Doing well in bad times

Some small retailers were able to change course before holiday, head off economic crisis

December 24, 2008|By Andrea K. Walker | Andrea K. Walker,

What could have a been a miserable holiday season for Smyth Jewelers isn't going to be so bad, thanks to some creative thinking by the owners last summer.

When sales started to slow at the small, 94-year-old, family-run company, it began a gold buyback program, purchasing old jewelry from customers and melting down the gold. Many customers then used the cash to buy new jewelry from Smyth - helping the company to better weather the recession and slow holiday shopping season.

"Our guys were on top of things," said Ruthann Carroll, director of advertising for Smyth, which has stores in Timonium and Annapolis. "We tried to do things so we weren't caught off-guard at the last minute."

Independent retailers are suffering just as large department stores and big-box retailers are, as panicked consumers cut spending. The holiday season by many estimates is shaping up to be the worst in years.

But small retailers in some cases have also been able to adapt to the tough economic times better than larger retailers by lowering their prices, changing their assortment or reorganizing the employee structure. Their small size makes it easier to change course, analysts say. Others are benefiting by offering a niche product or capitalizing on a loyal customer base.

While many small retailers are still suffering and could go out of business as soon as next month, others are doing surprisingly well, or at least better than expected.

"Smaller retailers tend to have more loyal customers," said Tom Saquella, president of the Maryland Retailers Association. "Their customers aren't necessarily shopping for the cheaper price. They like the store. That does well for them in this type of environment."

Daedalus Books & Music said its sales are as strong as last year's as consumers seek them out for cheaper gift alternatives. The Columbia-based book company, which also has a store in Belvedere Square, has lower prices because it sells overstock and "remainder" books - the excess inventory that publishing houses sell at discount.

"We do well in an economic downturn," said assistant manager Kini Collins. "We're not having to cut any of our normal business expenses to do what we do."

Small retailers, particularly in urban downtowns, also offer a shopping experience that isn't found in a typical mall, retail experts said.

"People are looking for something different where they're not parking in a garage and going to see the same things they can see everywhere," said Nan Rohrer, vice president of economic development and planning for the Downtown Partnership.

The owners of B. Fabulous and Pink Silhouette, clothing and gift boutiques in downtown Bel Air, have also enjoyed a brisk business despite the economy. Sales are up 30 percent at Pink Silhouette, said owner Susan Patti. Sales are also good at B. Fabulous, which opened this year.

Patti, who runs the stores with daughter Christina, said they fill an upscale niche in Bel Air. The boutiques carry designer brands that cannot be found at other retailers in the immediate area, such as Michael Stars and Lily Pulitzer. They are also among the area's few boutiques in the midst of many similar big-box shopping centers.

"We've had a need for some time in Bel Air for nice stores and a nice street," Patti said. "It's become in vogue now to shop the small, quaint shops where you get that special attention."

Because independent businesses are small, they are also more nimble, capable of changing their inventory strategy.

"They are more flexible and able to scale back and rearrange their merchant assortment," said Jie Zhang, an assistant professor of marketing and the Harvey Sanders Fellow of Retail Management at the Robert H. Smith School of Business at the University of Maryland. "They should take advantage of the fact that they're small and can be more flexible."

Nouveau Contemporary Goods Inc., a furniture and home goods store in Belvedere Square, quickly changed course this summer as the housing market decline meant that people cut back on decorating and furnishing their homes.

"We knew to have a good fall we had to do a retooling of the stores and our merchandise," said co-owner Steve Appel.

The owners began looking for lower-price gifts - in the $25 to $30 range - that they could sell during the holidays. They found that vendors, also struggling with reduced demand, were lowering their prices as well. The strategy has worked, and Appel said the store is selling more items than last year, though profit is about the same because of the lower prices.

"Our sales are right on track with last year," Appel said. "We may even hit a little above, depending on how the week after Christmas goes."

Being small also comes with some disadvantages. Larger retailers are often better able to negotiate lower prices with vendors because of volume. Larger companies also keep more cash reserves to be able to buy new inventory. Smaller business often must sell most of what is in the store to make cash to buy new inventory, Zhang said.

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