With the holiday season on its way, Ted Frankel knows what his customers want in their stockings this year: value.
The owner of Tom’s Toys in downtown San Luis Obispo said his strategy is to continue the approach that he’s taken for the last two years when he became a discount retailer. He will buy items for less from manufacturers and pass the savings on to shoppers.
“People want to shop in a really nice store, but they don’t want to pay that much of a premium to do it,’’ Frankel said. “If I were to guess, I’d say that retailers won’t see a decrease (in sales), but they won’t see an increase, either.”
As consumer budgets tighten, local retailers are preparing for weak to modest growth this holiday.
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Economists with the International Council of Shopping Centers, a global trade organization of the shopping center industry, forecast 1 percent growth over last year for the traditional November-December shopping season. That’s an improvement from 2008 when sales sagged.
“The wear and tear of the recession and financial crisis on the consumer psyche is slowly giving way to renewed hope, optimism and most likely gift buying,” said Michael Niemira, chief economist and director of research for the association.
Christine Boudakian, San Luis Obispo district manager for Kohl’s — which has a store in Paso Robles and last week opened one in San Luis Obispo — said the department store chain is eager to help shoppers stretch their budgets this holiday season.
“We know shoppers are selective about disposable income and where they choose to spend it,’’ she said. “It is clearly a very competitive and challenging economic environment right now, and we are not expecting near-term change. We remain focused on gaining market share and will continue to plan sales and inventory conservatively.”
Sales are critical The season is critical for retailers because holiday sales account for up to 40 percent of annual sales.
Deborah Cash, executive director of the Downtown Association in San Luis Obispo, said many merchants learned lessons from last year and are “playing it safer.”
“They learned last year not to overstock,’’ she said. “They’re buying less but buying the right stuff and paying closer attention to what people are spending their money on.”
Cash said she’s not sensing the gloom and fear that were prevalent last holiday season, and it appears that businesses are holding their own.
“We anticipate that it won’t be as easy as it was in the past during the holiday season,’’ she said. “There will still be that period of recovery that we’re all going through.”
Clint Pearce of Madonna Enterprises, developer of the Irish Hills Plaza shopping center, said the city will be helped by the introduction of Kohl’s, which replaced Mervyn’s, and Forever 21, which took the space previously occupied by Gottschalks.
“I wouldn’t be surprised if sales exceed those of the previous stores last year,’’ he said. “We have a lot of pent-up demand.” Jim Throop, director of administrative services for Paso Robles, said the city isn’t counting on a big bump in sales tax revenues in the near future. The city is enthusiastic about the opening of Lowe’s this month, but he said that alone won’t be “a savior for us.”
“Our forecast isn’t showing an increase,’’ he said. “We’re assuming we’re at the bottom and we’re going to be there for a while.”
Jim Lewis, assistant city manager for Atascadero, said the city has flattened out and is trying to grow again. He said the city is preparing an aggressive marketing campaign to encourage residents to support their local businesses this holiday season at events such as Winter Wonderland and Walk around the Lake.
“People are still spending, but it needs to be a good value, and it needs to be a good experience,’’ he said. Spending mood?
San Luis Obispo County’s economy is not unlike others across California or the nation that are struggling to dig out of the recession, economists say.
In the second quarter, sales tax revenues for the county as a whole dropped 10 percent over the same period last year, according to the most recent data available from Hdl Companies, a sales tax consultant for city governments. And city officials are cautious in their outlook for future quarters.
Kirk Lesh, economist with California Lutheran University in Thousand Oaks (and former economist with the UCSB Economic Forecast Project), said that lingering uncertainties about unemployment will cause shoppers to stick to the basics. In its 2009 economic outlook for the county, the UCSB Forecast Project noted that real taxable sales growth had been negative since 2007 and was not expected to grow until 2011.
“They’re cutting back on everything they can, and even more than that, with the economy in bad shape, they don’t know how long they’re going to be without a job,’’ he said.
Brad Kemp, director of regional research for San Rafael-based Beacon Economics, said three months ago he was looking to the holiday season as a bellwether of positive change to come. Now, he’s not certain that consumers will be in a spending mood.
“The savings realized from the tax cuts from the previous administration and further by the Obama administration are scheduled to come to an end,’’ said Kemp, who forecasts a consumer pullback on spending until the second quarter of next year.
“I don’t see spending habits changing considerably,” he said. “I hope the tax cuts are extended a little longer. The savings will go away when the tax cuts go away.”
While Kemp said he believes the recession has ended, he said the economy still has a ways to go before it’s back on its feet.“We’ve stopped the bleeding, but we haven’t fixed the patient,’’ he said.
Prepare for discounts
Although the county’s economy is not fully on the mend, business owners and city officials say skittish shoppers will eventually emerge from their cocoons.
Bill Roof, general manager of the Hampton Inn in Paso Robles, said he has not noticed many signs that the recession is over. But he said there “seems to be some light at the end of the tunnel.”
“It’s certainly not 2007, but we’re not struggling either,’’ said Roof, whose advance bookings haven’t changed much from last year. “Harvest weekend is strong, and I don’t see that changing with the holidays.”
At the Prime Outlets in Pismo Beach, general manager Joseph Scott said new shops — such as the Nike outlet store — have helped to lure shoppers. While he declined to provide sales figures for the outlets, he said traffic to the Welcome Center located in the mall has increased 9 percent this year. The shopping center plans to open early again on Black Friday — the official start of the holiday shopping season — and stores will extend their hours.
“The brands will be further discounting this holiday season,’’ he said.
Frankel of Tom’s Toys remains optimistic about store sales this year. Despite the economic weakness at the end of 2008, he said, the stores he oversees did well because he cut prices, doubled his advertising and changed personnel. Of the four locations, San Luis Obispo is holding up the best against last year’s numbers, he said.
He plans to open his fifth location in November in Santa Maria. “There’s no question that we’re in tough times,’’ he said. “But my long-term belief is that we will be OK.”