Weak holiday spending and a state- and national-level economic meltdown have hit home for some local businesses as consumer penny-pinching and purchasing of just the essentials continues to grow.
“There’s a lot less foot traffic out there,” said John Geisen, owner of the Koffee Klatsch on Higuera Street. “Christmas was actually OK, but as soon as no tourists are around it quiets down a lot.”
Data on the U.S. Census Bureau Web site documents a plummet of retail sales from June to November of 2008.
According to the data, consumer retail spending dropped from a high of just below $385 billion in June to just above $355 billion in November – a near 8 percent drop in less than a six month period of time. Reports from December sales and the fourth financial quarter are still expected to trickle in over the next few weeks.
Geisen said that despite the economic downturn, his business has been staying afloat due to his Website, which allows him to keep lower prices and enables him to market his products globally. He added that he would not be able to stay in business without a Website.
“It wouldn’t allow us to stay here, not with the high rent,” he said. “Unfortunately because the economy is slow it doesn’t mean your rent goes down.”
Geisen stays in contact with other local business owners in the downtown area and said that many are running into fiscal hardships as a result of the sluggish economy. In addition to less foot traffic, Geisen said that customers at his store are purchasing just the essentials such as coffee and tea and that they are staying away from supplemental purchases.
“We’ve been here 30 years; we are the oldest coffee and tea retailer in the county but this really seems to be the toughest (year),” Geisen said. “The amount of foot traffic has gone down but it’s not even just that, it’s that people aren’t spending any money. People just aren’t pulling out their cash. They get stuff that they really need.
“Before, tourist would say ‘oh I really like that tea pot,’ they’d come in for a cup of coffee and they’d see a tea pot or pick up a pound of coffee, but that’s really kind of fallen away, they get what they really need and that’s it.”
San Luis Obispo Chamber of Commerce President/CEO David Garth said local businesses are spread fairly evenly in terms of good or bad business.
“There’s a whole variety of impacts, some are doing OK or about the same as they did last year and some are doing not-so OK.”
Among the not-so OK are car dealerships, which have had to cope with the tightening of available credit and a consumer market that is not spending money.
“The pervasive feeling is fear,” Garth said. “That fear turns into more conservative spending and that in turn affects other businesses.”
Garth cited Mervyn’s and Linen’s and Things as two recent businesses that have pulled out of San Luis Obispo, but also said that those particular companies have been battling economic burdens for years.
“They’ve had problems for years,” he said. “The economic downturn just pushed them over.”
In addition, the San Luis Obispo Chamber of commerce has seen a slight decline in membership from its peak of about 1,550 members in mid-2008 to the present figure of 1,500, Garth said.
He attributed the decline in memberships, which cost from $200-$2,000 depending on the size of the business, partly as a result of the economic downturn but primarily as a result of less-than-aggressive membership sales by the organization.
It’s not all bad news according to Garth.
Despite the few businesses that are doing poorly, he said that many are reeling numbers similar to the beginning of 2008, and some have actually increased their business numbers.
“Businesses that are doing okay are almost ashamed to say that they are because it’s almost counter to what they’re supposed to be,” Garth said.
Among those businesses holding its own in the stagnant economy is Decades Vintage Clothing on Higuera Street.
Sales clerks Addison Harris, 19, San Luis Obispo, and Lacey Redd, 29, San Luis Obispo, said that sales have been comparable to the same time as last year, but that shoppers have turned out in spurts.
“It was about the same as it was this time last year and apparently the same as it has been the past five or six years,” Harris said.
Redd reasoned that cash-crunched consumers were waiting around for sales during the holiday season which led to hit-and-miss sales days.
“Christmas seemed to be compacted down to three days,” Redd said, “That was pretty odd. It didn’t pick up until about a week before Christmas. It felt like we were waiting for people to come in and then the finally did and it was over.”
Redd said that sales picked back up immediately following Christmas and that the foot-traffic into the store increased.
“We did really well after Christmas,” he said. “It seemed like people were out more after Christmas than they were before.”
Aside from the retail angle, the current market also has had an impact on local construction contractors.
Brian Fisher, a painting contractor based out of Grover Beach, has seen his fair share of hit-and-miss for his business Pinnacle Painting.
“For me, it’s not that bad,” he said. “We’ve got about six jobs lined up right now and I was starting to worry about it because I was having to pay my own bills plus all my employees I was thinking I was going to have to lay guys off so I could pay my bills cause the phone wasn’t ringing. Come Monday (Jan. 5) I got three calls. Two I’ve already been accepted on.”
A business like Pinnacle Painting requires a lot of overhead costs including purchasing equipment and supplies, while managing payroll for a staff and keeping up with bidding opportunities, Fisher said.
Although Fisher’s business is paralleling in volume compared to last year, he said that the actual profit is not up to par due to a rise in costs.
“The prices of everything going up has made it hard adjusting my bids to pay everything and that’s my part where I haven’t spent enough time in the office watching the way the cost of all my sundries and paints compared to (the cost) of my employees,” Fisher said. “My overhead went up a lot when prices went up and gasoline and all that.”
Fisher purchased the business several years ago from a former painter Kirby Dillinger, who had established a good reputation in the San Luis Obispo area. Fisher said the reputation has been key in maintaining his business during the current economic crisis. He added that the reputation factors in across all construction trades.
“Pacific Builders, a locally licensed general contractor, have such a great reputation, they’ve been around since ’82, I think they’re going to pull through and make it last,” Fisher said. “It’s the newer guys who don’t have the reputation that are having the trouble,”
Garth said that the Chamber of Commerce offers workshops and seminars that aim to provide tools for keeping businesses afloat. One suggestion he made was for businesses not to get wrapped up in speculation and to work with the task at hand.
“Deal with the reality, not with the rumors and fear,” Garth said. “And focus on the things that you can change, not the things you can’t . the strong businesses will survive and the weak ones won’t.”