Area Retailers' Short-Term Outlook Much Of Same
OCEAN CITY - After a ho-hum holiday shopping season, retailers are starting to see just how dark the immediate days and months ahead just might be.
After what many in the nationwide industry are citing as the least profitable shopping season since 1970, area retailers are beginning to assess if consumers will continue to be as conservative with their dwindling dollars in 2009 as they were at the end of 2008.
'I think that people might have money to spend, but they are just scared to spend it right now, and they are definitely looking for the best deals, said Coastal Surf Supplies owner Deeley Chester. 'Personally, I think that retailers are going to change the way that they buy their products in order to adjust to the times.'
Chester's Coastal Surf Supplies, located in West Ocean City, is a wholesaler and distributor all over the United States and most recently have expanded service into Costa Rica, but its main service area remains the East Coast.
'We are in a different position as a distributor and one of only a few like us on the East Coast, but we are working harder than we ever have just to keep up our numbers,' said Chester. 'We've had a definite cutback in orders of probably 20 percent from customers, and probably five or 10 of our customers have closed their businesses altogether.'
Mark Pugh, co-owner of K-Coast in Ocean City, thinks the mid-Atlantic region will fare better than most but is concerned with the double digit number declines in the industry over the holidays all across the board.
'We were down 16.5 percent and from what I have heard, we have fared quite well in town. I expect the balance of the winter and early spring to be terrible but if the weather is good this summer and late spring I am still optimistic for local companies with good credit and good balance sheets,' Pugh said. 'Unfortunately, the rest may not make it.'
Pugh hinted that the necessary trend that his and other local businesses will probably follow is holding a smaller inventory comprised of reduced price pointed items and then offering deals to move the products.
'We have also lowered our price point and started a new •€˜value buy' program for 2009, passing the saving we get from suppliers directly on to our customers, generally, at 20 percent throughout the store. We are still committed to a full inventory as no one wants to shop at an empty store but rather one that still provides good value,' said Pugh.
In basically every category, national retailers saw huge declines in revenue with luxury items like jewelry and electronics taking the biggest dip at 34.5 percent and 26.7 percent, respectively.
Todd Ferrante, owner of Park Place Jewelers, which has a location on the Boardwalk and in the Ocean City Factory Outlets, said that his business, 'experienced about the same as what the whole country felt' over the holiday shopping season, but feels that things may start to turn around in the spring.
'No one is immune to what is going on in the economy and I think it's going to be a very slow first quarter for this year, but the first quarter is always the slowest in Ocean City,' he said. 'I'm optimistic that things will start to pick up in the second quarter and people who have been staying home all winter and being conservative with their money will want to get out of the house, come to town, and have a good time.'
Ferrante, president of the Ocean City Chamber of Commerce, said that Park Place Jewelers will try to draw customers with lower price pointed items and deals in order for folks to feel better about spending their money when others are tightening their proverbial belts.
'People who buy jewelry know they are making an investment in something that is going to hold its value,' said Ferrante.
While men's and women's clothing plunged, and furniture sales declined 20 percent, as well as a 14 percent drop in footwear sales, the one area that dropped the least was Internet-based sales, only showing a 2 percent decline nationwide.
Local resident Todd Herriot, who owns and operates a vintage clothing website www.thatsrad.com out of his Ocean City home, says that expanding his sales to the Amazon.com store in addition to sales on his own website and Ebay, certainly gave his Christmas season a much needed shot in the arm.
'It ended up being about average. It was nothing spectacular but it wasn't pathetic either,' he said. 'Thankfully, my international customers spent a ton of money. I used to make six months' worth of money at the Christmas season, but it hasn't been like that in the last few years, and it definitely wasn't like that this year.'
Herriot said that based on the orders that came in, consumers in international markets seem to be hurting less than American consumers, and are even willing to spend large amounts to ship the products overseas.
Pugh noted that the economy might take a long time to bounce back as much of the spending was on borrowed money rather than earned money.
'I see our inventory going back to more of the basics to meet the new demands like more T-shirts and basic shorts and board shorts rather than the high-end items they demanded in the past,' he said. 'We sold what our customers wanted and for awhile there while we still offered $36 basic board shorts they wanted $55 board shorts with all the bells and whistles.'
While it could be deduced that many businesses will provide a 'lack of luxury' in their inventories, some will just change the ratio of high and low priced items and try to offer something different than their competitors to gain any edge they can.
'We are always changing with the market, said Gage Lester, director of marketing at South Moon Under, 'and I see lower price point items and new and available merchandise taking precedent over super-lux or high priced items.'
Lester cited about a 10-percent decline in South Moon Under's local sales, but said that the holiday season was 'much better than we expected it to be', pointing to strong online sales, special promotions and the type of consumer that the popular women's clothing store caters to.
'Women are always going to buy clothes, but we know that everyone is going to feel the effects of this economy at some point, so we will continue to try and offer fresh products that you won't find anywhere else, but we will cut prices and expenses where we can,' said Lester.