Putting the carts before stores yields benefit in world of malls.

MATT Sebree isn't shy about his ambitions. He wants to revolutionize the business of vending carts.

Sebree, director of specialty leasing for Caruso Affiliated Holdings, knows his enemy well: packed malls teeming with kitsch-crammed carts. "It is the same product pretty much every place," he said. "The consumer gets bored with it after a while."

In looking for new cart tenants, he avoids scouting other malls, instead going to hip boutiques. That's how he got Los Angeles-based Industry Rag, which sells vintage clothes to networks and movie studios, to sign up for a cart at the Grove.

Vending carts are no small matter for shopping center operators, who can generate over $1 million a year for each of their malls--and without long-term rental contracts that can tie landlords to failing retailers. That's made cart vending, often referred to as specialty leasing, a $10 billion annual industry, a threefold increase from 10 years ago, according to Specialty Retail Report, a trade magazine.

"There has been an evolution in the industry due in part to mall operators who have embraced specialty retailers," said Patricia Norins, the magazine's publisher.

With specialty retailers now a staple, mall operators are seeking to reinvigorate their cart programs and attract shoppers tired of the run-of-the-mill. It's happening at a time when newer, lifestyle center malls are punctuating the shopping experience with entertainment and dining elements.

In general, traditional brick-and-mortar retailers aren't thrilled at this development. They worry about crowded common areas and chintzy merchandise that can cheapen the overall center and bog down traffic. But it can work the other way, too.

At the Westfield Fox Hills shopping center, David Oliver, owner of a dress and sportswear store called Ames, said the proliferation of cell phone carts and other vendors gives the mall a bustling look. "I think people are attracted to busy places," he said.

Loading carts

Mall operators have various cart strategies. Sydney, Australia-based Westfield Group, which has 10 L.A.-area malls, is known for jamming in as many carts as possible and loading up the hallways with seasonal items. Ted Kaminski, director of specialty leasing at Westfield America, declined comment.

At the Grove, there are 20 carts, and Sebree is not looking to put in any more. Too many, he said, can cannibalize each others' sales and block sight lines to the traditional retail stores.

Sebree said he picks up a few seasonal carts hawking Christmas or Halloween goods, but generally sticks to the ones stocking the latest fashions. He's also careful about placement: Unlike malls that utilize every inch of open space, Sebree puts carts next to certain shops to maximize sales for both merchants.

Near the Grove's Nordstrom store, for example, there's a Spa To Go cart because Sebree believes Nordstrom shoppers are a target audience for spa items. Near children's apparel store Janie and Jack, there's a cart carrying baby shoes. "We really try to complement what is missing from a merchandizing standpoint is in our stores," said Sebree.

If a cart doesn't rack up safes, it usually doesn't last. While permanent retailers are on long-term leases that can last eight to 10 years, cart vendors usually sign month-to-month deals. At the Grove, cart vendors typically sign three-month agreements. The short leases allow mall operators to rotate in seasonal items during the busy holiday period.

Last year, Ann Arbor, Mich.-based book seller Borders Group Inc. placed 800 calendar carts in malls nationwide. "Essentially, we provide a service for products that are in demand for a specific period of time," said Holley Stein, a Borders spokeswoman. That has worked well for Borders, with cart sales increasing up to 30 percent since the company started cart vending in 1993.

During the holidays, Norins said a cart can bring in $30,000 in profits. The rest of the year, a good cart can generate about $16,000 in sales per month, according to Deborah Kravitz, co-owner of Sherman Oaks-based Provenzano Resources Inc., which operates the Santa Monica Promenade cart program.

Bigger players

It's not that cheap to get started. At the Promenade, monthly rent ranges from $2,000 to $2,300, although Norins said she's seen rents soar to $4,000. On top of the rent, merchants must pay the mall operators a percentage of the action (there's a base fee of 15 percent of expected gross receipts at the Promenade). Vendors also have to stock the merchandise and pay a security deposit.

Partly because of the costs, one-person operations have been replaced by bigger retailers, especially when permanent space at a mall is unavailable. While wait lists have popped up for some carts--the Grove has no openings--it's still easier to get a cart than a permanent retail location.

Today, about half the carts at the Grove are single operators, while the rest of the cart vendors have multiple locations. Nationwide along with Borders Group, Round Rock, Tex.-based Dell Inc. and Orlando, Fla.-based Tupperware Corp. have extensive cart programs.

Kravitz said the industry began changing when cell phone companies got interested in carts. That jacked up rents for smaller vendors. "There were a lot of bidding wars. I would say rent was boosted a couple hundred percent in some locations," said Kravitz.

Most malls began to hire specialty leasing and cart merchandising experts to ensure the cart programs were professionally managed, but that had the effect of homogenizing the niche, making many of the carts look alike.

Such staleness is what Sebree wants to change. Because cart vendors don't have large inventories, merchandise can be churned quickly, and it's possible for carts to keep up with the latest trends. That's what Sebree expects the Grove carts to do.

"People are shopping more and more at carts because they carry things that are unique, things that are not carried in the mainstream stores," he said. "That is really where the industry needs to go."