Biz: The pinch that stole Christmas?

If economists and retail analysts are to be believed, this holiday shopping season is setting up to be a grim one, thanks to a baleful economy and a precipitous drop in the Consumer Confidence Index, which hit an all-time low in October and is not expected to improve much, if at all, by Christmas.

Still hip: Hip Replacements’ new owners, Kip Veno (on bike) and Franzi Charen, are intent on keeping the store a treasure trove of vintage wear and doodads. Photo by Jonathan Welch

One downtown Asheville merchant, who asked that her shop not be identified, put it this way: “I’m a little antsy, to put it mildly. Not yet freaking out, but close. My store has been open less than a year, and I was really counting on Christmas. I’ve invested well over $100,000 in this place, and that doesn’t even count inventory. … And if I don’t at least break even during Christmas, I’m probably done here. That’s just the way it is—I don’t see how I can survive. I’ve already seen foot traffic fall off, and those who do come in just want to browse. I don’t need browsers; I need sales. I expect a lot of people who might typically shop downtown for Christmas will probably be hitting the sales at the malls and shopping at discount stores.

“Despite the wonderful experience you have by shopping downtown at Christmas, I just think that for a lot of people this year, it won’t be enough to outweigh the fact that they can get a lot more for their money shopping somewhere else,” she says bluntly.

N.C. State University economist Mike Walden shares her view, predicting a 5 percent to 8 percent drop in the volume of purchases in North Carolina. Retailers know this, he says, so they’ve been more frugal in stocking their stores.

Shoppers will be able to find some good deals, says Walden, but they’ll need to get there early because the inventory won’t be as deep as usual. Retailers, meanwhile, won’t be hiring as many workers this holiday season. And stores that target middle- and lower-income households may do better than the kind of upscale boutiques found downtown, because even high-income consumers are worried about the economy and looking for a bargain.

Other forecasts are less bleak but still troubling. The Nielsen Co.‘s holiday forecast predicts a 4.7 percent gain in dollar retail sales compared with last year. Unit sales, however, are expected to be virtually flat—up just 0.8 percent from 2007 figures.

Meanwhile, the National Retail Federation projects a 2.2 percent rise in sales to $470.4 billion. Falling well below the 10-year average of 4.4 percent holiday sales growth, that slight gain would represent the slowest growth since 2002, when holiday sales rose just 1.3 percent.

One might figure that thrift stores, at least, would be benefiting from the current economic mess, but that hasn’t happened either, says Jaymie Eichorn, spokesperson for Goodwill Industries of Northwest North Carolina. Secondhand gifts simply aren’t popular, she says, and more shoppers are putting off buying thrift items for themselves as well. The sagging economy, she adds, has also sparked a decline in donations, which were strong before the bottom fell out.

Someone always benefits, however, and this time it’s consignment stores, which Eichorn says “are seeing a huge increase in sales. I think it’s because people are trying to reap a little more value out of their goods. Rather than donating them to places like Goodwill, they are going to consignment stores to see if they can get a little more for their stuff.

Goodwill, meanwhile, is “not as successful as we were in the first half of the year. … Even with clothing sales and treasure hunts, people are still having to make that decision: ‘Is this something I need, or something that I want?’” notes Eichorn. “Even with things as inexpensive as what you can get at Goodwill, people are having to make that choice, and we’re still seeing that impact.”

Circling the wagons

Local merchants, however, aren’t ready to give up the fight—especially considering the holiday season’s crucial importance for many store owners. Rather than simply hoping for the best, downtown merchants are trying to address their concerns head-on.

The Asheville Independent Restaurant Association, for example, has hatched a program called “Experience the Sizzle” in order to draw more folks to downtown stores and restaurants, using special deals and even weekly fireworks displays to draw crowds (see “The Buzz,” Nov. 19 Xpress).

Meanwhile, the Asheville Downtown Association has come up with additional lures, says Mary Ann West, who chairs the group’s Holidays Committee. Besides dressing up Pritchard Park in holiday finery and lights—a first, says West—the ADA has begun hosting Santa Claus in the park every Saturday morning. “Hopefully people will come downtown to meet Santa and show their kids the lights,” she says, adding that Saturdays in Pritchard Park will also feature holiday singers.

The group even plans to post docents downtown every Friday night during the holidays to inform and guide visitors.

Nonetheless, West says she’s not so sure the holiday season will necessarily be bad for downtown merchants. West, who co-owns and manages the Miles Building at the confluence of Battery Park Avenue, Haywood Street and Wall Street, counts among her tenants a handful of shops that sell exotic gifts, wigs, upscale clothing and home decor, and so far, things look bright.

“Speaking for my shops, they’ve been doing really well,” she reports, though a recent cold snap did cut into business somewhat, producing a “dead weekend.” The owners of Frock, a women’s clothing boutique, told her recently, “What recession?” she adds.  “Frock’s had a record-breaker, so they are optimistic, definitely.”

Meanwhile, over at Mast General Store, one of downtown’s largest and most popular retailers, management is taking a wait-and-see attitude and hoping for the best, says Outdoors Manager Lane Nakaji.

“We’re just trying to keep expenses in check and continue to offer a lot of promotions,” he says. “But I know from a personal level, we’re trying to at least break even. If we can do that, we’re successful. We just want to keep our current employees as long as possible. We’ve already hired holiday help, and they are usually working up until the first week of January. Right now we’re fine and on track to do that.”

But while the store, like most retailers, is looking forward to Black Friday (the day after Thanksgiving), it may take longer than usual to reach sales goals for the big day, says Nakaji. “If we can get there, that’s great. Right now, as with everyone, we’re down a little bit for the year; people are a little bit more cautious as far as their spending. But we really haven’t seen a big decline in our business, fortunately—and I’m knocking on wood right now.”

And even if business does falter, “It’ll be a good year for consumers, as far as getting good deals, because of the condition we’re all in,” he continues. “Retailers are going to have to mark down more than we’re used to.”