Cautious Merchants Prepare for Holiday Season

By Ed Moosbrugger

November 16 -- Downtown retailers are hoping that consumers will adjust to the shock of $3-a-gallon gasoline and concerns over major disasters around the world in time for a robust holiday shopping season.

Merchants enter the biggest shopping season of the year amid a climate of uncertainty. Some report that sales were adversely affected, at least temporarily, in recent months by gasoline price shocks and a wave of natural disasters.

But despite these concerns, some stores are expecting a strong holiday season.

At Puzzle Zoo on the Third Street Promenade, President Jay Demircift said business has been good so far this year and he expects a strong holiday season.

“We're gearing up for it,” he said. “We think it's going to be great.”

Puzzle Zoo has been helped a bit by the closure of Toys R Us at Santa Monica Boulevard and Fourth Street, Demircift said. (REI, a retailer of outdoor recreation equipment and apparel, will open a store in the former Toys R Us space next year.)

Still, the uncertainty facing retailers is reflected in regional and national economic reports.

The Federal Reserve reported that retail sales weakened somewhat in September and early October in the San Francisco district, which includes Southern California.

Also, a recent national survey showed that consumer confidence has fallen sharply, raising the possibility of a slowdown in retail sales in coming months.

“The last couple of months have been slow since the economic slowdown,” said Naren Patel, owner of Shiva Imports on the Third Street Promenade.

“Gas prices really hurt,” he said, noting that fewer people were driving to Santa Monica to enjoy the restaurants and movie theaters, causing a drop in nighttime business.

Indeed, for a time Patel was closing his store earlier than normal on Monday and Tuesday nights due to a lack of business, although he planned to extend hours again after Halloween for the holiday season.

In the face of the uncertainty, Patel is stocking up for the holidays, when items that sell from $20 to $50 are popular with shoppers.

“I'm hearing from vendors that things are slow,” he said.

Mark Hennessey, owner of Hennessey & Ingalls art and architecture bookstore on Wilshire Boulevard, said fewer people have been coming into the store, but those who are visiting are spending more.

“I had a strong last two months and a real strong quarter,” he reported.
But there has been fallout from natural disasters in other areas.

When hurricane Katrina struck “that week was very slow,” Hennessey said.
Hennessey expects a very good holiday season for a variety of reasons, including many new things in the book business and his belief that people have become conditioned to higher gas prices.

Adamm Gritlefeld, owner of Adamm's Stained Glass & Gallery on Fourth Street, said he's gotten calls from artists and galleries around the country reporting that summer was not good.

On the positive side, higher-end merchandise has been selling well at his place, and there are recent signs that lower-end business is picking up, he said.

“In the last three or four weeks there has been a very encouraging pickup across the board,” Gritlefeld said in mid October.

Adamm's also felt the impact of higher gas prices in July and August.
“Even the tourists were spending less,” Gritlefeld said. He believes consumers are shocked by higher gas prices, pull back on spending and then adjust.

One aspect of Gritlefeld's business has helped get around the problem of high gas prices for consumers. He's had some significant action on the Internet, with two recent sales of $1,200 and $3,600.

“It's nice,” he said. “No hassle.”

SANTA MONICA HOTELS had a solid August, with increases in both occupancy and room rates.

Occupancy rose to 88.7 percent, up 2.6 percent from a year earlier, at hotels tracked by PKF Consulting. That placed Santa Monica second, only behind Santa Clarita, in Los Angeles County markets measured by PKF.

The average room rate in Santa Monica rose 8.1 percent to $261.47 in August among hotels in the survey.

Santa Monica's increases in both occupancy and room rates exceeded increases for the county.

For the first eight months of 2005, Santa Monica's hotel occupancy rate dipped 0.2 percent to 80.2 percent, while its average room rate increased 8.6 percent to $232.16.