As many of you know, I own two retail furniture stores in North Georgia, one in Dalton, and one in Chatsworth.   It's bad up here.  Real bad.

There are many reasons why things are bad in my area.  I know many of you are students of macroeconomics and not necessarily microeconomics.  But it is in fact in the world of microeconomics that I live and breath and operate my retail stores.  So, if my post mostly pertains to this area of expertise, please forgive me.

First, the decline of the housing market and the subsequent virtual stoppage of any new construction almost anywhere has greatly affected northwest GA.  We are a one horse town up here, totally relying on the carpet and hardwood flooring industry, which is tied directly to the fate of the housing market.  Unemployment up here is high, but when you add the fact that about every other worker is on short time at the plant, the overall effect on disposable income is close to devestating.  So,  hardly anyone in my customer base has any money to spend on furniture as they are all paying for the basics, such as housing, auto, utilities, food, and gas.  As a consequence, almost every single retail business up here is in some sort of financial crisis.  God knows, I am.

Secondly, Hispanics make up about 40% of the population of our area.  About a third of these people are undocumented.  However, that number is misleading.  In fact, about 90% of these families have at least one primary member of that family who is undocumented.  For instance, a typical Hispanic family may consist of a legal husband, an illegal wife, and two or three little American citizens.  The state of Georgia, in their infinite wisdom, have chosen to make life almost intolerable for the undocumented member of this family.  And since the immediate future of this whole family is now in jeapordy as to whether they can stay in Ga or even in the US, the aren't spending any money on "hard goods".

Thirdly, even the middle class and upper middle class have been so unsettled by recent economic events that they have almost ceased to spend money in retail stores.

Let's talk statistics.   My own business revenue declined in increments fairly quickly to around 50% of normal.  This decline started last October and has continued without pause until the present.  This decline is pretty much the norm for all retail activity in our area.  This number alone is devastating.  Businesses have been closing regularly since April.  Many more will close immediately after the Christmas season.  We do not see a realistic chance of a change in consumer confidence until summer 2009, if then.  There is not going to be a quick solution for our problems up here.  Too many houses are on the market for there to be an immediate need for new housing construction.  New construction may not even resume with any decent level of activity until 2010.  We will all be closed by then.  We cannot make it in our current form as a retail business until 2010. 

Business has gone from bad to worse to terrible to devastating and now to catastrophic.  I have cut all the expenses I can.  I cannot change my leases and the owners of the buildings will not negotiate.    If no relief comes during the spring 2009 during income tax season, I will have to close.  Any advice or hope?  

 

 

---

Make each day count to improve yourself and those around you

I am certainly no expert on retail, but a lot of economists believe that the demand for durable goods is being "pent up" in a recession, meaning that when the recovery occurs, all of a sudden people could be buying floors/carpets in existing homes (the floors are all now being worn out at the same time), and people who would have been buying homes now (natural population growth) are all going to hit the market in numbers we don't see even in a good economy...  

Understandably, timing is everything for you, and hopefully, if you cut your expenses sooner than forced, and more drastically than forced, you can last longer.  I look at it like this - the chance of recovery is 100%.  timing is unknown. But the longer it lasts, the more floors/carpets will need to be replaced when it ends. 

Also - I don't know where your costomers come from for the most part, but unemployment in Atlanta and Chattanooga is not bad at all, average income is highest its ever been (its true!), even if people are buying fewer homes right now, it only means they have more money on existing home improvement..  This should recover WAY earlier than the greater economy.  Can you attract those customers?  What about apartment landlord companies?  More people are renting, apartment floors/carpets get replaced at fixed intervals no matter how the economy does..  Can you attack those customer bases by giving them better value?

And last point - that inventory of unsold homes with falling prices is a pent up goldmine - better than new home construction because they will eventually be sold to people who can actually afford them and will have incomes with money left over for fixing them up. When these begin to go, new construction will start, likely at levels we have not yet seen. I know its not doing you any good now, but its coming. 

I am sure you've already thought of all this...  Hang in there, buddy.. We are all rooting for you!

I wish wall street and the government would stop panicking and let this correction occur and get it over with.  If we let real estate drop like it should, financial institutions reorganize as they naturally would, and stop with these pointless blank checks and bailouts, this would all be over by the end of 2008, before labor markets really have a chance to react. Last i remember, capitalism and free markets was still the best system for prosperity across all income levels.  Has this changed? No one informed me.  Yes, its cyclical.  That's not a new thing..

 

---

________________________________________
"Я это понимаю на рациональном уровне, но не могу принять на эмоциональном" --Бизнесмен Борис Березовский

I'm almost afraid to say this in light of the mortgage crisis, but what about long term financing, the kind where they don't have to start paying until 2010 or something.  I guess you'd really be selling them hope that the economy will get better by then.  It doesn't seem quite as dangerous as selling the idea that buyers will grow into a mortgage since a furniture payment is lower and will still be fixed and isn't going to double like some mortgage payments did. 

The lower to middle income stores surviving around here seem to be the ones "selling paper".... the Ashley business model, I guess.  I realize Ashley is down and closing some stores, but I think that's partly the economy and partly because they focus on one time rather than repeat business.

It wouldn't help you at all to carry that kind of financing in house, but what about a finance company if local banks are leary at this time?   I've only dealt with Wells Fargo and Citi, and only for 6-12 month no interest accounts, but the stores around here offering long term must be getting the financing from someone, right?

