Recession Research Paper
Recession hits local retail industry hard
http://www-rohan.sdsu.edu/~gopez/story1.html
San Diego County retail sales
Home | Overview | The Data | Final Project |
Story Highlights
San Diego retail trade sales decreased 7.5 percent in 2008 when adjusted for inflation. Small and large retail businesses have made cuts to decrease losses. Economist says sales will remain stagnant in the near future because of debt, the collapse of the housing market and high unemployment
Recession hits local retail industry hard
By Elouie Gopez November 23, 2009
President Barack Obama’s “cash for clunkers” program provided a boost to overall retail sales in August, with an increase of 2.7 percent compared to sales in July, according to an article …show more content…
from the Los Angeles Times published Sept. 30.
However, unlike the accidents that create such clunkers in the first place, the program and similar efforts have failed to make any significant dents in the retail industry overall.
The recession has had an enormous impact on retail, resulting in employee layoffs, store and mall closings, bankruptcy and in cases such as Mervyn’s and Circuit City, liquidations. Though the U.S. Census Bureau reported in August that overall retail sales increased, sales subsequently decreased 1.5 percent in September and 5.7 percent compared to September 2008. Overall, the Bureau estimates that retail trade sales are 6.4 percent below last year. According to Dr. George Belch, a professor and Chair of the Marketing Department at San Diego State University, weak sales can be contributed to conservative consumer behavior. The economic downturn has drained consumers of income, putting an emphasis on necessities and cutting back on discretionary purchases, or purchases for non-essential items that can be put off later. As a result, Belch says retail sales are then harder to grow because of a lack of demand. San Diego sales spiraling downward San Diegans are no exception. According to a September report …show more content…
from the National University System Institute for Policy Research, or NUSIPR, a local think tank based in La Jolla, the total personal income in San Diego decreased by 0.7 percent when adjusted for inflation in 2008. This decrease in personal income led to a shift in local consumer behavior and spending. As of the second quarter of 2008, the report states that local retail sales have declined 1.8 percent compared to 2007. Overall, San Diego retail trade sales decreased 7.5 percent in 2008 when adjusted for inflation. Additionally, the NUSIPR report states that these losses have been incurred due to a precipitous drop in discretionary spending on the purchase of on non-essential items, ranging from durable goods such as appliances and home furnishings to non-durable goods, such as clothing and
1 of 3
2/21/2012 3:05 PM
Recession hits local retail industry hard
http://www-rohan.sdsu.edu/~gopez/story1.html
books.
With lessened income comes a greater emphasis on necessities such as food and housing. According to the report, “retail sales of nearly $1 billion have disappeared across the County of San Diego the past two fiscal years ending [in] June 2008.” Local Economist Kelly Cunningham, a Senior Fellow for NUSIPR, says the decline in sales can be attributed to not only a decrease in personal income, but also to the psychological impact of seeing fellow citizens financially struggling as well. “When you see your neighbor laid off and struggling, it may lead you to spend less,” said Cunningham. “It makes you think ‘I could be next’ and decide to conserve what you have. In other words, consumer confidence is down.” Small businesses braving the storm However, the losses in sales add up to more than just dollars and lost sales. Small business owners and employees are feeling the pinch too. Jim Parenti, the owner of Artifex Entertainment, a comic book and gaming specialty store in Mira Mesa, has had to make many changes both personally and professionally in order to keep his store afloat. Parenti said his work hours have increased, with his average work week increasing to 60 to 70 hours a week. This estimate doesn’t include the time he spends out of the store researching and buying new products as well as selling higher-priced items to collectors. Parenti said he hasn’t had a day off work in approximately six months. With his income going down, Parenti said he has also had to
tighten his inventory, meaning he buys less product from distributors to sell to customers. Though Parenti declined to discuss how much the store’s profits have been affected, he voiced concerns about the store’s immediate future. “I’m worried about my lease not being renewed,” Parenti said. “I have to be more careful about how I spend and what I stock. I’m pretty much taking things a month or two at a time.” Freddy Ellis, the general manager of Willy’s Workshop, a skateboard shop in Rancho Penasquitos, has similar concerns. In addition to a decrease in inventory, other changes have been made, including less free equipment for the store’s sponsored skate team as well as pay cuts due to the lack of business. Ellis said the store has cut the number of employees on the sales floor in half on weekdays, effectively bringing down employee salaries to compensate for lowered sales. “Business has definitely slowed down,” said Ellis. “I’ve got a lot more time to clean and do inventory instead of making sales because there’s no one here.” Chain stores facing the pressure too Financial concerns aren’t limited to just small businesses, however. Chain stores are under pressure as well. Robert Norton, the assistant manager of a Barnes & Noble bookstore in Mira Mesa, says the company has had to make difficult changes in order to reduce losses and encourage sales. To cope with the recession, the company has transitioned from focusing on customer service to more of a sales-oriented approach. Other changes included the reduction of employee hours to meet sales goals, fewer employees on the sales floor, as well as cross training employees in other departments. Additionally, employees are encouraged to sell member cards to customers, which guarantee savings for each purchase, as well as e-mailing coupons in an effort to bring in more customers by
