Consumer confidence crucial for the struggling retail sector

As consumers balance promising signs of economic recovery with news of layoffs and local government

As consumers balance promising signs of economic recovery with news of layoffs and local government cutbacks, their willingness to spend remains conservative.

Experts say consumers are still worried, holding off spending for the most part as they expect rough economic times to continue this year. Though the economy as a whole may be turning the corner, they aren’t ready to.

“Consumer confidence is weak throughout New York with more continuing to say that things are getting worse rather than better and well fewer than half of New Yorkers in every region expecting happy days this year,” Don Levy, director of the Siena Research Institute, said in January.

A handful of Rotterdam Square Mall patrons who spoke to The Gazette last month had such a perspective.

While having a soda with a relative, Schenectady resident Selwyn Harlow said he hopes the economy improves, but between news of his city’s fiscal troubles, and a mix of announcements of both layoffs and new jobs for the area, he’s concerned.

“Every time you turn around, they’re trying to tax everything,” Harlow said.

Harlow said he does his part in helping the economy by going out to restaurants on a fairly regular basis.

However, “We don’t buy a lot of things,” he said.

Disabled Vietnam veteran Ronald Gary, of Schenectady, said he’s on the fence about buying a house. Inflation has him worried.

He said the American economy is in trouble and there’s nothing people can do about it.

“We’re getting hit from all angles,” he said, mentioning rising gas prices, postage rates, and government spending that leads to more taxes.

Gary said people have to squeeze a dollar as much as they can to survive.

“I look for a sale. It takes a lot of footwork, but I look for a sale,” Gary said. “Every time I see a penny on the ground, I pick it up.”

The overall consumer confidence index was at 63.4 in January, up 16 percentage points for the Albany-Schenectady-Troy area. Future confidence, however, was down 3.2 percentage points to 58.6.

Buying plans for the fourth quarter of 2009 showed slight downturns in home and major home improvement sectors and increases for automotive, computer and furniture sectors.

Mark Sokol, owner of Northwind Refrigeration & Appliance Service in Schenectady’s historic Stockade district, sees people’s struggles every day as he enters their houses to repair their appliances.

“There’s a lot of people having a hard time; a lot of people having soup and crackers. There’s no filet mignon,” Sokol said.

Sokol’s business has been thriving through the recession, increasing overall by 30 percent from 2008 to 2009, driven by service calls and sales of used appliances and warranties.

He said property owners are trying to cut corners every way they can due to high taxes in Schenectady County.

“There is quite a demand and we’re trying to keep up,” said Sokol, who started off the year with better sales than he had a year ago.

Olender Mattress adjusted its costs in response to lackluster sales in 2009 and now waits for the housing market to recover enough to boost business.

Many people buy beds when they move into a new house, according to owner Richard Olender.

“We’re not selling as many higher-end products as we were previously. Some people are trading down,” said Olender, who has run the 108-year-old, family-owned business since 1982.

This year he’s also increasing his advertising, he said.

Olender said he doesn’t know what to expect this year.

“You just have to be very conservative in your purchasing,” he said. “Look at every cost you have to see where you can trim.”

Usually the end of the year brings a big push in computer sales for Omni Computers in Schenectady. 2009 did not.

“This time, there wasn’t. It was really flat,” CEO Scott Johnson said. “The computer sales were pretty consistent all year along, but we just didn’t get that last minute bubble at the end.”

Johnson said the company’s belt was tightened and Christmas bonuses were affected.

“Money got tight,” he said.

But this year will be better, he said, as newer technologies allow for more remote service work and reduce operating costs.

Omni’s revenue is split about 70-30 between residential and business customers.

Johnson expects the money made through computers sales to decline even if more computers are sold because of price declines, but he sees the service sector continuing to grow.

“I don’t see computers going away. More and more businesses are using them,” he said. “They’re really the heart of most companies. If the server goes down, you can have 30 people on the payroll not doing anything.”

As consumers become more knowledgeable, many are buying hardware online, and even attempting do the work themselves, though not always successfully.

“We’re going more and more into service every day,” Johnson said.

The Retail Council of New York State expects much of the nerveracking, challenging environment to continue for retailers who faced a roller coaster ride last year, according to spokeswoman Rebecca Flach.

“Consumer confidence is slightly on the rise. Unemployment is still high but it is slowly starting to decrease. Home prices and the stock market are starting to improve, all of which are triggers,” Flach said.

Flach agrees with other industry analysts that 2010 won’t be a year of particular growth for retail.

Expect to see inventories that lean toward practicality in response to more pragmatic consumers who have been changed by challenging economic times. Even the defi nition of luxury has changed, Flach said. “Maybe people aren’t willing to spend the big bucks on cashmere. They’re trading down a bit. It’s hip to be frugal now,” she said.

Categories: Business

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