Wednesday, February 6, 2008

Strange to say, but this the first time I can remember a generalized economic slowdown affecting my business. 28 years before my first recession!

Of course there have been recessions before, but apparently I was selling thousands of dollars of some fad product and never noticed. Pokemon, or Beanie Babies, or whatever just overwhelmed whatever slowdown was happening.

But I haven't had a real fad product in the store since the peak of Pokemon in 2000, so I think I may finally be just like other stores. Something to be proud of, huh. I'm finally a real store, affected by economic trends. Ahhhh....I've grown up.

When I bought the store in 1984, it was at the nadir of more of a depression, but of course, I had nowhere to go but Up! I sometimes think that is a very good time to buy, like buying at the bottom of a market dip. Except that it was such a huge struggle for that first 5 years to even find customers.

And, I saw heavy declines in sales in the Sept. Oct. and Nov. of 2001; but it bounced right back up to normal at Christmas and went on it's merry way.

Oh, and when Saddam invaded Kuwait the first time, it hurt, but we were already suffering such a huge decline in cards that it was just one more thing. If there was a recession in 2002, apparently I was selling so many comics I didn't noticed.

For retail, it's safe to say, this is already a recession, official or not. I've had several months worth of sales below the previous year, and this is after years of double digit growth.

For once, I have another store's statistics I can look at to compare. A store whose customer base and product and location and everything else are completely different than mine.

My wife's bookstore has seen double digit growth in each of the first four years, but over the last 3 months, that has moderated. She was up by .17 a day last month, for instance, which means basically level.

It's always been frustrating to me not to know how my compatriots downtown are doing; but I can't ask, they wouldn't tell me. In six months, after all this is over, I'll find out. But until then, they'll force a smile and say, "everything great!"

The other thing about a generalized slowdown -- it simply doesn't compare to having a product bubble pop on you. I've had sales on product go from 5 or 6k a month drop to basically zero in just a few months. I don't mean to say this slowdown won't hurt, but it can't compare to selling 20K in sports cards at the peak, and then dropping to a few hundred dollars worth a few years later. I've gotten to be a bit of an expert at disasters.

But -- what I always say, knowing that you are about to be socked in the jaw doesn't make it hurt any less.

I didn't really believe it would slow, but I prepared just in case. So, I'm actually probably more in the black this year than last, when I was still seeing steady growth and was willing to take chances.

There's a weird sort of satisfaction in weathering the slowdowns. Like a post-holocaust scenario, where you hunker down and start getting inventive and creative; I can't explain it. It's like, watch me dodge this bullet, look how I leap over that rolling rock, hah, you missed me! Making it through such a time with as little damage as possible, is almost more satisfying than increasing sales in good times.

Recession 'if' turning into 'how bad?'
Shrinking - Business at banks, travel agents, contractors and other service industries drops more than expected in January
Wednesday, February 06, 2008
The Associated Press

Lingering hopes that the U.S. economy might avert a recession withered Tuesday after business in the nation's service sector -- its banks, travel companies, contractors and stores, among others -- shrank for the first time in five years.

It was unwelcome news for many investors, who were beginning to believe that the Federal Reserve might engineer a way out of the worst economic slowdown since 1991. Stocks tumbled, with the Dow Jones industrial average losing 370 points, its biggest point drop since August.

Much of the talk was not about whether there would be a recession, but about how bad it might be.

The Institute of Supply Management's new composite index measuring the health of the service sector was 44.6 in January, below the level of 50 that indicates expansion. The group's measure of nonmanufacturing business activity fell to 41.9 in January, from a revised reading of 54.4 in December -- its largest drop ever. Economists surveyed by Thomson Financial/IFR had expected a slight slowdown but had still forecast growth, with a median estimate of 53.

The last time the ISM reported that the service sector shrank -- that is, registered less than 50 -- was March 2003.

"It will be tipping plenty of people over the edge" in convincing economists that the U.S. is in a recession, said Nigel Gault, chief U.S. economist at Global Insight.

