Seasoned Merchants Adapt To Survive

By Ann Meyer

December 1, 2008

Third-generation florist Jim Phillip has been known to say, "Even a single flower can cheer you up." This year, some cash-strapped customers are taking him literally, buying smaller bouquets and dampening his average order size.

So it goes in the world of retail during tough economic times. As customers cut back, many merchants are feeling the squeeze.

Westmont-based Phillip's Flowers, an 85-year-old family-owned business with 10 Chicago-area locations and about $18 million in annual revenue, has switched to a lower-cost satellite music service, re-examined how often the trash needs to be picked up, renegotiated its health-care benefits and joined forces with other florists on delivery routes to save time and money.

"We're looking at every area," Phillip said. "We have to make sure we squeeze savings where we can" because price increases aren't an option.

Like today's shoppers, Phillip's Flowers also has been opportunistic this year, acquiring two competitors to bring in new sales.

With many merchants shrinking or going out of business, some say a retail shakeout could spell opportunity for survivors.

"It will make us stronger in the end," said Michael Abt, president of Abt Electronics in Glenview, a 72-year-old family-owned business that claims to have never had a layoff.

Abt is confident the company will survive because of its financial strength. "We don't have debt," he said.

Some independents stand to gain market share, experts said, by reacting quickly to better serve customers. By knowing their customers, independent retailers can offer the right product at the right price and promote it efficiently, said Peter Gill, spokesman for the Illinois Retail Merchants Association.

"A down economy is an opportunity to attract new business," agreed Kevin Garvey, vice president of sales at Garvey's Office Products in Niles. "You've got to bring value to people. That might mean you're going to make a smaller gross profit."

Garvey's has been picking up customers through cold-calling. "People who wouldn't have picked up the phone a year ago will hear you out and be open to at least giving them some sort of competitive quote," he said.

Garvey's launched a consumer-oriented Web site, GetGarveys.com, in September to leverage its merchandise. It also is overhauling its main Web site, GarveysOP.com, spending $500,000 on the revamp to make it easier to navigate. "It's a big investment in a down economy," Garvey said, but it should pay off over time as it gives customers another reason to shop there.

Differentiation is more vital when the economy is soft, Gill said.

In consumer electronics, where margins are especially tight this year, Abt has found a way to give customers extra savings while helping the environment. The company has teamed with CExchange to offer customers free Abt gift cards when they recycle such electronics items as cell phones, gaming systems, cameras and camcorders.

Service counts extra during a downturn because retailers might not get a second chance at winning a customer, said Jim Baum, managing partner of Here's Hallmark in Morris, where sales have dipped in the past month.

"You have to make an impression with those new customers. It's not just smile training," said Baum, who has been a retailer for more than 45 years. It starts with product knowledge and understanding the customer's needs, he said.

Other merchants believe it's better to simply cut back and ride out the downturn by managing inventory.

"Our experience has been it doesn't really help to advertise more," said Brian Ziegler, president of Elgin-based Ziegler's Ace Hardware, with 10 stores. "It's a better strategy to be more conserving of cash."

If staffing levels are too high, retailer Jay Goltz, president of Goltz Group, recommends businesses act sooner rather than later. "In the past, I waited too long to react," he said, adding that survival is the goal. "Business isn't going to pop back in January."

The best way to weather a downturn is to form a realistic plan, he said. While it's tempting to hope for improved economic conditions, "hope is not a strategy." Instead, take a hard look at your budget, adjust it accordingly and come up with a plan for getting through the next 18 months, he said.

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