Industry Report

Economy, Tariffs Cloud Retail Outlook as 4Q Approaches

By JOYCE M. ROSENBERG AP Business Writer

NEW YORK (AP) — The weakening economy has made Kim Hawkins’ bridal customers hesitant about splurging, even for their big day.

“They’re getting some of the more simple centerpieces, like glass vases or candles rather than the more extravagant centerpieces,” says Hawkins, owner of Events Wholesale, a Watkinsville, Georgia-based company that sells decorative items for weddings, parties and other events.

Hawkins has also noticed that more people visit her website but don’t buy. Given the slower spending, she’s stepped up her marketing to companies that put on events; she’s gotten a “pretty good” response that has helped replace her lost business from consumers.

As independent retailers and other small businesses prepare for the fourth quarter — the busy season for many of them — consumers have become more conservative. The economy has slowed this year, and the latest retail sales report from the government was disappointing; sales were unchanged in August from July when car, truck and gas purchases were subtracted. And confidence in the economy fell sharply this month, according to the Conference Board, which released its latest survey of consumer attitudes on Tuesday.

Meanwhile, retailers have other issues including the Trump administration’s tariffs on imports from China that have made merchandise more expensive. They’re also dealing with consumers’ increasing preference for online shopping.

Annie Rupani began seeing shoppers becoming conservative around Valentine’s Day, even though it’s one of the busiest holidays for her Houston chocolate business.

“Our average sale value last year was $33.95, whereas this year the average is $29.10,” says Rupani, owner of two Cacao & Cardamom shops and an online store. Customers have gravitated toward the smaller boxes of chocolates she sells.

Rupani is adapting to the changing environment by developing products that can be sold at lower prices and that will appeal to chocoholics as well as gift-givers. In her online business, she’s negotiating better rates with her shipping company.

“Ours is a luxury product, but it’s as important now as ever to be accessible to everyone,” Rupani says.

The retailers that management consultant Carlos Castelan works with are planning for a possible recession, keeping their inventories lean and being cautious about hiring. He advises them to also think long term, responding to consumers’ changing attitudes toward shopping.

“Americans are spending less time shopping,” says Castelan, managing director of Minneapolis-based Navio Group. “But when they are coming in to shop, you need to help them, to answer their questions so they can overall have a memorable experience that keeps them coming back for more.”

Retailers are learning how to cater to different consumers. Rupani finds that customers searching for fine chocolates on the internet know what they’re looking for, while people who stop in at her shops may not understand that her chocolates are artisanal, not mass-produced. She’s focusing more marketing dollars on the internet, hoping to double her online business to 20% from the current 10%.

Eileen Mockus is finding ways to appeal to customers who want upscale organic linens and clothes but don’t want to spend top dollar, especially during the holidays. So Coyuchi, which sells sheet sets that cost into the hundreds of dollars, will be offering items under $50 that will appeal to gift-givers.

“We want to be able to have a broader offering for the customer,” says Mockus, CEO of the company that has a store in Point Reyes Station, California and also sells online and through other retailers.

The company has also started a program that gives discounts to customers who return their used Coyuchi linens, which are then recycled.

The economy has been a factor in OC Facial Center’s shifting its focus away from traditional spa services and to acne treatments. For the company’s customers, dealing with troubling skin issues is a necessity, while massages and facials can become expendable when the economy looks less solid.

“If we only focused on the facials, I think we’d be seeing there are some ebbs and flows year over year,” says Daniel Robbins, chief marketing officer for the company that has locations in Mission Viejo and Lake Forest, California.

OC Facial Center lost some business several months ago when the stock market tumbled, taking the Dow Jones Industrial Average down more than 2,000 points.

“Being here in Orange County, where the cost of living is so high, people get scared,” Robbins says. But the company’s business treating acne keeps growing, he says.

Tariffs are an issue for many retailers; new duties against Chinese goods that President Donald Trump ordered into effect Sept. 1 included tariffs on clothing, linens, glasses and other tableware and jewelry, all of which are big sellers during the fourth quarter. Earlier tariffs have sent prices of thousands of industrial and consumer goods higher.

Cacao & Cardamom’s packaging comes from China, and Rupani has seen the prices she pays rise by 50% over the past year. While she packages her chocolates in boxes and paper designed to give an upscale impression, “it is something that we may need to reconsider,” she says.

The tariffs have led Hawkins to look for vendors who can sell her wedding and party goods at a lower price. But many candles, vases and other items will still have to be bought in China.

“I have been reaching out to different suppliers who might have resources in China that might more reasonable — but they’ll still have the tariff added to that,” Hawkins says.

COPYRIGHT Associated Press

Copyright 2019 The Business Journal, Youngstown, Ohio.