On a recent Friday morning, Richard Miller got a phone call offering him an instant line of credit. He laughed at the irony as he hung up the phone—only minutes before, he'd been talking about closing the North Park gift shop, Lost Your Marbles Too, that he's owned for 13 years, nine of them at the same spot on Ray Street.
“When I moved here in the late '90s, people told me that businesses move to Ray Street to die,” Miller said. “I said ‘That's not going to happen to me—I'm going to prove them wrong.'
“We've been here nine years,” he said. “I think that's a success, you know?”
Miller has no plans to take advantage of the credit offer. On Dec. 31, he'll lock up his store—filled on this particular day with Christmas ornaments, candles, jewelry, knick-knacks and two beige cats fond of reclining on display cases—for the last time. Since last Christmas, sales have taken a dive, he said. It used to be that each customer, on average, would spend $35 or $40 in the shop, But, during the last year, per-customer-spending has dropped to below $25. When the economy turns bad, Miller pointed out, one of the first things people stop buying are gifts.
“When you have a narrow profit margin to begin with, and you see a 30-percent decrease in your sales for the year, that means you've lost probably 60 to 70 percent of your profit margin,” he said. He's not willing to go into debt simply to stay open. “Honestly, I don't see the economy turning around fast enough for me to continue to survive.”
During the last few years, more than $100 million has been invested in North Park's revitalization—through a combination of state and federal grants, private development and tenant improvements. The neighborhood is one of San Diego's 18 business improvement districts (BID), the goal of which is to make neighborhood commercial cores more attractive in order to lure consumers away from outlying malls and toward a more community-centric way of life.
While economists have tracked consumer spending on big-ticket items and analyzed trends coming out of chain stores like Wal-Mart and Costco, the recession's effect on local retail and restaurants—the components of literal Main Street—has yet to be seen.
North Park, for now, boasts a reasonably healthy commercial district. Despite the economic downturn that began two years ago, in the first six months of 2008, 18 new businesses moved into the North Park BID footprint while only three closed—and none of those closures were due to the economy, said Elizabeth Studebaker, executive director of North Park Main Street. So far, Lost Your Marbles Too is the only business she knows of whose closure is recession related.
There are empty storefronts in North Park, sure, Studebaker said—but you'll find that anywhere at anytime. The neighborhood's largest empty storefront, on University Avenue where Big Lots used to be, remains unfilled largely because it's hard to find a renter for 40,000-square-feet of retail space. But it's hardly an eyesore. The owner recently re-painted the building, and local gallery Agitprop has committed to putting a new window display up each month.In Studebaker's estimation, the economic downtown is a speed bump in North Park's overall upward trajectory. If anything, there's opportunity to be had—like more affordable rent.
“Square-footage lease rates, I think, were probably really artificially inflated for the last—at least year and a half,” she said. “And now I think it's coming back to a more comfortable place where… it's more manageable to consider leasing a space that's less than $3 a square foot.”
Denny Knox, executive director of the Ocean Beach Main Street Association, another BID, shares Studebaker's outlook. While some businesses are struggling, “a number of restaurants are having banner years,” Knox said—like the popular burger joint Hodad's, which was recently featured on the Food Network. “And that means that everyone who works for them is having a very good year,” she said.
Besides being business improvement districts, Ocean Beach and North Park are San Diego's only two Main Street programs, a designation handed out by the National Trust for Historic Preservation for which a BID must apply. To keep such a designation, Main Street associations are, among other things, required to keep track of business openings and closures and employ strategies to ensure business and job growth. A “shop local” campaign is one basic strategy that's being encouraged, sold to consumers on the basis that between 60 and 70 cents of every dollar spent with a small business stays in the local economy, compared with 6 cents for every dollar spent with a national retail chain.
Ocean Beach is unique, Knox pointed out, in that owners and employees of local businesses tend to live in the area. “We're hoping that our businesses will at least have a base of local consumers” to sustain them through the economic downturn, she said.
How long that might last is anyone's guess. San Diego is known for having a local economy that fares better than most, said Michael Schuerman, director of research for the San Diego Regional Economic Development Corporation. And, he pointed out, county sales-tax revenue over the last dozen years has showed positive growth—at least through the mid-point of 2007 (the most recent data available). Unfortunately, a lot of that growth can be attributed to homeowners pulling equity out of their homes to buy things like cars, furniture and appliances.
University of San Diego economist Alan Gin said he doesn't see the local economy improving anytime soon. “At least for the first couple of quarters for 2009, things are shaping up pretty difficult where retail is concerned,” he said. For a long time, the decline in retail sales was limited to stores that were tied to real estate, like furniture and appliance stores. Now, Gin said, “I see the damage spreading into other retail sectors, including general merchandise stores, department stores… other retail sectors. And so that's a little bit worrisome.” Since January 2002, Gin has published a monthly index of economic indicators, and November's data showed the local economy at an all-time low.
But there's some good news, too, he pointed out. By Gin's estimation, for every 10-cent drop in the price of gas in San Diego County, consumers have an additional $7 million each month to spend.
“So, compared to the all-time high that we reached during the summer, we're down almost $3 a gallon, so we're talking about an extra $200 million a month San Diego County residents have to spend now.” While not all of that is going directly into the local economy, it could explain why sales were so strong after Thanksgiving, Gin said. He agrees that local retail can be buoyed by community loyalty.
For Studebaker, the fact that there are businesses in North Park that have been there for 30, 40, even 80 years means that there's a staying-power formula that other retailers can tap into.
“If you have a solid business plan, and you really have a good product and you have a good client base, I think it's absolutely possible to weather this situation,” she said. “But obviously, though, not everyone's going to survive it. But that's everywhere. It's not just North Park or San Diego; it's everywhere.”