Business

The spending party's over

For most of this decade, Charlotte's boutiques, big boxes and gleaming malls have beckoned shoppers from across the region like a high-powered magnet, drawing dollars out of wallets and items off shelves with similar speed.

But now, amid economic jitters, residents are keeping their checkbooks in check.

After riding high on the twin engines of population and economic growth, local retail sales have sputtered, just as in much of the rest of the country, according to newly released data from the N.C. Department of Revenue.

Between July 2007 and June 2008, the state's fiscal year, retail sales in Mecklenburg County grew 0.7 percent, to $14.2 billion – the smallest increase since 2002, after 9-11. In surrounding counties such as Cabarrus, Catawba, Gaston, Iredell, Lincoln and Union, retail sales fell compared with the previous year.

The numbers show that consumers in Charlotte and surrounding areas are cutting back, and businesses are feeling the effects. With the regional and national economies still absorbing shock waves from the housing market, financial crisis and rising food and gas prices, that trend is likely to continue into at least the holiday season.

“(Customers) seem to be buying the sure thing, the bread and butter items, as opposed to the frills,” said Craig Warner, owner of Warner's Rugs and Carpet in Charlotte.

The store has seen a drop off in its sales, especially in its Oriental rug business, Warner said. Though people are buying the same number of oriental rugs, they've traded down to cheaper products. Sales of accent rugs are also down, though wall-to-wall carpet business has been steadier.

As a major regional retail center and home of the state's largest city, Mecklenburg delivers the largest single slice of the state's sales tax pie. And, thanks in part to an ongoing population boom – the county has added about 20,000 residents a year, and usually more, every year this decade – its retail sales have also been among the state's fastest-growing.

Between 1996-97 and 2006-07, taxable sales grew 59 percent in Mecklenburg County, and even more in some adjoining areas: 95 percent in Iredell and 137 percent in Cabarrus, for example.

In the last year, taxable sales statewide increased by $1.3 billion, or 1.3 percent. In such a large economy, that's not much of a gain, said Bill Spencer, director of the policy analysis and statistics division of the N.C. Department of Revenue.

Even so, the fact that Mecklenburg's retail sales grew at all in the current economy still suggests that the area is still faring comparatively better than others nationwide, said Tony Crumbley, vice president of research for the Charlotte Chamber.

“We've always been impacted by economic highs and lows,” he said. “Our peaks and valleys just haven't been as great.”

Shoppers becoming frugal

If people are optimistic about the future, they tend to spend money, said Ravi Bansal, a professor of finance at Duke University. Now, because of wage stagnation and rising unemployment, they're holding back, he said.

That has significant ripple effects: Consumer spending powers two-thirds of the overall economy and companies produce goods and hire people in response to it.

The National Retail Federation, an industry trade organization, is forecasting below-average sales growth during the upcoming holiday season, saying that current financial pressures will force shoppers across the country to be frugal, conservative and less willing to splurge. The NRF does not foresee an economic turnaround until the second half of 2009.

Across the region, shoppers and businesses alike say they are making adjustments to cope. Though not everyone interviewed said they had made dramatic changes, most had noticed some difference in their lives due to the economy.

“As far as buying goes, right now it's really – is it something we need, or something we can pass on?” said Gerald Matkins of Charlotte, who works in the restaurant business.

Fitz Gaines, 28, a salesman for his family's trucking company in Hickory, said he had more money to spend on himself and others before the economy soured. “It definitely gives me a lot of anxiety, because you don't feel like you can save – everything goes out the door,” he said. “I don't really buy much of anything anymore, especially clothes and things like that.”

In Mecklenburg County, sales at apparel, automotive, furniture, general merchandise (which includes discount, department, drug and sporting goods stores) and building materials stores were down in 2007-08, while food sales were up. The pattern is similar in other regional counties.

Audiomasters, a home and car stereo business in Pineville, is already in an industry facing intense – and, says owner Rick Wright, unfair – competition from the Internet. Gas prices have only exacerbated the situation; this month is shaping up to be the worst September in the shop's nearly 20 years in business, he said.

“We've reduced payroll, we've cut expenses, we've gone after every nickel and dime we can,” Wright said. “When business is good, you tend to just let those things slide. But when you start seeing what we're seeing, slower and slower days and fewer and fewer people that have expendable money…instead of buying a set of speakers, they're going to put gas in their car.”

Consumers, he said, are scared to spend, and he predicts the situation will worsen before it improves.

Even businesses where sales are steady or up have noticed shifts because of the economy.

At Ace Hardware in Waxhaw, sales are up, owner Bobby Eggleston said, likely because the store is located in a wealthy and fast-growing area. However, commercial business, which is more tied to new construction, is off because the building boom has cooled.

And at women's clothing boutiques Avalilly's in Cornelius and Fresh in Charlotte, sales are steady compared with last year, but customers are buying far more dresses than ever. That's partially for style reasons, and also because dresses allow women to make an outfit from a single piece, as opposed to several, owner Emily Haggart said. Customers are also more interested now in whether they can wear the dresses again, whereas in the past they were more open to frivolous purchases they'd wear only once, she said.

Across the board, retailers say they'd like things to pick up by the end of the year – and that improved confidence, especially in Charlotte's now-uneasy financial services industry, would help tremendously. But until then, they'll keep working with what they have.

“Our stores are fortunate to be in this community,” said Bill Bartee, the owner of Jesse Brown's Outdoors, an outdoor outfitter in Charlotte. The store has experienced generally good business this year as people sought less expensive alternatives to pricey electronics and overseas trips, Bartee said, though sales have been a bit off since July.

“I'd rather be here than in Detroit, that's for sure,” he said. “As a business we keep that in mind, because it can't be good times, all the time.”

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