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Holidays challenge independent stores further

This holiday season independent merchants are being pressed more than ever to capitalize on what sets them apart from the rest of the retail universe
Small Talk
"I used to worry about the sales, and it's not worth it," Kids Country Toys owner Jerry Strick says. His store offers customer service that bigger chains don't match.Bob Bird / AP
/ Source: The Associated Press

At Jeff Cassels' jewelry store, falling real estate values and rising gold prices are more than news headlines — they are contributors to an uncertain holiday season. At Joanie McDonald's clothing store, however, a weakening dollar is turning into a boon.

This season finds independent retailers across the country dealing with a new set of economic challenges even as they still contend with growing competition from big-box retailers like Wal-Mart Stores Inc. and Borders Inc. That means merchants are being pressed more than ever to capitalize on what sets them apart from the rest of the retail universe — merchandise that's unique and well-suited to a store's clientele, and customer service that's beyond the ordinary.

Customers of Kid Country Toys, two specialty toy stores in Charleston, W.Va., can dispense with the screwdrivers and bandages usually needed to put tricycles and other toys together. Owner Jerry Strick said his staff will assemble purchases free of charge. Toys can be gift wrapped as well.

Strick, who's been in business 35 years, uses services that Wal-Mart and Toys "R" Us Inc. don't provide to draw customers to his store. And he stocks brands that the big chains don't buy but that his customers want.

He's upbeat about this season, partly because business is up slightly from 2006, but also because he's learned over the years not to sweat it. So he doesn't believe layoffs in the area and recalls of some toys made in China will have a big impact on his business.

"I used to worry about the sales, and it's not worth it," Strick said. "The population in Charleston has gone down, the competition has gone up, and we still hold our own, so I really don't worry."

But Cassels, who owns GB Heron in Salisbury, Md., is worried about the season, having watched real estate problems grow and his sales decline.

"I don't expect good things," Cassels said. "We were down about 14 percent headed into the Christmas season."

Cassels said that with customers paying more for necessities like gas and food and worried about home values, "I'm pretty much last on the line" of spending priorities — especially since the price of gold has shot higher in recent months, crossing $800 an ounce for the first time since 1980.

"The only thing I am doing well is selling engagement rings — people are still in love," he said.

But selling custom-designed jewelry helps business, because that GB Heron apart from other retailers. To lower his costs, Cassels recently bought equipment that helps create the jewelry faster.

Cassels, who's in his 19th year in business, says he never knows until Christmas Eve how the season has fared. It's a hard wait: He does 25 percent of his annual business between Thanksgiving and Dec. 25.

The depressed real estate market in Nevada has hurt Jody Branson's gift shop, Fresh Ideas, in Gardnerville, located near the state capital, Carson City. Sales are down about 10 percent from last year.

"There's a lot of real estate agents and homebuyers who would come in, but they don't have the money to spend with (housing) slowing down," Branson said.

But she said, "I'm not letting it get me down — I can't complain at 10 percent, where there's another store that's closing" nearby. Moreover, Branson said she's built a reputation with customers: "People know what we have and people always come back."

Sometimes a negative for the economy, such as a weak dollar, can help retailers.

Joanie McDonald, who owns Jennifer Reale Design, an upscale women's fashion boutique in Delray Beach, Fla., hears from other retailers that business is slow and hopes are dim for the holidays. At her store, however, "business is good and I'm expecting a very strong season."

McDonald said her success is coming from the foreign tourists who have been streaming into Florida to take advantage of currency rates as well as the sun and sand.

"I had a group of women in my store today that spent $500," McDonald said. "I'm very impressed with the number of foreigners we get in and the money they're spending."

There are Borders and Barnes & Noble Inc. stores in Austin, Texas, but Steve Bercu, CEO of BookPeople, a huge store in the capital's downtown area, has few if any concerns.

"We've had our best season in store history each of the last seven years and I'm expecting this year to be another really pretty good year," Bercu said.

BookPeople differentiates itself from the chains in several ways. It offers a big selection of gifts alongside its massive book inventory; Bercu estimates gifts account for 30 percent of revenues. It also has developed its own offbeat culture — BookPeople is a proponent of a tongue-in-cheek movement called Keep Austin Weird — and uses it as a marketing tool.

"We have a looser view of things," Bercu said.

BookPeople also holds programs that go beyond the typical author signings. It holds literary day camps for children of different ages, hoping to create a new generation of customers.

Being different has also helped keep Plum, a Harrisburg, Pa., women's clothing store in business for 40 years, and owner Isaac Mishkin expects that to help him through a sales slowdown that has also afflicted other retailers in the area.

"Our year was fine until two months ago and then had what I'd say is a 10 percent decline," said Mishkin, adding that sales look like they're picking up now.

What has worked for him is to stock clothes that are different from competitors', especially the national apparel chains. Mishkin's clothes are moderate to upscale, and he'll buy merchandise, including some suits that can run $800 to $900, with groups of his customers in mind; by knowing what they're looking for, he buys clothes he knows he can sell.

He's expecting sales to bump higher as the season progresses, but the difficult environment will likely shave his sales and margins somewhat.

"When it's all said and done, we'll probably end up a couple percent in sales and down a couple percent in profit," he said.