Consumer Woes Making Small Businesses Close
Thursday, December 18, 2008
The November report of the Consumer Confidence Index showed only half of Americans have a positive attitude about the economy. That's a 33 percent drop from last year, while a third of Americans don't see the situation improving over the next six months.
This isn't a surprise to three local small business owners who say while they are trying to adjust budgets, find cheaper ways to advertise and attract new customers with special offers, questions still remain about the future.
Garton: The light at the end of the tunnel is speculative, but we do know that the tunnel has to have an end and our goal is to survive.
They can't live by homes alone
Garton and her husband run Paradise Designs, a home landscaping and design company in Dana Point. Their business had seen great heights, but as the mortgage crisis gripped Southern California and foreclosures began to rise, Garton began to feel the fallout.
Garton: Our business has slowed but not dried up. We are off about 20 percent, and are not booked as far in advance as we were last year. The downturn in the housing market, locally in particular, has had a negative growth effect on our business.
The Gartons started Paradise Design out of their garage in 1990. Garton's husband had been in larger businesses before, but was looking for something different.
Garton: He was climbing the corporate ladder, but was getting tired of the travel and time away from his kids. He was really ready to reap the rewards of his own efforts.
Today, the company employs 40 people, but now their business is starting to suffer because people can't even keep their homes, let alone add extra landscaping to them.
And now the business that started at home suffers because people can't keep their homes. It's a time where consumers seemingly would rather hold onto their money than invest it into upgrading a home, either for personal interest or for renting.
Garton: We see a lot of our clients holding onto contracts in kind of a suspended wait and see state. We have a lot of hooks in the water, waiting for consumer confidence to rebound.
While Paradise Design plays the waiting game, the business has had to cut back. Employee hours have been scaled back and new equipment purchases have been suspended.
Garton: Our goal is to keep our employees working so that we do not have to rehire and retrain when things get busy again.
Cutting excess hurts what's Essential
When times are tough, small businesses that corner a specific market take a large hit. Tourists and mall walkers who keep their wallets in their pockets hurt those businesses even more. Corporations can handle losing a few hundred bucks. Small businesses may not be able to open the doors.
George Galindo knows this first hand. He owns San Diego Pet Supply, a store in downtown San Diego which has been open for more than a century.
Galindo: Most people feed their animals first before themselves. You have got to remember this business was around before large chain stores. It was created because of need as with any type of shop.
Now there's need to worry about its existence. Revenue has fallen more than 30 percent, and the store is emptier each day despite the holiday season. Galindo's already laying off people, and he may not be done yet.
Galindo: The truth is that most customers buy less and less due to uncertain times and this affects everyone. The most drastic move I have made is to have to let someone go and add to the unemployment numbers. This person has been with our company for over 12 years, and it hurts.
Galindo's store on 15th and Market isn't the only one in his area showing signs of decline. Galindo has seen other stores put up "Out Of Business" signs.
Galindo: I've seen many changes and none seem to be good. [There's been] many vacancies and the most available commercial spots than other years.
But all Galindo can do is weather the economic storm, and remain as an example of small stores surviving.
Galindo: I will strive to stay open, as not too many mom and pop shops exist. We will do our best to not become like many others [and] survive the times. The only thing that keeps me going is the routine of coming to work to keep the pets fed and knowing that someday we will be back on track.
Will work, but no one's buying the food
In a world of dollar menus and $5 footlongs, the family-owned restaurant is fighting against the economy more than ever to stay stable.
Ken Cassinelli: Right now were holding on by our fingernails.
Cassinelli and his wife own Apertivo, an Italian restaurant and wine bar in North Park.
Cassinelli: We have no deep pocket investors to buy us a new building like some other less successful restaurants in the neighborhood. If we can't make it and have to close, my wife and I have no other income and are over 50 years old in the worst market for employment in years.
One of Apertivo's special niches is its dedication to pure and healthy food, with multiple suppliers across the globe.
Cassinelli: We make everything on the menu from scratch everyday. No artificial ingredients, no preservatives, no pre-prepared foods ... I still come in every morning and make specials and soup or whatever new vaguely Mediterranean dishes I feel like. That is the best part of my job.
Apertivo opened in 2004, and at the time could barely keep a workforce. They could keep customers, and the lines to Apertivo swelled, the seats were full, and the wait exceeded an hour and a half.
Cassinelli: Everything was so fast that we had to expand in May 2007, and we were still mostly full.
And as the economy fell, so did the customers. The dining room changed from vibrant to empty.
Cassinelli: Somewhere around May or June 2008 the bottom fell out. Our sales declined 25 to 35 percent. Nothing in the neighborhood changed. The economy just imploded. Right now I have old regulars come in I haven't seen in a while and they almost apologize. All my suppliers tell the same story everywhere.
Cassinelli has had to make severe cuts to his staff and raise prices across the board to make up for lost business and a jump in supplier prices. Corporations can afford to drop prices to tease customers. Apertivo and many family restaurants like them can't.
Cassinelli: I'm 51 years old and have seen the effects of two or maybe three recessions in my life other than the economic situation we're in today. In my opinion this is far worse than anything we've seen since World War II.
The time is now for Cassinelli, or else there may not be an Apertivo to come back to.
Cassinelli: My customers work for a living and jobs are all we need, otherwise we won't make it past spring time.
The End of a Dream?
Galindo: Americans all want more than we can afford, and I think most have hit their peak in expenditures and now it is time to pay their dues. We have yet to remember to save and count our pennies.
Americans are counting and saving. What they aren't doing is buying. While business increased three percent over the first weekend of holiday shopping, researchers still can't guarantee the trend will sustain throughout the rest of the year. That leaves Ani Garton wondering if a couple will remake their lawns as a Christmas gift. It leaves George Galindo hoping he doesn't have to send another batch of employees home for Christmas with pink slips. It leaves Ken Cassinelli wishing for a miracle to keep his restaurant open.
Galindo: I do not see an end in the future because I don’t think the foreclosure market has hit its peak. When this does that is when people will realize what is happening to the American dream.