Gault said that in March 2001, the beginning of the most recent recession, the index had a break-even reading of 50. And during that recession, the index hung around 48 or 49 -- several points higher than January's reading.

"This is an absolute collapse of this index," he said.

"The number's so terrible it's almost beyond belief, especially among the optimists," said Scott Anderson, senior economist at Wells Fargo & Co. "The writing's on the wall. More and more economists are talking about recession, and whether it'll be a severe or mild one."

The January reading from the ISM "was about as big a shock as you can probably get," said Joel Naroff, chief economist at Commerce Bancorp.

Challenger, Gray & Christmas Inc., a placement consulting firm, said companies announced 69 percent more job cuts in January than in December, and about 21 percent of those were in the financial sector. According to the firm, the financial sector eliminated more than 153,000 jobs in 2007, a record amount.

Anderson said January might end up being the official start of a recession. Many businesses already suspect as much.

Moving company Allied Van Lines filed for bankruptcy Tuesday, saying it had fallen victim to the downturn in the housing market and its own heavy debt load. Charming Shoppes Inc. -- which runs the Petite Sophisticate and Lane Bryant clothing stores -- said it would cut 200 jobs and close 150 stores.

Stocks of rental car companies plunged Monday after Dollar Thrifty Automotive Group Inc. slashed its 2007 earnings guidance. The company said it sees weak demand in the travel market and soft used-car sales.

Ryan Kaminski, who runs a Mexican restaurant in Sarasota, Fla., said the squeeze he has felt as both a business owner and a consumer since last summer is growing worse. The restaurant's traffic started thinning out last summer, pulling 2007 sales down 10 percent from a year earlier, and so far this year sales are down 15 percent from a year ago.

"I used to be able to find a person from any trade -- carpenters, electricians, plumbers -- in the restaurant every day," he said. "Since the housing market crashed, it's just dried up. Those type of customers are just gone."

Kaminski, 31, said he and his wife don't spend much anymore either. "We've cut out eating out and we didn't go on vacation last year," he said. "It's getting bad."

Localized tourism drops

In the tourism sector, water park operator Great Wolf Resorts Inc. is seeing a drop in business at its resorts in Traverse City, Mich., and Sandusky, Ohio -- two areas where jobs are dependent on the sagging auto industry, said the company's chief executive, John Emery.

Business is up slightly overall for the Madison, Wis.-based operator of 10 resorts. But at the Rust Belt parks, families are cutting their spending by 2 percent to 4 percent. "Those are tough markets for families for right now," Emery said.

Executives surveyed for the service sector report by the ISM fretted over the economy, high oil prices, the falling stock market, lower customer demand, stiffer competition and sluggish sales, said Anthony Nieves, chairman of the trade group's nonmanufacturing business survey committee.

Two measures that fell were those for new orders and employment, and that could signal more trouble ahead. New orders fell to 43.5, and employment fell to 43.9. The drop in employment is especially troubling, because the service sector has been the overall economy's engine of job growth for months.

Factory cutbacks

Factories eliminated 28,000 jobs in January and have cut 269,000 jobs over the past 12 months, the government reported last week. The economy as a whole lost 17,000 jobs last month, which was the first nationwide loss of jobs since August 2003.

The financial services industry, part of the wider service economy, has been especially hard hit by falling home prices, mortgage defaults and the devaluation of mortgage-backed investments.

After writing down their portfolios and putting money in reserve to prepare for further losses, banks, mortgage lenders and brokerages are now strapped for cash and have pared their payrolls to cut costs.

1 comment:

Duncan McGeary said...

Reading the words, "I didn't really think it would slow," I realized, after all the other things I've written, that probably sounds strange.

I should say, it was always in the realm of possibility, and it was always one of the scenario's I looked at and planned for.

But, I must admit, I thought my business would be more recession proof. I thought it would be take longer to affect us, and wouldn't affect us much at first.

It's still early, and I've had a couple of up months, but I figure that just gives me a chance to reinforce the foundations.