As posted by: Wall Street JournalRetailers everywhere are expecting lousy holiday sales. But one group is bracing for an especially harsh season: small, independent businesses without the cash cushions or price-slashing abilities of the major chains.
Many small companies already are struggling this year due to sharp drops in consumer spending, the credit crunch and the overall bad economy. Grim holiday sales could be enough to force many that rely heavily on the holiday season to shut their doors permanently.
"There are some independent retailers that will do fine, but the bulk of them will see a very, very difficult year," says Craig Johnson, president of Customer Growth Partners LLC, a New Canaan, Conn., retail consulting and analysis firm. He expects overall holiday sales to rise 1.2% this year, the worst year-over-year increase since 2001. But even if shoppers do outspend the bleak predictions, they will still gravitate toward large discounters like Wal-Mart Stores Inc. and BJ's Wholesale Club Inc. -- and low-priced goods. Many small retailers market good like Plumeria Jewelry, Herbal Tea, Natural Baby Clothing, Black Tea and Unique Jewelry
Most independent retailers don't have the margins to compete on price. So, many are scrambling to find a competitive model this year -- offering exclusive gift items, giving more personalized service or hosting events and fund-raisers to lure in more foot traffic. Others are seeking customers in new markets.
"They really have to be creative in finding ways to get people shopping at their stores and can't depend on the same things they were doing before," Mr. Johnson says.
Charles Mayer & Co., an upscale Indianapolis boutique selling china, crystal and decorative accessories with roughly $1 million in annual sales, recently hosted an evening fund-raiser for the Indianapolis Symphony Orchestra, attended by about 150 guests. Crystal and tableware designer William Yeoward greeted guests at the event and signed his pieces and books. Owner Claudia Ryan, who opened the store in a popular shopping district in 1992, served hors d'oeuvres and wine and raffled off door prizes.
The event, which cost Ms. Ryan just under $5,000, generated about $14,000 in book and crystal sales -- twice what the boutique brings in on a busy holiday-season day. Ms. Ryan says it was positive marketing for the store and led to more sales and interest in the store's William Yeoward pieces before and after the event.
The store has cut holiday inventory by 10% due to the slow economy. "We're trying to stay very focused and careful and very cautiously optimistic," Ms. Ryan says. November sales were down substantially, she says, but December sales are, so far, keeping pace with last year.
Ms. Ryan also is keeping her store open late on Thursdays in December, and offering more gift recommendations to regular customers. She recently asked sales associates to keep detailed notes on customers' purchases and interior-design preferences on the computer, so the employees could call or email them when items they might like come in.
"I think that's an area where we can compete," Ms. Ryan says. "How can a big department store really know its customer?"
Stephen Hoch, a retailing expert at the University of Pennsylvania's Wharton School in Philadelphia, says small retailers need to be innovative about their marketing and use a personalized approach to compete against the big retailers that are "drowning them out" with advertising right now.
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"They really have to go back to that mailing list of prior customers and make a direct appeal and send a compelling offer, such as a private sale or special event," he says. "The local guys need to be local, need to be relevant, need to be personal and play to their strengths."
Small businesses, Mr. Hoch adds, shouldn't be afraid to haggle on prices with prospective customers that are particularly price-sensitive.
Surfin' Seafood LLC, a Seattle-based seller of freshly caught flash-frozen seafood that it delivers to homes, typically does about 20% of its annual sales around the holidays. But this year, holiday-season sales are expected to fall to only 10% of total sales, as fewer corporations buy the packaged seafood as holiday gifts for employees and customers.
Holiday gift packages, which include a variety of holiday-themed fish and shellfish, generally sell for $85 to $195. This year, though, the company introduced a $50 gift package with fewer pieces to appeal to more price-conscious consumers. And the company is playing up the packages' appeal as a way to give an environmentally friendly gift that's also practical in this economy since it's eaten.
Co-owners Tina Montgomery and Jennifer Hanseler, who deliver a lot of the seafood themselves, also are heavily promoting gift certificates and have extended the deadline for shipping packages in time for Christmas.
While a horrible holiday season is unlikely to put them out of business, the partners are worried about what an extended downturn will mean for their business. "If it was just a few months that [sales] are down, it wouldn't be a problem," says Ms. Montgomery. "If this is long term, then I think we're more nervous."
Other small retailers are trying to hold on through the holidays by finding new channels of potential business. "It's very concerning that the market is so soft in what is usually our most profitable time of the year," says Vicki Updike, vice president of marketing and merchandising at Miles Kimball Co. of Oshkosh, Wis., which produces retail catalogs under several brands. Sales are down about 10% this holiday season over last year's season.
So in October, the 400-employee company began sending out 50,000 catalogs to residents of Canada through a company called Canada Post, which helps retailers handle the logistics of shipping products into the country. So far, the results have been "encouraging," Ms. Updike says, with revenue per order from Canada about double that of U.S. orders. The company plans to continue expanding into Canada and hopes it will help boost sales during the holidays and in the months ahead.
"I think we're in survival mode right now," she says.
