Retailers playing safe to ride out the economic rollercoaster

With the economy sputtering, retailers are in survival mode.

And to save themselves, they are considering two very different routes.

The first is to play it conservatively, hoarding cash and trying to cut every expense.

The second is to pursue a more entrepreneurial, albeit risky, path by expanding. Expansion in down times can pay big dividends down the road when the economy improves, but it could sink the ship if the recovery doesn’t come soon enough.

Getting aggressive by trying to take market share from competitors — with a fresh new logo campaign or merchandising approach — takes courage, but it is another tactic being tried by several Albuquerque merchants.

Opening a store in a better location is an especially bold move that only the well-capitalized or supremely confident are willing to risk at this uneasy time.

Playing it safeThe most common approach this holiday shopping season, for both locally owned stores and national chains, is to cut prices and attempt to ride out the economic storm. Many stores slashed their inventory prices in October after September sales softened.

Other businesses held the line on expenses by not adding holiday seasonal staff or refraining from advertising in expensive formats, such as newspapers and billboards.

“My advice to our retailers is: ‘If it doesn’t cash flow, it must go,’” says Trent Stafford, vice president of development at Hunt Development Corp., owner of ABQ Uptown, the city’s most upscale shopping center.

“Cash is king right now and the last thing you want to do is burn through it. Tighten the purse strings so you can pay to keep the lights on.”

Stafford’s tenants are primarily large national retailers who are desperately seeking a decent holiday shopping season in order to survive. Retail conditions have been dismal nationally, and little better locally. ABQ Uptown has already lost its Sharper Image store and could well lose other tenants if conditions don’t improve.

Among the better known local and national retailers who have announced store closures in Duke City this fall are American Home Furniture, Cold Stone Creamery, Comfort Zone, Linens ’N Things, Ruby Shoesday, the Sharper Image and Zale’s. Mervyn’s will be closed after the holidays and has been conducting a multi-million- dollar going-out-of-business sale at the Coronado and Cottonwood malls that has drawn large crowds eager for a bargain in tight times.

Opportunities for locals arise
The demise of some national names can provide a good opportunity for local retailers, says Bob Feinberg, a senior vice president at Grubb & Ellis New Mexico. Many national retailers are struggling and have become less able to offer the kind of merchandise and level of service Duke City shoppers are looking for.

“Local retailers need to bend over backwards at times like these to offer quality and service,” Feinberg says. “Now more than ever it is going to matter.”

Feinberg points out that many nationals have relied on cutting price and little else to attract consumers, which has ultimately hurt them.

Feinberg’s competitor, Seth Nodelman, a vice president at CB Richard Ellis who did leasing in San Francisco for two decades before moving to the Duke City, believes there are a range of options for distressed merchants.

Having merchandise that reflects the state of the economy is critical, he says.

“The paradigm has shifted to value — we are now in the Walmart economy,” Nodelman says. “The days of conspicuous consumption are over. It’s not tasteful to flaunt it. Necessities are in, ostentatious and frivolous are out.”

For cash-strapped retailers who are current on rent payments, Nodelman says it is not uncommon for tenants to ask landlords for a concession, whereby the retailer is allowed to stop making rent payments until sales improve.

Other concessions, such as shortening hours of operation, also are a possibility.

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