Retailers fight to survive Merchants: The owners of small businesses must withstand numerous blows from without -- and within -- as many of their woes are caused by their own poor management.

August 26, 1996|By Alec Matthew Klein | Alec Matthew Klein,Dun & Bradstreet Pub Date: 8/26/96 SUN STAFF

The merchant moves from one task to another like a shark that can survive only in perpetual motion. No lunch buy merchandise track inventory ignore fatigue. Go, go, go.

But in a lull at 12: 08 p.m., Judith Taylor Orlinsky eases into a smile. Over are those desperate days when she hired a young man to stand at the side of a busy Baltimore thoroughfare, dressed as a samurai, wielding a katana killing sword and a tanto knife, waving at speeding cars -- anything to catch the attention of potential customers.

"We were in trouble," she said, "right from the beginning."

From a $58,000-a-year salary as a state lobbyist to a self-imposed $600-a-month wage as a small retailer, Orlinsky has come to this: $145,000 in the hole. But hers are the ordeals of small merchants nationwide -- a series of mishaps heaped on top of calamities snowballing into disasters, all in the name of profit, independence and the simplicity of sweeping the proverbial door stoop.

In a pyrotechnic age of big business, shopkeepers have sustained their way of life, remaining a vital cog in the economy. Small businesses, the bulk of them retailers, employ almost 60 percent of the nation's work force, account for about 54 percent of sales and contribute 40 percent of gross domestic product. "In short," President Clinton said in a 1994 address, "a great deal of our nation's economic activity comes from the record number of entrepreneurs living the American dream."

But the merchant's dream is pursued at a greater risk than ever before. Facing the relentless march of mass merchandisers, small retailers are shrinking in numbers, and those that survive typically do not hang on for long -- nearly a third fail within 36 months.

Japonaji, Orlinsky's Japanese crafts boutique, is especially vulnerable in Baltimore even as it marks its three-year anniversary this month: The South Atlantic region absorbed the sharpest rise in debt -- 135 percent -- associated with business failures last year, according to widely followed figures compiled by Dun & Bradstreet Corp. Maryland felt the brunt with 466 merchants failing, up nearly 50 percent over the previous year.

"No one disputes that failures for small businesses are much higher," said Frederick C. Scherr, editor of the Journal of Small Business Management. " It's pretty tough."

DFor Orlinsky, it's an unending trial -- 60 hours a week in her shop, another 10 to 20 hours when she pulls down the storefront shades, always a synapsis away from error. Even at 12: 12 p.m., when she fires up the computer: "These things are wonderful if you know how to use them," she said.

Orlinsky didn't. And the computer -- an elaborate system linked to the entire operation -- crashed, wiping out all her inventory and pushing the store to the brink of collapse just before its grand opening in August 1993. The toll: more than $70,000 in equipment, consulting fees and a yearlong court battle with the computer supplier.

"It was OJT -- on-the-job training," she said. Suddenly, there were bills, orders, promotions and mailing lists. Perhaps worst of all, she was her own boss: "I'd yell at myself all the time."

For good reason. Before moving to Fells Point in May, Orlinsky had set up shop on Falls Road, on a heavily traveled but hardly accessible strip on the city outskirts. She dished out $47,000 to knock out a brick wall for a front door and glass window, but her landlord reimbursed her at a $17,000 loss. She spent $60,000 in her first year on advertising, including an 800-toll-free number and a 24-hour secretarial service to field orders for Japanese water gardens. She sold five, maybe six.

And then there was the store sign, a black metal-framed behemoth planted on the edge of the road -- but in the way of another retailer's sign. Hauled to a second spot, the sign promptly blocked another retailer's sign. Moved a third time, the sign stayed clear of other businesses -- and the view of virtually every potential customer.

Every mistake that a small retailer could make, Orlinsky seemed to stumble into, picking a poor location, buying costly and sophisticated equipment and misplacing advertisements. All cardinal sins. All self-inflicted. And all too familiar to the industry: "Bad management is 90 percent" of the cause of business failures, said Joseph W. Duncan, Dun & Bradstreet's chief economist. "It's not fraud, it's not economic forces. It's bad

management."

'A losing proposition'

Orlinsky, however, has survived her mistakes -- so far. And the distance of time is reassuring, even at 12: 52 p.m. on a day with a trickle of customers, few sales and an occasional call from that bane of retail existence, the bill collector.

But it could be worse. It could be the spring of 1995 when her accountant Ronald Ellison prepared her taxes and noted: "Maybe this is a losing proposition."

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