As for the part of the population worried about deportation, what about a lease purchase or rent to own option?  My father had a retail furniture store when I was growing up and he had a specific section of furniture available for this option.  If they knew they could return the items at any time, with no penalty and no further payment, if they have to leave the country, perhaps they wouldn't be afraid to committ to new furniture?  The upside for you is that repossessing in the event of non-payment is far less messy legally.  Some people will return the furniture trashed, but Dad's profit margin was so high on the ones who kept paying that it evened out.  If the furniture came back in decent condition, he just rented it to someone else.

Good luck, Mark.  We need good, honorable business owners to stay in business.  :)

Leah, thanks for the input,  you too Egor.

I thought about Rent To Own.  Problem is that program has a huge up front cost and I have waited too long.  Now I can't afford it.  In essence,  you gotta pay 700 for an LCD television and your customer pays about $20 the first week and only $80 or so for the first 30 days, which is when the bill will come due for $700 from my supplier.  Huge back cash flow.  One needs about 8-12 months lead time to make that one pay.   I thought I could kick start this program with repossessed furniture, but these scoundrels up here are simply moving to Texas or Mississippi with my furniture.  I have gotten very little back.   I have filed a LOT of lawfuits in Magistrate Court seeking garnishment, but all that takes time and costs me the customer and his family and all his relatives who all get angry when I sue one of the family.

I am in fact running up to 24 months no interest (Wells Fargo) with no down payment and even no payments.  We have to take a 9.2% discount on this paper (I receive 90.8% of the contract value)     Very few takers even on this.  Everyone wants to avoid new debt.  Who can blame them?  A lot of these same people have large credit card debt and simply don't want to aggravate the problem. 

Egor, I agree with you, a huge "pent up demand" has to exist out there.  Problem is to exist when the dam breaks so I can make a little money.  If the reduction in revenue hadn't been so severe, I would be more optimistic.  But.....  a 50% reduction in income without compensating reduction in rent?  A successful business model for that one hasn't been invented yet. 

If only I could achieve a slight increase in income.   But,  consumers are all smelling blood in the water and are asking for severe and unreasonable discounts every day, so that the remaining businesses up here are all competing for the same few available dollars and will NOT let a consumer who has cash walk out.  So we all are selling him at reduced prices just to maintain what cash flow we can.  God, it's a buyer's paradise up here.

I am out of answers but you guys seem to have a few.  Thanks and keep them coming.

Leah.....  you were in my industry.  Everybody says it's the worst they have ever seen in the furniture business.  Many are veterans of 25-30 years in this industry.   Many of my suppliers have already closed and many more are on the brink.

I hope the Chinese are starving.  They make all this furniture anyway.  Now they might begin to know how all the little guys who used to produce furniture up in North Carolina, Tennessee, and Virginia feel about loosing their jobs.

---

Make each day count to improve yourself and those around you

I'm stumped. That was all I could think of, but I really hope you find the answer.

It is terrible right now.  The reps have been saying that for a nearly two years and the business from a year ago looks great compared to now.  :( 

I'm out of it, but most of my friends are still in the industry.  Some are making more on hourly fees for re-staging than retail sales right now.  The middle income sales have disappeared and the retail money that is there seems to be from doing 20,000+ jobs ( more Florida condos than usual... maybe people taking advantage of buyers market in real estate?) rather than multiple smaller sales.  Of course, those big jobs are harder to find in any economy and now salespeople can't count on single item sales to fill in the gaps.

If there isn't some relief soon, I know a number of people who will be changing careers.

mkgilstrap:

 It's bad up here.  Real bad.

man, i'm one of those dudes who enjoy living a spartan kind of life, with as few conveniencies as possible..

so, even though i don't have any idea why anyone in their right mind would want to get furniture (other than a simple mattress $90 max, a chair and a table, just for the heck of it), i would like to offer you my sympathy. I presume owning a business is something you enjoy doing.

i, on the other hand, have a different problem. I have no phucking idea what to do with all the money i'm making. It all gets accumulated in the savings/CD/bond/crap knows what kind of accounts. I never spend it, and sometimes i wonder if i ever will. it does make me smile though when i check the balance online, but that about as much enjoyment i get from it as ever. like that slinky you know... it's useless but every time you kick it down the stairs it brings a smile to your face..

 in any case, good luck. I hope things will turn better for you soon!!

 

 

---

oooops, don;t know why I was talking about flooring and carpeting..  Those "carpets of Dalton" i see off I-75 got me confused.  I guess what i said still applies..

 Pom, i am with you.. We had a topic here once weighing self-employment and I said I would never do it..  i know, it runs the country and makes all this possible but i can only live with a predictable income, growing faster than my needs and the economy, and no real commitment. Complete independence. 

The comfort in putting away money is your financial stability when it all goes to hell, or if you want to (or have to) stop working.  That works for me.

But obviously none of this is possible without people who disagree w me.  Its all good, they need us too.. 

---

________________________________________
"Я это понимаю на рациональном уровне, но не могу принять на эмоциональном" --Бизнесмен Борис Березовский

Egor:

 and no real commitment. Complete independence.

exactly the point. it was such a liberating experience to be able to put ALL my crap into my (yes, granted, huge ass) republican-kind 4-door sedan and go to CA for a year... until i became home sick and wanted to get back to GA:-) LOL

there is something charming about Georgia.... it's darn always on my mind:-) 

 

---