Rapaport Magazine

U.S. Retail

By Lara Ewen
Unpredictable Economy Spooks Consumers

Early fall brought with it some unhappy times, and many stores admitted that sales have been erratic. Most retailers blamed a lack of consumer confidence, egged on by alarming media reports of fiscal cliffs, federal employee furloughs and the government shutdown. Wealthy customers are still spending, but the middle class is increasingly cautious and discretionary spending, especially in women’s self-purchasing and men’s watches, has dropped sharply over the course of the year. Still, optimistic jewelers said they hoped holiday would bring a bit of cheer to a difficult and unpredictable year.

Uncertain Sales
   For some independent jewelers, this has been another year of roller-coaster sales. “I think things have been a little soft in 2013,” said Russ Varon, co-owner of Morgan’s Jewelers, with two stores in Southern California. “We’re not meeting our goals, and the news media talked about the fiscal cliff, and we didn’t know what taxes would be and we’re not getting the customer who walks in to spend. There’s no discretionary spending. It’s been shaky all year.”
   Even for stores that were not down, there was a fear that the recession was not quite over. “So far, 2013 has been about the same as 2012,” said Paul Geiss, owner of Paulo Geiss Jewelers in Charleston, South Carolina. “I think it will end up about the same. The first half of the year was slightly better than 2012, and we had a couple of big sales, which helped the bottom line. The past two to three months have been extremely slow, though. October started out pretty good, and I don’t think the recent government shutdown news has had any impact on our business, but overall, people are still afraid to spend. The economy has not recovered, and there is too much uncertainty with Obamacare and taxes.”
   Certainly in the Washington, D.C. tristate area, government policies have had a noticeable effect on business. “We have experienced a funky year,” said Amanda Coleman, general manager at Nelson Coleman, located in Towson, Maryland, and serving the Greater Baltimore metropolitan area. “There’s a huge percentage of people in this area who work for the government, and with the shutdown, people just weren’t spending money.”

Outside The Beltway
   Even businesses outside of the nation’s capital are affected by recent government issues. “I think there are a lot of people worried about what’s happening in Washington D.C.,” said Don Hamann, president of Sartor Hamann, with three stores in Nebraska. “And you can’t get away from it. But we really haven’t done too bad. It’s been kind of off and on. The ranch people have really done quite well and they’re spending money, and we’re getting more people from small towns. There are a lot of people with a lot of money and there are a lot of older people who have money and are tired of feeling bad, and they’re buying bigger diamonds and better grades. But the watch business is on the tough side. So some days are better than others.”
   On the plus side, some stores were up. In the Northeast, W. Mark Michaels, co-owner of Michaels Jewelers, with ten stores in Connecticut, is seeing good numbers, and he expected the year to end well. “We have a 12 percent projected increase for 2013,” he said. “We’ve been tracking at 18 percent ahead through September 30, 2013. Over the past two years, we’ve had a major emphasis on building customer relationships, improving selling techniques, getting more products that our customers want and marketing. So we’re basically making something happen.”

Holiday Expectations
   Despite an unpredictable year, most store owners are staying upbeat about the year-end sales. “We have good but realistic expectations for the holiday season,” said Coleman. “It’s good that they’re giving back pay to furloughed government employees, for example. So we have realistic but hopeful expectations for Christmas.”
   In the Midwest, Hamann says this December’s success will hinge on factors he can’t control. “Holiday depends on what happens in the next month or so,” he said. “What happens with the government? I have no idea. This is one of the hardest times I can remember to figure out where we are and where we’re going. It’s crazy.”
   Despite the challenges, Michaels felt that there was still opportunity in the coming months. “Our strategic growth plan is to continue to capture a larger market share in a shrinking market,” he said. “It’s survival of the fittest. My father said, ‘Deal with what you can control, not what you cannot.’ So we look at where we can take market share. We’re a hundred-year-old business, and we simply want to dominate.”

Article from the Rapaport Magazine - November 2013. To subscribe click here.

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