2 of 3
2/21/2012 3:05 PM
Recession hits local retail industry hard
http://www-rohan.sdsu.edu/~gopez/story1.html
giving them the means to save more money. Norton says doing so essential is due to the nature of their products. “With the exception of textbooks, books are a luxury item that can be done without during tough economic times,” said Norton. “All the team members are having to take on more duties, including managers, in order to make payroll.” While she understands why these changes are being implemented, Barnes & Noble Employee Chelsea Sohn struggles to cope with them. “I feel like we never have enough people to cover the store,” said Sohn. “I can’t get enough hours at work and when I am working, I’m under a lot of pressure to sell more.” Belch says such pressure is common among retail employees during this recession. “There’s more pressure on employees due to less help,” said Belch. “Employees have to provide good services to customers who are there and willing to spend money.” Future sales likely to stay stagnant If the retail industry and the economy are going to recover, consumers have to spend, as the “critical driver of U.S. economic growth, as well as economic expansion in San Diego, has been increasing consumer spending,” according to NUSPIR. However, Cunningham doesn’t see the retail industry rebounding anytime soon. Cunningham said sales will remain stagnant in the near future because of debt, the collapse of the housing market and high unemployment numbers. Cunningham said these factors and others should keep consumer spending down for the time being. “It comes down to people spending,” said Cunningham. “Spending drives business and what people spend drives the economy up. “ But in order for that to happen, companies like Barnes & Noble will have to tighten their belts, play up their strengths, and try to create a loyal customer base during these times of economic duress. “Hopefully, when the economy corrects itself, the customers will return with the same vigor as before,” said Norton. “Right now, we have to do everything we can to keep the customers we have.” Elouie Gopez, Senior Email me
3 of 3
2/21/2012 3:05 PM
http://www-rohan.sdsu.edu/~gopez/story1.html
San Diego County retail sales
Home | Overview | The Data | Final Project |
Story Highlights
San Diego retail trade sales decreased 7.5 percent in 2008 when adjusted for inflation. Small and large retail businesses have made cuts to decrease losses. Economist says sales will remain stagnant in the near future because of debt, the collapse of the housing market and high unemployment
Recession hits local retail industry hard
By Elouie Gopez November 23, 2009
President Barack Obama’s “cash for clunkers” program provided a boost to overall retail sales in August, with an increase of 2.7 percent compared to sales in July, according to an article …show more content…
from the Los Angeles Times published Sept. 30.
However, unlike the accidents that create such clunkers in the first place, the program and similar efforts have failed to make any significant dents in the retail industry overall.
The recession has had an enormous impact on retail, resulting in employee layoffs, store and mall closings, bankruptcy and in cases such as Mervyn’s and Circuit City, liquidations. Though the U.S. Census Bureau reported in August that overall retail sales increased, sales subsequently decreased 1.5 percent in September and 5.7 percent compared to September 2008. Overall, the Bureau estimates that retail trade sales are 6.4 percent below last year. According to Dr. George Belch, a professor and Chair of the Marketing Department at San Diego State University, weak sales can be contributed to conservative consumer behavior. The economic downturn has drained consumers of income, putting an emphasis on necessities and cutting back on discretionary purchases, or purchases for non-essential items that can be put off later. As a result, Belch says retail sales are then harder to grow because of a lack of demand. San Diego sales spiraling downward San Diegans are no exception. According to a September report …show more content…
from the National University System Institute for Policy Research, or NUSIPR, a local think tank based in La Jolla, the total personal income in San Diego decreased by 0.7 percent when adjusted for inflation in 2008. This decrease in personal income led to a shift in local consumer behavior and spending. As of the second quarter of 2008, the report states that local retail sales have declined 1.8 percent compared to 2007. Overall, San Diego retail trade sales decreased 7.5 percent in 2008 when adjusted for inflation. Additionally, the NUSIPR report states that these losses have been incurred due to a precipitous drop in discretionary spending on the purchase of on non-essential items, ranging from durable goods such as appliances and home furnishings to non-durable goods, such as clothing and
1 of 3
2/21/2012 3:05 PM
Recession hits local retail industry hard
http://www-rohan.sdsu.edu/~gopez/story1.html
books.
