SmallBiz Small Talk Retail Outlook

In this Monday, Sept. 16, 2019, photo Annie Rupani, owner of Cacao & Cardamom, fills a custom box with chocolates inside one her shops in Houston. She's seen the amount that people spend on each visit drop in the past year. Like many retailers, she's going to put more effort and investment into her online business.

NEW YORK — 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 in September, according to the Conference Board.

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."

A look at some of the factors that are likely to affect shopping in the coming quarter:

— Consumers are anxious and spending less. Two recent measures of consumer sentiment, the Commerce Department's August retail sales report and the Conference Board's September consumer confidence survey, were sobering signs for the fourth quarter. Retailers' perennial hope is that consumers won't hold back because the holidays are a special time, but even a little tightening of each shopper's budget can add up to lower sales overall for retailers.

— Tariffs may hurt. The Trump administration's tariffs on goods imported from China includes clothing, linens and tableware, all of which are big sellers during the holiday season. Retailers must decide whether to try to find merchandise made in other countries or if they sell Chinese-made goods, whether to raise their prices. Retailers did get a partial reprieve when President Donald Trump delayed until Dec. 15 planned tariffs on thousands of other consumer goods; those duties would not affect items already on store shelves.

— Don't look for must-have items. The highly sought-after gifts that once drove holiday shopping — like Elmo and holiday Barbie dolls, or, back in the 1980s, Cabbage Patch Kids — have been absent in recent years, noted Carlos Castelan, managing director of The Navio Group, a management consultancy based in Minneapolis. And many of the most popular products are electronics that are widely available. That can be a plus for small retailers who can cater more to their own clientele than trying to latch on to a trend.

— Online competition gets fiercer. More consumers are likely to do more of their shopping on their phones, tablets and PCs, looking for the lowest prices as well as speed. Traditional retailers can get shoppers to buy, but they must provide service that can't be found online and an emotional connection that makes a trip to a store or mall worth it.

"Taking price out of the equation to win on experience and convenience is critical," Castelan says.

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