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Story Last modified at 11:18 p.m. on Wednesday, January 5, 2011

Shoppers chill on holiday spending
Small local businesses make plans for weathering 2011 after a year of freezing sales numbers

BY MARY LOCHNER
For the Star

photo:News

Chugiak High School student Hannah Rockwell shops with her mom, Christy Rockwell, in Eagle River last year. Flat holiday sales and an uncertain economy have local shop owners bracing for a tough year to come.
STAR file PHOTO

This holiday shopping season brought a chill to many local small businesses.

Local retailers experienced a drop in consumer confidence, Chugiak-Eagle River Chamber of Commerce executive director Susan Gorski said.

"It's definitely been flat," Gorski said of local holiday sales in 2010. Like retailers anywhere, she said, most local stores rely heavily on holiday sales.

The local picture tracked with pre-holiday forecasts.

A recent survey by Alaska economics analyst firm Northern Economics showed that twice as many Alaskans said they planned to spend less on Christmas this year compared to Alaskans who said they'd spend more.

Consumers have indeed been behaving cautiously, said Red Boutique owner Rachael Sabado. She saw customers pre-shopping in her store early in December, mulling their choices over, and then returning later in the month to make purchases. Most of the holiday rush didn't hit her store until the week before Christmas, she said.

People have been hesitant to buy all year, said Belly Baby & Beyond owner Alexis Kallen. She said she thinks recession-related fears have fueled buyer anxiety.

"Everywhere else it hit in 2009, and we got hit this year," she said. "And I don't think we're going to see the big picture until (2011), where the businesses are trying to hold on another year."

Patrons of The Book Shelf purchased in sufficient numbers to spark a slight uptick in sales this December over last, store manager Cindy Montgomery said. But then again, last year's sales numbers weren't the most spectacular in the store's dozen years of operation.

"Right now we're just holding our own," she said.

Even though most Alaska economic sectors were barely singed by the recession's destructive blaze, indirect indicators of consumer confidence in Alaska show spenders up here were spooked, Alaska Department of Labor and Workforce Development economist Alyssa Shanks said.

Shanks looks at retail job hires and sales-tax figures statewide to gauge Alaskans' collective yen to spend.

"Looking at 2008 and 2009, we weren't expecting Alaskans to purchase things differently than they had been, because our economy wasn't hit the way it was down south," she said. "It seemed like there was an infection of the Lower 48 consumer confidence. Up here they became more cautious about how they were spending."

Small businesses, big recession

Recession-related reductions in retail sales generally may affect small businesses more than large ones, Shanks said. Small businesses have fewer cash reserves than large businesses do, and the current economy has made it more difficult to obtain loans, she said.

On the positive side, some categories of small business might qualify for special federal loans meant to help them.

"If you fit into that mold, that could be good," Shanks said. "If you don't, you could be really hurting."

Big businesses have another advantage over small, local ones: They can offset losses in a diminishing domestic market by tapping into foreign ones.

Large companies like General Motors and Wal-Mart are seeing a rise in the portion of total sales that come from abroad, according to political economist and former Secretary of Labor Robert Reich, who authored an editorial on the subject that ran in national papers Dec. 21.

Developments closer to home have had an adverse impact on local small businesses as well, Gorski said. The new Tikahtnu Commons Shopping Center in Anchorage was built close enough to the Chugiak-Eagle River area that it's created a drain on shopping dollars spent locally, she said.

Stores' strategies for the year

Local small-business retailers say the dip in sales in 2010 has them thinking about strategies for weathering 2011.

At The Book Shelf, in-store events boosted December sales, Montgomery said. The bookseller had four book signings before Christmas – one of them cleared the store's entire stock of the author's book in a single day.

Also, Montgomery, said, "I think we have really loyal customers."

Kallen, of Belly Baby & Beyond, has turned to online social networking, putting a challenge on her Facebook page for people to check out a local business they haven't been to yet.

She is planning an online poll that asks customers what they like best about the store. She's also taking a hard look at her sales tracking from previous years.

"Most years in the past we've been OK," Kallen said. "This year I need to know what people like more."

Sabado said she's thinking of bringing new products to her Red Boutique, and possibly advertising.

But sometimes that's a tough limb to go out on for small businesses in a tight economy, Kallen said.

"You have to decide where you want to put your money," she said. "Is advertising gonna do it or bringing more product?"

That conundrum has set Kallen to thinking about ways she could partner with other local businesses for cross-marketing strategies that split the cost of doing an ad among two or more businesses.

Meanwhile, the Johnson family, new owners of Eagle River's Game Stop, don't have a previous Christmas to compare sales to but are feeling pretty high on the holiday rush.

"It's all new for us but I can definitely say it was great," Kelsey Johnson said. She credits the release of big-name products in the gaming industry with attracting flocks of holiday shoppers.

But ultimately the success of small local retailers comes down to one thing, Kallen said.

"We can't make it if you don't frequent the stores out here."

Mary Lochner is an Eagle River freelance writer.



This article published in The Alaska Star on Wednesday, January 5, 2011.