Monday Q&A: What’s in store for retail?

carytownRetailers battled through last year’s tough shopping season. Now it’s all about survival. The pullback in consumer spending has made the past six months difficult for retailers across the county, and Richmond is no exception. Negative sales. Decreased foot traffic. Slimmer margins. What can a retailer do?

Some have turned to the Retail Merchants Association for guidance. The organization has noticed an about 10 percent increase in event attendance over last year. And despite reports of dismal holiday sales, only 27 of the group’s 1,000 members have gone out of business since fall.

BizSense sat down with Nancy Thomas, the new president of the RMA, to talk about the local retail environment and what the group is doing to help retailers.

Thomas previously served as chairman of the RMA board of directors. Her retail experience includes 14 years as owner and operator of furniture store The Arcade on Grove. More recently, she co-founded Turn Key Interiors, a design firm specializing in resort, residential and commercial design.

Below is an edited transcript.

Richmond BizSense: How bad is the current economic situation for retailers?

Nancy Thomas: According to the government numbers that came out recently, some of the specialty retailers like Abercrombie are down 19 percent. Gap is down about 18 percent. But the good news is Macy’s and Target were only down 3 percent to 4 percent. That is good news. They were expecting double-digit negative numbers. I think that is telling you they are doing nancythomassomething marketing-wise to reduce the negative same-store sales.

RBS: What are retailers doing to reduce the pain?

NT: They are starting to rein it in. They are being more promotional. They are buying smarter and not loading up on a lot of inventory. Those are all the things people need to be aware of as they move forward into the spring. They can do different things with their vendors. They can say, “If I buy 10 now, can I buy 10 more a month from now?” I think vendors are willing to be more flexible because they need business as well.

RBS: Many business owners these days are being forced to make difficult decisions about the future of their enterprise. What should retailers do if they are trying to decide whether to take out more loans or throw in the towel and close up shop?

NT: They need to bring someone in with fresh eyes and look at their business, and that’s what we do at Retail Merchants. We have several companies that are willing to come into your business and spend a couple hours with you free of charge and lay out the basics of your business. What are inventory levels? Where are your payables? What about your receivables? But at some point we all have to move forward, whether it is closing your shop or rebuilding. People can’t stand still in this economy. They need to move forward.

RBS: Many business owners say they are having trouble securing the loans they might need to continue operating. What advice do you have for them?

NT: I think for most businesses you want to be with more than one bank. You may want your credit cards with one bank, and you may want your checking account with another. When you have diversity in your financial holdings, it gives you the opportunity to go to one bank and say, “Hey, I need this.” If they can’t do it, at least you have a relationship with another bank.

RBS: What do you expect to see happen to retailers in 2009?

NT: Overall people that are thinking about expanding their businesses will probably hold off. You might see some people relocating their businesses into smaller spaces.

RBS: What do you think will happen with new shopping centers cropping up around Richmond?

NT: The good news about White Oak is that they came in right at the downturn. They leased White Oak at a perfect time. The only anchor store not open is JCPenney, which hopes to open in the next month or two. [The company recently announced a grand opening date of March 6.] That is an area where they desperately needed a new shopping area. If anything, that really added a lot of spunk to the economy in the East End of Richmond.

RBS: What about the centers currently in development? Will they have trouble getting leases?

NT: Some of the smaller shopping centers have halted increases in building. You’re going to see some empty spaces. That is just natural.

There is an opportunity for the independent retailers: If you want to open a business now, this is a key time to negotiate a great lease with a build-out clause. The sky is the limit now for negotiating leasing for a retail business. That’s why you may see some people changing locations.

RBS: There seems to be a trend right now to drive prices down as low as you can go. How can small mom-and-pop type business compete with the big-box stores in this environment?

NT: The ones that really knew what to count on for 2009 and 2010 were reducing their inventory. The good news is they can move cyclical inventory faster than the bigger retailer because they are not buying as much. For instance, if someone had a lot of Christmas stuff, they might not have bought as much this year. Therefore there is less to move, which makes room for the spring stuff. People are really looking at smaller inventory levels.

RBS: Where does the RMA stand on the proposal to cut the dealer’s discount?

NT: Obviously we want to protect the dealer discount 100 percent. There are two things on the table: One is to put a cap per store on the dollars that you are able to claim. For instance, the cap being proposed right now is $800. So if you are a store that gets a rebate of $800 or less, then you are protected. It’s anyone who has $800 or more that will probably lose the dealer discount. Luckily for us, that cap holds 99.9 percent of our members harmless. The problem with the cap is: You put a cap on it this year, sooner or later it will decrease, and it will hurt our members. There is also talk of an accelerated sales tax we want to stay away from, because that doesn’t help any of us.

RBS: Are people spending more locally to support the community?

NT: I think you hear more and more people saying we need to support the local people, whether it’s an independent retailer or the Target here. We need that money to stay here in the counties and in the city.

I think people, even though gas is still economical right now, are being smart about where they shop. They are no longer fleeing to Northern Virginia when we here in Richmond have malls that have exactly what the Northern Virginia people have. I think what you are also seeing – because Richmond has Short Pump and Stony Point and new corridors on Broad Street – people in Fredericksburg and Charlottesville are actually coming to us.

When people walk into a store, they want to know whose helping them. They want the relationship. That is what the small independent retailer can do. That’s what separates them from the big-box people.

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With the current recession,. this article sure helps.