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Growth Strategies: Cart Tricks

Two brothers define new uses for the old pushcart sales concept.
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Carts of Colorado Inc.

Stan and Dan Gallery, now 31 and 35, respectively, are not old enough to have invented the pushcart, but their company, Carts of Colorado Inc. (#431), sells more of them than any other company in the United States. What the Gallery brothers did invent was the "mobile merchandising system," a reason for customers with big checkbooks -- such as Coca-Cola, Marriott, and Walt Disney -- to buy their "mobile vending sites." In other words, the Gallerys sell lots of carts because they've defined a new retail niche and figured out how to service it.

Here's what happened. About nine years ago the brothers bought a couple of hot-dog carts in New York City and brought them west. From their initial $3,600 investment, they generated $300 to $400 per day per cart at construction sites and $1,200 to $1,500 per day per cart working weekend outdoor events. Food costs ran about 20%. They figured the return would be even better if they made the carts themselves, which it turned out they could do for about $750 each. Soon Stan and Dan, along with various other family members, were operating a 15-cart fleet -- large enough to get the attention of Denver's health department, which threatened to shut them down for problems relating to the carts' alleged failure to keep foods hot or cold enough. The brothers redesigned the carts -- new cooling units, high-capacity burners, hot and cold running water. Then a man from San Diego who was buying a hot dog asked about the business. Impressed with the money they were making, he wanted to buy a cart. The brothers decided to ask $5,200, though Stan doubted they could get that much. The guy bought 3. "All of a sudden," says Dan, who made the carts in his garage, "we're manufacturers."

More than a dozen other companies already manufactured pushcarts. But the Gallerys distinguished themselves -- first, by thinking up nontraditional uses, and second, by pushing innovative cart design.

For instance, they've shown Pizza Hut how it can use carts to sell its products in corporate and school cafeterias. They've shown companies such as Oscar Mayer how to use profitable paid sampling from carts outside supermarkets to boost sales inside. They've shown multiscreen theater operators that patrons who won't queue up in crowded lobbies will buy high-margin popcorn and soda from carts that roll down the aisle.

Stan and Dan believe that manufacturing proficiency will be another factor in their ability to fend off future competition. Consequently, they are vertically integrating their 65,000-square-foot plant and upgrading their already sophisticated CAD/CAM system.

Creating market opportunities gives potential customers reason to buy carts from someone; aggressive product innovation, the Gallerys hope, will keep them buying from Carts of Colorado. Anticipating the time when customers will have large fleets of carts that will require servicing and management, CEO Stan and vice-president of sales and marketing Dan are already working on the "smart cart," which will use microprocessors and radio telemetry to keep headquarters apprised of hourly sales and inventory levels. Other software can tell headquarters how to deploy its carts at different times of the day or under various weather conditions.

"What we're really selling," says Stan, "are methods of doing business."

"It's the people who don't get the concept," says Dan, "who don't buy."

* * *

Niche: Food pushcarts

Strategy: Define new uses for an old product andconvince the big players they need your brand

Headquarters: Commerce City, Colo.

Revenues

1988: $6,831,000

1984: $881,000

Profits

1988: Loss

1984: $9,000 to $44,000 (est.)

Employees

1988: 80

1984: 4

Scope: Local, regional, national, international

-- Tom Richman




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