With lessened income comes a greater emphasis on necessities such as food and housing. According to the report, “retail sales of nearly $1 billion have disappeared across the County of San Diego the past two fiscal years ending [in] June 2008.” Local Economist Kelly Cunningham, a Senior Fellow for NUSIPR, says the decline in sales can be attributed to not only a decrease in personal income, but also to the psychological impact of seeing fellow citizens financially struggling as well. “When you see your neighbor laid off and struggling, it may lead you to spend less,” said Cunningham. “It makes you think ‘I could be next’ and decide to conserve what you have. In other words, consumer confidence is down.” Small businesses braving the storm However, the losses in sales add up to more than just dollars and lost sales. Small business owners and employees are feeling the pinch too. Jim Parenti, the owner of Artifex Entertainment, a comic book and gaming specialty store in Mira Mesa, has had to make many changes both personally and professionally in order to keep his store afloat. Parenti said his work hours have increased, with his average work week increasing to 60 to 70 hours a week. This estimate doesn’t include the time he spends out of the store researching and buying new products as well as selling higher-priced items to collectors. Parenti said he hasn’t had a day off work in approximately six months. With his income going down, Parenti said he has also had to
tighten his inventory, meaning he buys less product from distributors to sell to customers. Though Parenti declined to discuss how much the store’s profits have been affected, he voiced concerns about the store’s immediate future. “I’m worried about my lease not being renewed,” Parenti said. “I have to be more careful about how I spend and what I stock. I’m pretty much taking things a month or two at a time.” Freddy Ellis, the general manager of Willy’s Workshop, a skateboard shop in Rancho Penasquitos, has similar concerns. In addition to a decrease in inventory, other changes have been made, including less free equipment for the store’s sponsored skate team as well as pay cuts due to the lack of business. Ellis said the store has cut the number of employees on the sales floor in half on weekdays, effectively bringing down employee salaries to compensate for lowered sales. “Business has definitely slowed down,” said Ellis. “I’ve got a lot more time to clean and do inventory instead of making sales because there’s no one here.” Chain stores facing the pressure too Financial concerns aren’t limited to just small businesses, however. Chain stores are under pressure as well. Robert Norton, the assistant manager of a Barnes & Noble bookstore in Mira Mesa, says the company has had to make difficult changes in order to reduce losses and encourage sales. To cope with the recession, the company has transitioned from focusing on customer service to more of a sales-oriented approach. Other changes included the reduction of employee hours to meet sales goals, fewer employees on the sales floor, as well as cross training employees in other departments. Additionally, employees are encouraged to sell member cards to customers, which guarantee savings for each purchase, as well as e-mailing coupons in an effort to bring in more customers by
2 of 3
2/21/2012 3:05 PM
Recession hits local retail industry hard
http://www-rohan.sdsu.edu/~gopez/story1.html
giving them the means to save more money. Norton says doing so essential is due to the nature of their products. “With the exception of textbooks, books are a luxury item that can be done without during tough economic times,” said Norton. “All the team members are having to take on more duties, including managers, in order to make payroll.” While she understands why these changes are being implemented, Barnes & Noble Employee Chelsea Sohn struggles to cope with them. “I feel like we never have enough people to cover the store,” said Sohn. “I can’t get enough hours at work and when I am working, I’m under a lot of pressure to sell more.” Belch says such pressure is common among retail employees during this recession. “There’s more pressure on employees due to less help,” said Belch. “Employees have to provide good services to customers who are there and willing to spend money.” Future sales likely to stay stagnant If the retail industry and the economy are going to recover, consumers have to spend, as the “critical driver of U.S. economic growth, as well as economic expansion in San Diego, has been increasing consumer spending,” according to NUSPIR. However, Cunningham doesn’t see the retail industry rebounding anytime soon. Cunningham said sales will remain stagnant in the near future because of debt, the collapse of the housing market and high unemployment numbers. Cunningham said these factors and others should keep consumer spending down for the time being. “It comes down to people spending,” said Cunningham. “Spending drives business and what people spend drives the economy up. “ But in order for that to happen, companies like Barnes & Noble will have to tighten their belts, play up their strengths, and try to create a loyal customer base during these times of economic duress. “Hopefully, when the economy corrects itself, the customers will return with the same vigor as before,” said Norton. “Right now, we have to do everything we can to keep the customers we have.” Elouie Gopez, Senior Email me
3 of 3
2/21/2012 3:05 PM