Austin businesses prepare for holiday shopping season

By Eric Pulsifer Wednesday, 25 November 2009

Locally owned stores optimistic about sales despite economic reports

AUSTIN — Holiday retail sales are projected to decline 1 percent this year to $437.6 billion, according to an October report by the National Retail Federation. While Austin may fare better than most of the nation, as it has during the recession, many locally owned businesses rely heavily on the November/December shopping season.

“Austin isn’t doing as bad as everywhere else, but it’s definitely rough out there,” said Dean Lofton, Austin Independent Business Alliance executive director. “For many of our retail businesses, this is the biggest time of their year, but they have the challenge of not having the corporate support to sustain them through the rest of the year.”

Angelos Angelou, principal executive officer of AngelouEconomics, said for most local retailers, the holiday season can count for 30 to 35 percent of total year’s sales.

“It is an important element of the health of the retail sector,” he said.

Angelou is in the process of finishing his company’s 2010 economic forecast for the Austin area and said he believes retail sales will remain down this year.

“Given the trends we have seen so far this year, it points to at best flat and at worst negative performance compared to last year,” he said.

Shift from spending to saving

U.S. consumers are expected to spend an average of $682.74 on holiday-related shopping this year, down from last year’s $705.01, according to a survey by the National Retail Federation.

Shoppers have begun saving a higher portion of their income than before, Angelou said, as they are concerned about their financial future.

“This recession is unlike any other we have had. It has definitely changed consumer behavior,” he said. “Austin is leading the state of Texas in retail sales decline this year, which is a first. Austin has a high unemployment rate, albeit lower than state or national averages, [and it has lasted for a] longer period than any other time in its history. I believe it has really led consumers to save more for a rainy day and not spend.”

Angelou said it might be some time, if ever, before holiday shopping seasons return to pre-recession levels.

“I don’t know that the consumer is going to return to spending 100 percent of what they’re making. I think the retail sector may have to adjust to a savings rate of between 4 and 6 percent, which we’re already seeing in the U.S. economy.”

The consumer savings rate has remained around 1 percent or less for most of the last 30 years, meaning consumers had more to spend, Angelou said.

“This may not cause retail sales to decline longer term; retail sales could return back to normal levels. However, this is the time when we need retail sales, and consumers are not spending,” he said. “But, having a positive savings rate is probably one of the best things that could happen to the U.S. economy over the long term.”

Against the odds

The numbers may point to soft sales for most this holiday, but many Austin business owners remain hopeful for a strong shopping season.

Reel Popcorn General Manager Jennifer Easley said a good location and an uncommon product helped make the popcorn store’s first holiday shopping season in 2008 a success. Easley said many customers stopped in last year who were in South Park Meadows for the shopping center’s annual holiday laser light show.

“We had only been open since Nov. 14 last year, and we were swamped,” she said. “Popcorn tins are huge during Christmas. We’re very optimistic about the holiday shopping season.”

Like Easley, Victoria Bounds, owner of consignment and resale clothing store Goodbye Hello, said having a unique product at a fair price helps keep business up year-round. Bounds is preparing for her third holiday shopping season.

“Last year was surprisingly good,” Bounds said. “Christmas is our best time, but we’re not dependent upon it.”

Game Over Videogames, a classic and used game store with three Central Texas locations, opened four years ago and has seen business grow every year. Owner David Kaelin said he is preparing for a record year going into the store’s fifth holiday shopping season and is even hoping to launch a new online store to reach customers outside the Austin market.

“We’re very much looking forward to this Christmas. We’re stocking up on inventory and getting ready for what we plan to be a very busy Christmas season,” he said. “We’re looking to top last year’s numbers.”

The end of the year is the busiest time for the store, but business has remained steady throughout the years, Kaelin said.

“I wouldn’t say video games are recession proof, but it’s more recession proof than many other industries. It’s actually done pretty well,” he said. “In our particular niche of the industry, classic and used games, we do very well and compete well with the major retailers.”

Austin Unchained

To encourage shoppers to buy locally, the Austin Independent Business Alliance created Austin Unchained in 2003. Held the Saturday after Thanksgiving, the shopping event is an awareness campaign designed to encourage shoppers to buy at local stores rather than from chains.

“Because times are tough and people are likely to spend less, we encourage folks to spend money locally because you keep three times as much in the local economy when you do that,” Lofton said. “We’re not asking people to make a huge change in their lifestyle, but just to realize the economic and cultural benefits of shopping locally.”

Economic recovery in Texas?

A quarterly report tracking the recession in America’s 100 largest metropolitan areas by the Brookings Institution released in September reports the economic decline began to slow in the second quarter of 2009, and the national housing market began stabilizing. Six of the 20 best-performing areas over the course of the recession are located in Texas. Only three metropolitan areas—Austin, McAllen and Washington, D.C.—showed “early signs of full recovery from the recession.”

Similar promising news came from a report by Moody’s Economy.com and msnbc.com published in October that found one in five metropolitan areas in August saw an economic upswing, and, for the first time this year, areas have moved from “recession” into “recovery.” Austin and six other Texas metropolitan areas were included among those in Texas to see economic recovery. No area has yet to be classified as in “expansion,” or seeing an increase beyond its previous economic peak.

September numbers from the U.S. Bureau of Labor Statistics ranked the Austin metro area as the second best performing area of the largest 50 metros in the country, second only to Virginia Beach, Va.

AngelouEconomics principal executive officer Angelos Angelou said though Austin may be in better shape than most of the country, the Central Texas area has long had above-average stats.

“The unemployment rate is lower than both the state and national averages, but then again we have to remember that Austin was never like the Texas average or the U.S. average,” Angelou said. “At the peak of employment, prerecession, we were creating 35,000 jobs; now we’re at a loss of 5,000 jobs yearly in Austin.”

Angelou said Austin may very likely come out of the recession stronger than before, but that recovery will not come overnight.

“At the national level, it may take five to seven years before we go back to where we were in 2007,” he said. “I think the recovery is going to be slow, and it may have its ups and downs, but this is not going to be a steep recovery like we have been accustomed to out of every recession. This is going to be very slow.”