Natural Foods Merchandiser

Data shows economic climate, rising prices challenge retailers

In October, retail sales sank to a 40-year low, with retailers both big and small affected, according to data from the American Express OPEN Small Business Monitor.

The study found that retailers, compared with services and manufacturing businesses, were more likely to feel the impacts of rising energy costs, more likely to have lost sales because of higher prices, and more likely to work longer hours instead of hiring additional employees. Sixty percent reported having to raise prices to keep up with rising costs. A quarter of all retailers reported that they're concerned about being unable to pay bills on time, and just over half said that the weakened dollar has had a negative impact on their business.

The survey, however, wasn't all bad news. In spite of these negative trends, more than four out of five retail entrepreneurs reported that they have plans for future growth. And, though 29 percent say the uncertain economy is their biggest challenge, 48 percent of retailers still report having a positive view of the economy. These mixed signals can be seen in the approaches of individual retailers in the natural products industry.

"We really started noticing the economic downturn in April," said Faye Gibson, owner of Adele's Naturally, an independent natural foods store in Evansville, Ill. "I think everyone is nervous, and I heard on NPR that October sales were the worst in 40 years. That's pretty scary."

Adele's Naturally had to recently let go of one full-time staff member, leaving three full-time and four part-time employees. Rising costs have also taken a toll. "I'm fortunate that my bills are paid, but I've had to deal with rising costs through a combination of smaller margins and increased prices," Gibson said. "Some things like maple syrup I just don't stock anymore."

Other retailers still have expansion plans in the works, in spite of recent downturns. "October wasn't as good a month in terms of hitting projected sales, but the first 10 days of October are strong, and turkey sales are robust, which is a good indicator of how good November will be," said Heather Isely, executive vice president of Vitamin Cottage, a naturals chain based in Lakewood, Colo.

"I do believe it will take time for the truth on the economy to sort itself out, but we're not puling back on expansion plans," Isely said. The company plans two new store openings in November, including a store in Austin—Whole Foods' back yard—and two more in the spring.

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