California Apparel News

Retailers Find Ways to Thrive as Consumer Spending Slows

Summer heat and big promotions sent many Californians to apparel retailers to buy the latest warm-weather clothes, but consumer spending is showing signs of cooling off, according to the National Retail Federation.

“Consumers are beginning to pull back,” said Rosalind Wells, chief economist for the Washington, D.C.–based trade association. “Retailers can expect the second half of the year to show moderate gains due to the slowdown in the housing market and other economic factors, such as rising interest rates and higher gas prices.”

Wells said that year-over-year retail sales increases remain strong, but month-tomonth gains appear to be flat. The monthly change represented a slight slowing in consumer spending, according to an association statement released July 14. It took into account June retail sales recently released by the U.S. Department of Commerce. Total June retail sales increased 6.2 percent yearover- year, according to the Commerce Department, but they decreased 0.2 percent from May.

A possible slowdown was unwelcome news for retailers working to make the most dollars in a market characterized by heavy promotions and traditional sluggish spending during the hot days of late July and early August.

“We’re pretty optimistic for fall,” said DeAnna Bonin, a manager for the Renee Bardot boutique in Beverly Hills. She polled many retailers she knew throughout Los Angeles County and reported that many saw their sales dropping by more than 25 percent. “But it’s tough right now. It’s slower than other summers.”

Retail consultants said there was no quick solution to overcome the late-summer blues. However, George Whalin recommended that a slow time was perfect for fine-tuning business plans. “During slow times, retailers often try to generate money with sales that give away the store. That doesn’t make much sense,” said Whalin, president of San Marcos, Calif.–based Retail Management Consultants.

“What they often need to do during quiet times is to review what needs to be fixed and find out what they can do better,” Whalin said.

Hot temperatures and heavy sales have benefited shopping malls. Consumer traffic has climbed an estimated 5 percent at the Northridge Fashion Center, a General Growth Properties Inc. mall in the Northridge district of Los Angeles. While temperatures push past 100 degrees in Northridge, the mall beckons with air conditioning set at 76 degrees, said Lisa Avakian, its senior marketing manager. “About 11:30 a.m., it starts getting real busy,” she said. “It’s so hot that people are coming to the center to eat and hang out.”

Avakian said they’re also attracted by chain store promotions such as American Eagle’s offer of free passes to the AMC Theater in exchange for trying on a pair of jeans. Pacific Sunwear also offered promotions of $50 for two pairs of shorts.

Shifts in tourist business also may be affecting California retailers. This summer, rising fuel prices encouraged many Americans to postpone a California trip. But at the same time, many Californians opted to spend their vacations in state. “Here, you have a built-in local drive market,” said Jack Keyser, chief economist for the Los Angeles County Economic Development Corp. “So, someone might decide not to travel to New Mexico, but they might go to San Diego.”

The World Cup competition may have encouraged soccer fans to spend their money overseas rather than travel to California, said Lara Dean-Fernandez, who with her husband, Eduardo, owns The Assembly boutique in San Diego. “We didn’t have our Europeans this year,” she said. “We did have our New Yorkers, though.”

Summer is a time of high hopes and shrugging off slow business, said Dean-Fernandez, who said she plans to open a second boutique in San Diego’s Hillcrest section. She also said the company faced a 5 percent drop in business in June after earning Christmas season–like sales in April and May.

Dean-Fernandez blamed the slowdown on increasing fuel prices. She credited riding through a few slow weeks by making sure that her business savings were healthy. She recommended saving 10 percent of monthly gross sales. “Before you know it, you have $3,000 to $4,000 in the bank. The cushioning makes up for any drop in sales.”

Dean-Fernandez also experimented with changing some of the store’s visual displays. She kept people coming into her boutique with fliers mailed to loyal customers that offered a 10 percent discount.

Retail consultant Jamie Novick recommended that smaller boutiques play the game by finding out what summer promotions work for larger retailers but not do it to the point where a boutique’s prices are slashed to beat larger stores. She also said that boutiques should focus on improving customer service to survive slow times.

“There is no magic answer,” said Novick, owner of The Next Step Retail Solutions, based in Rancho Santa Margarita, Calif. “It’s a mix of merchandising and revisiting the reasons you were successful in the first place.”

Different steps retailers could take to attract customers during slow periods include:

bull; Changing the look of the store. bull; Learning customers’ tastes to better service them and adding personal touches such as sending thank-you notes to customers. bull; Revising orders from manufacturers tofocus on what is selling well. bull; Hosting a store event such as a wine party to attract customers.

Many retailers might not have the money or the staffing to throw an event, Novick said. But every retailer can improve customer loyalty by shaping services to their needs. For example, if mothers with infants patronize a business, they may increase the frequency of their visits if the retailer makes store aisles wide enough for strollers.

Other retailers fight against the late-summer blues by making their business as season-proof as they can.

Jaye Hersh, founder of the boutique Intuition in Los Angeles, specializes in selling fashions worn by celebrities such as Paris Hilton and Jessica Simpson. She notifies her customers of the latest celebrity trends through her e-commerce Web site shopintuition.com and e-mail blasts.

“It doesn’t matter if it’s summer or if it’s January, celebrity is 24/7, 365,” Hersh said of her customers’ interest in the fashions of the famous.

She will be debuting her first fragrance, It By Jaye Hersh, at the end of July. In August, she plans to expand the size of her boutique from 750 to 1,500 square feet.