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A man wearing a black balaclava grabbed cash from a shop till before threatening staff in a reported robbery.
Police were called to the incident at a convenience store in Bellevue Road, Ramsgate, at about 10.40pm yesterday.
Members of staff went outside and locked the man in the shop, but let him go after he made threats towards them.
The man, who was carrying cash in one hand and a black bag in the other, then ran down the alleyway opposite the shop towards Cottage Road, where he was detained by members of the public until officers arrived.
Money and a knife were recovered and a 33-year-old man was arrested on suspicion of robbery and a racially aggravated public order offence.
He remains in police custody and detectives are appealing for witnesses.
Investigating officer detective constable Kerry Whiting said: "We would like to hear from anyone who witnessed a man standing outside the shop shortly before the robbery took place.
"We are also very keen to hear from the members of the public who helped detain a man in Cottage Road and who haven's yet spoken to us."
If you can help, phone police on 01843 222289 or Kent Crimestoppers anonymously on 0800 555111 quoting reference number ZY/34058/18.