Downtown
Retail Shows Signs of Slowdown |
By Ed Moosbrugger
February 12 -- A weakening economy has caught up with
Downtown Santa Monica retailers, with disappointing sales in late
2007 and signs of softness in January.
Although some stores had surprisingly good sales, more experienced unexpected
slowdowns.
The year was flat and Christmas was a little slower than the previous year,
said Mark Hennessey, owner of the Hennessey & Ingalls art and architecture
bookstore on Wilshire Boulevard.
A year of flat sales was something new for Hennessey. “We’ve
always grown, even through 9/11 and the earthquake,’”
he noted, adding that although the situation isn’t alarming,
it is cause for concern.
U.S. retailers had their worst holiday season in recent years in 2007, hurt
by the housing slump, high gas prices and economic uncertainty. Santa Monica
stores had the added burden of the prolonged strike by Hollywood writers.
“I had a great year, but December was off,” said Todd Swift, partner
at Taos Indian Trading Co. on Santa Monica Boulevard. “It all sort of
hit at the end of the year. I could tell it was off in the first week of December.”
At Shiva Imports on the Third Street Promenade, business was up and down during
the year, with a slight drop in sales, said owner Naren Patel.
“We pretty much depend on tourists,” he said. “We got a lot
of people from Europe.” But high gasoline prices discouraged people from
the Los Angeles region from driving to Santa Monica to shop, he said.
Shiva has benefited, however, from heavy rush hour traffic, Patel said.
He’s noticed that some people working locally are hanging around more
to miss rush hour traffic jams and are doing some shopping during that time.
At Carlson’s TV and Appliance on Fifth Street business got off to a strong
start in the first quarter of 2007 but tailed off after that. The store ended
up with significantly lower sales and profits, said General Manager Mike Nichols.
Still, he said it was a good year.
The decline wasn’t surprising in light of industry conditions.
“The appliance industry is driven by the housing industry,” Nichols
said.
What has surprised Nichols is substantial price increases by vendors even in
the face of lower demand. Despite uncertainty, Nichols, who calls himself an
optimist, expects a good year in 2008.
Fourth Street merchant Adamm Gritlefeld was pleased by holiday business.
“Surprisingly, the Christmas season was unbelievably fantastic, mostly
because of tourists,” at Adamm’s Stained Glass & Gallery, he
said.
But local consumers are still hesitating to buy and January sales have been
disappointing, Gritlefeld said.
A number of customers have put off purchases because of recession fears and
the writers’ strike, he said. For that reason, Gritlefeld will be more
careful in his buying.
Business has been okay in January, but “I won’t say great,”
Swift said.
Downtown retailers rely heavily on domestic and foreign travelers, and stores
reported mixed experiences.
Explaining the sales drop in 2007, Hennessey said “mostly, the walk through
traffic was what was off. We count on tourists. We’re just not seeing
it.” He had expected more foreign tourists because of the weak dollar.
Swift is using the weak dollar as a sales tool with European visitors to his
store and hopes tourism will pick up.
Gritlefeld has had strong business from visitors from Europe and South America,
and also domestic travelers. He has stepped up his advertising aimed at visitors.
Santa Monica’s visitor industry has held up pretty well. For the first
11 months of 2008 it had the second highest hotel occupancy rate in Los Angeles
County among markets tracked by PKF Consulting. Its occupancy rate was 83.1
percent, up 0.1 percent from 2006. Its average room rate rose 9.5 percent.
In November, however, occupancy dipped 2.3 percent from a year earlier to 76.
3 percent, according to PKF. The average room rate increased 5.2 percent.
An uncertain factor in the retail outlook for Downtown in 2008 is the closure
of Santa Monica Place at the end of January for a major remodeling of the regional
shopping center. (Macy’s and the parking structures will remain open during
construction.)
Swift thinks the closure may temporarily boost his business.
“It will probably send people my way,” he said. “I’ve
already noticed it. People go where the action is.” Santa Monica Place
already had many vacancies as it prepared to begin construction.
Patel is concerned about the disruptions to traffic that could be caused by
the Santa Monica Place project.
He thinks some shoppers may avoid Downtown for a while and hopes the City of
Santa Monica will have a good police presence to help keep traffic moving.
Even though the construction may cause some temporary disruptions, retailers
such as Gritlefeld and Patel think the renewed Santa Monica Place
will be good.
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