Hard times make marketplaces work

Merchants have long gathered at flea markets and other types of venues to sell their wares.

But with fewer people able to afford the startup costs of a new retail shop, these types of setups are drawing renewed interest.

Demand is high, said Mark McKnight, senior business counselor at the Small Business & Technology Development Center.

For small business owners, it's a cheap way to open shop. For landlords, it's a chance to fill space.

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"People are a little more cautious," McKnight said. "On the other hand, people are losing their jobs, which forces people into looking into whether they can make a go of a business of their own."

For those who want to test the water, space in a marketplace can make opening a shop affordable when startup loans and credit are hard to come by. There are no utility bills, no insurance needed and no long-term lease.

Renee Smith took the plunge after being laid off in October by Prince Telecom - a subsidiary of Time Warner Cable.

She's never had a job in retail but wanted to open her own shop selling jewelry, purses and ladies' accessories. She figured she would use her tax refund, $4,200, to bankroll the shop.

"This is my second layoff, and I figured I wanted to do something different to be more in control of my own destiny," said Smith, 37, who lives in Clayton.

She explored what it would cost to open her own store but found that even the cheapest rent of $600 a month would be too much.

"I would have had to almost triple in price the cost of the merchandise just to fill [the store] up and keep it running," she said. "It was just more than what I was wanting to put into it, especially given that it's something I've never done before."

Then she learned about the Carolina Marketplace in Raleigh. As a tenant, Smith pays just $50 a month to rent a spot and set up shop. Her only other overhead is the cost of her merchandise.

That will make her startup money stretch much farther.

"Without the opportunity to put into the marketplace," she said, "my business would have had to be put on hold."

Tough competition

Still, that's not to say the marketplace format is a stress-free solution that works for everyone.

There's competition - and lots of it - from shopping centers and malls, flea markets such as the one at the N.C. State Fairgrounds and even yard sales.

Marketplaces also suffer from frequent turnover, lack of foot traffic and trouble with publicity. With dozens of merchants clustered in one building, it can be a confusing shopping experience, and one that turns off some shoppers.

Still, merchants and landlords are hoping that shoppers at least give them a chance.

In Garner, Clark Womack opened the Garner Marketplace in December.

A commercial real estate broker with Commercial Associates in Raleigh, Womack first tried to rent the 11,000-square-foot space. But the space - in a shopping center on N.C. 50 near the intersection with U.S. 70 - sat empty for six months.

"Everybody was either, 'I've gotten laid off or I've always wanted to open this.' But then when they start looking at three- or five-year leases and insurance and advertising and startup, it was a bit too much."

So Womack signed the lease himself and started spreading the word. He now has rented space to about 24 vendors. He also has additional space where he rents temporary spots by the day or by the weekend to people who are looking to get rid of some items or host a fundraiser.

"Instead of 5,000 or 10,000 square feet, I'm now negotiating for 15 feet," he said.

Merchants sell everything - collectibles, clothing, DVDs, hand-knitted quilts. One young girl and her parents have set up a booth selling homemade candles, while others sell furniture. There's even one person operating an alterations business.

So far, Womack has relied on word of mouth and advertising in local newspapers. Though foot traffic has been slow, he said, he still thinks the center will gain momentum as more vendors open and more shoppers discover it.

"More and more, each week, it seems like we're starting to get some people I see in here regularly," he said. "It seems like every weekend we get, 'I didn't know you were here.'"

As long as there are business owners willing to rent space, Womack said, some profit on the space is better than no profit. Plus, he's building relationships with people who might become future tenants if they ever do open a solo shop.

A mom and pops haven

"I don't see how a lot of the mom and pops can do it otherwise right now," he said. "I don't know where they go."

Nancy Anderson was thinking along the same lines when she chose to open the Carolina Marketplace on Brentwood Road in Raleigh. So far, she has three tenants. Ten others have put down deposits. There's room for another couple of dozen.

Anderson converted the showroom of her interior design business into the marketplace because the showroom wasn't needed since the recent decline in home sales.

Big space makes money

"I've spent probably about $2,000 to start the Marketplace," she said. "When we moved in here, we spent $200,000 to update the space. I'm protecting it and making some money back on it."

There are very few options for larger spaces, other than dividing them into smaller stores, which takes money, Anderson said.

"I don't know what else it could be other than like a banquet hall," she said. "Someone said, 'Oh make it a dance club.' It's got 22-foot ceilings."

The situation is more than perfect for people such as Pat Parrish, a retired plumber who wanted to take his eBay coin business to the next level and open a coin shop. But he found that rent for most stores would make his business unprofitable.

"I found a nice place I could get for around a grand a month, and most places were more than that," said Parrish, a Garner native.

Since he still gets some income from a plumbing business he partially owns, he was simply looking to supplement his income with his coin business, making the marketplace in Garner a better fit.

Parrish's shop has been open there for only two weeks, but he said that so far walk-in traffic has been enough to successfully supplement his eBay business.

"It's dirt cheap compared to paying regular rent, and you probably do about as well here," he said.

Still, regardless of the venue, any retail business takes dedication and planning, said McKnight, the small business center counselor.

"It is very difficult," he said. "It's a tremendous amount of work, and you have to absolutely love it."