Indys Buck Tide

Mar 1, 2009

Examples of independent merchants that are weathering choppy economic waters better than their giant retail brethren continue to be reported in many parts of the country. That is primarily because of their ability to be more flexible in merchandising and management decisions.

Tens of thousands of stores across the U.S. are expected to shut their doors this year, amid the continuing recession. Here, however, are examples of retailers in and around Birmingham, AL, who say the gloomy predictions don't tell the whole story, even though the economy has already claimed casualties in the form of big box retailer bankruptcies, including those with stores in Birmingham.

The current storm isn't necessarily driven by an actual need to pinch pennies, according to Bob Robicheaux, a retailing expert at the University of Alabama at Birmingham. "It's become cool to stop spending," he said. "People are saying, 'I'm just not going to spend like I used to. I'm going to buy a cheaper brand of clothes, stop buying name brands at the grocery store,' but it's all driven by psychology." Robicheaux and J.L. Shaia, who runs Shaia's men's clothing store in Homewood, AL, are both cautiously optimistic about the coming year's prospects for Birmingham's retail scene, despite national forecasts that project major bankruptcy filings and massive closings. For Shaia, the shop his grandfather opened in 1922 kept pace with 2007's record sales results for the first 11 months of last year.

But December was tough, he conceded. At the time of this report, it was too early to predict the full January outcome, but Shaia reported that customers flocked to a sale at the store that started on January 3. Shaia's has seen ups and downs for 87 years, he said, and during that time, the family business has learned to quickly adjust to changing market conditions and consumer preferences. That gives him and other independent merchants an edge over national retailers when the economy turns sour, Shaia said.

"We are much more flexible and can turn on a dime, adjust to conditions," he said. Shaia also credits the store's loyal customer base, something that the big names can't always claim. "Where it's strictly a matter of price, those customers are not going to be faithful," he said. Shaia blames a constant barrage of gloomy economic news for a lot of people's unwillingness to spend, and says he's facing the new year with a positive attitude. "I can't go into 2009 with my tail between my legs," he reasoned. "I've got to be enthusiastic for my employees and my own peace of mind."

Robicheaux also sees confidence, or lack thereof, as the reason behind consumers' changing spending habits. While some people have lost jobs and other income, far more are secure in their finances and reacting out of fear, he suggested. The recession itself was triggered by real economic maladies, including the subprime mortgage crisis. But, "there's absolutely no reason in the world for the consumer to stop buying Toyotas to the rate of 35 percent less than last year," he said. Robicheaux cited the Japanese automaker's December 2008 sales results as an example of the deep losses automakers and retailers are experiencing amid historic lows in consumer confidence. "For most households, there's more fear than there is loss of income," he said.

"The average American is just so aware that we're in financially bad times that everybody's cutting back, and frankly, while some cutbacks and savings are going to be good for some households, some of these households that are already secure are cutting back so radically that we're driving ourselves into a deeper recession." Such radical spending cuts are hurting retailers, and the typical one is in a cash bind these days, dealing with merchandise left over from the holiday season and facing the prospect of having such outdated items on the shelf come spring. Some stores didn't even make it into 2009 before buckling to bankruptcy.

Among those with Birmingham locations that have closed or are slated to close are KB Toys and Linens 'N Things. Circuit City, which has closed its Trussville, AL, location and canceled plans for a U.S. 280 store, is reorganizing.

Enroute to New York to attend the National Retail Federation convention in January, Robicheaux expected the mood to be somber and said he felt like he, "was headed to a large wake." But he also anticipates a lighter mood later this year. "I think that if we begin to see some light at the end of the tunnel, maybe by mid 2009, consumer confidence will begin to grow, the stock market will come back up a little bit, and then we can look forward to a healthy 2010."

While the national chains buy for a list of store locations, he pointed out that merchants like Shaia markets for a specific area. "From a merchandising and management standpoint, it makes a lot more sense that the independent merchant can survive," he concluded.

This article was edited from a story in The Birmingham (AL) News.

Topic: Business Strategies

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Article ID: 944

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