big way. It creates a strong foundation of sales that we can rely on with greater consistency. We are forced to be better, plan with more thoughtfulness, and perhaps greatest of all, allows us to expand our team with some really talented people. These individuals have brought entirely new skill sets to our team that influence many other areas of our business.
8. Jump, and then figure it out
Our first meeting with the mall was intimidating. The work involved was definitely underestimated. We knew it would be hard, but had no idea how hard.
This was a "jump into the deep end" type decision that required a tremendous amount of trust in our team. We spent crazy hours, late nights, and had a ton of frustrating moments.
At store opening, it was well below our original expectation. But we stayed committed to improving it over time. And today, it's in a pretty great spot!
We are pumped to enter the upcoming holiday season and can't wait for you all to visit us at Mall of America.
-Peter & Matt