RETAIL For many area stores, survival is a tough sell

By Don Shilling

Ron D’Alesandro is concerned as he watches stores around him get picked off like targets in a shooting gallery.

This year, at least seven retailers have closed or are closing their stores on U.S. Route 224 in Boardman — Mahoning County’s busiest shopping corridor.

D’Alesandro, the owner of La-Z-Boy stores in Boardman and Howland, was worried when his sales dipped in October and November as the credit crunch hit and stock markets crashed. Now, his spirits are rising because December sales are running ahead of last year’s pace.

“I’m cautiously optimistic — if we get our manufacturing issues resolved,” he said.

The big question for area retailers is whether General Motors and its Lordstown complex can stay afloat, he said.

Retailers have good reason to worry because the national recession will take deadly aim at them in 2009, forcing more store closings and company bankruptcies, said Chris Boring, owner of Boulevard Strategies, a Columbus consulting firm.

“The shopping center industry is headed for the worst year in its history,” he said.

D’Alesandro, who is trimming expenses to prepare for 2009, said he’s confident his stores will survive because of his attention to the business and his knowledge of the market.

Having a sound business plan will be crucial to surviving the recession, said Peter Reday, professor of marketing at Youngstown State University. Retailers have to be the best provider of something that the consumer wants to buy, he said.

National retailers that have closed stores along Route 224 were having trouble even before the economy worsened recently, he said. They either weren’t marketing their products properly or were inefficient in their operations, he said.

For example, Linens-N-Things, which is liquidating all of its stores, has been operating poorly for some time, and Circuit City has been beaten by Best Buy for years, Reday said. Circuit City has filed for bankruptcy protection and closed stores but said it is keeping its Boardman store open.

D’Alesandro pointed to Krispy Kreme as an example of the recession’s forcing out companies that didn’t have strong marketing plans. The North Carolina-based chain recently boarded up a doughnut store next to La-Z-Boy.

Krispy Kreme’s offerings focused almost strictly on doughnuts and were too narrow to draw in enough customers, D’Alesandro said. Dunkin’ Donuts, on the other hand, has expanded into other items, such as sandwiches, he noted. Krispy Kreme recently has started to add ice cream to its stores.

Other Route 224 retailers that have closed this year or are closing are Value City, Hoover Sales & Service and three furniture stores.

Bill Kutlick, a Boardman-based agent who handles commercial real estate, called the current business climate a “cleansing cycle.” The retailers that can survive this Christmas season are going to be well-positioned to succeed when business picks up, he said.

This is especially true locally, he said. Retailers here haven’t been hit as hard by the recession because they didn’t experience the boom years that other parts of the country had, he said.

The economic collapse is so severe in those areas that consumers have just shut down spending, he said. The Mahoning Valley, however, has a more practical population that will still buy a couch or other consumer product if the time has come to replace it, he said.

D’Alesandro said Mahoning Valley retailers have been dealing with tougher times since Delphi Corp. filed for bankruptcy in 2005 and cut 3,000 good-paying jobs from its area plants.

“As far as I’m concerned, the recession here started in 2005,” he said.

He said his furniture sales for this year are running ahead of last year, although he said 2007 was “nothing to brag about.”

Reday said the most successful retailers in this recession are those targeting either the high-end or low-end. Both Nordstrom and Wal-Mart are doing well because they know their customers and are providing them with what they want, he said.

Nordstrom can succeed with its designer collections because well-to-do shoppers can afford discretionary spending, he said. On the other hand, lower-income shoppers will delay purchases for themselves when times are tough and turn to Wal-Mart for items they must buy, such as clothes for their children, he said.

Retailers such as Dillard’s have a more difficult time because they are in-between, he said.

“Shoppers are saying, ‘I don’t really need another sports coat or I don’t really need another pair of pants,’” he said.

Boring said apparel is taking the biggest hit of any sector in the recession as consumers delay purchases and shoppers expect falling prices.

Department stores in particular have been hit hard, said Boring, who expects Sears to announce store closings.

The housing slump has hurt some home improvement stores, such as Home Depot and Lowe’s, and furniture stores, he said.

A decrease in discretionary spending has hurt restaurant chains and book stores, while Toys “R” Us has been damaged by Wal-Mart’s toy section for several years, he said.

Normally, retailers announce their store closings in January and February once they see how operations fared during the Christmas shopping season, he said. It will be interesting to see what happens in early 2009, he said.

Kutlick said he’s hoping the recession is bottoming out and that the retail market will begin building back up in six to 12 months. It will take some time for companies to put together deals, however, he said.

“For some people, a year is a long time, but for me, that’s a normal part of business,” he said.

He said he’s confident, however, that vacancies along Route 224 will fill up because it is the area’s core retail location.

“The real estate is too good for it not to fill up,” he said.

Reday said the retail recovery will depend on how shoppers feel about the future.

“It depends on the psychology of the consumer. Will they start buying discretionary items?” he asked.

Boring said he wonders if retail levels will really bounce back.

The economy in recent years was fueled by consumer spending, but the collapse of the credit market showed that spending was heavily reliant on borrowing, he said. Perhaps a major restructuring has occurred, he said.

“It is an economy based on consumers spending money that they don’t have on things they don’t really need. I’m not sure that’s sustainable,” he said.

shilling@vindy.com