Forecast cloudy for pivotal Sunshine State
Larry Thomas -- Casual Living, January 1, 2010
Tim Newton lives and works in Florida, and when he goes to work or to the mall or to a restaurant he sees a different world from the one portrayed in the news. Florida, he said, is not the economic wasteland the media insists it is.
“There are still people buying down here,” said Newton, managing director of Leader's Casual Furniture, a 19-store retailer based in the Tampa Bay area. “The mass merchants are still packed. Open-air malls are crowded almost every day. Houses are selling. If they're not selling, the owners are renting them. It's not all negative.”
That is a rare piece of good news for members of the casual furniture industry, who need good news out of Florida. The Sunshine State is a tone setter, an all-important first glance at sales trends for the year.
“Florida kicks off what the season will be for the Northern dealers when they thaw out in February and March,” said Tami Newton, who manages sales and marketing for Palm Springs Rattan & Garden Classics, the wholesale division that grew from Leader's. “Part of the reason is we're getting an influx of all those northern transients with second homes. If we have steady increased sales, if people are reaching into their pockets and buying, that's a good sign when the Northern dealers open up.”
“Florida is a big barometer,” said Craig Terrana, president of Atlantic Adirondack Company in West Palm Beach. “The makeup of Florida has changed so much in the last 20 years that it's not just a bunch of retirees anymore. There's plenty of money being spent here in our industry. A healthy Florida means that the industry has turned around.”
Strictly by the numbers, it hasn't turned around yet. Heading into the fourth quarter of 2009, the unemployment rate reached 11%. The last time the unemployment rate was that high was October 1975, when the U.S. economy was still suffering from the aftershocks of a stock market crash and energy crisis.
But Rick Baker doesn't need to see the numbers. Baker, national sales manager of Fort Myers-based Suncoast Casual, can hop in his car and drive the 25-mile stretch between Fort Myers and Naples. He used to pass 13 casual furniture dealers along the route. Now, only three are left.
“[Consumers] were in total freak-out mode,” said Les Lewis, summing up his 2009. Lewis and his wife, Darlene, own American Patio and Fireplace in Gainesville. “Some of our customers would come in and say, 'Good, you're still in business.' They didn't want anything, they just wanted to make sure we were still open, which is nice, I guess.”
Robert Jenkins, president of Fireplace and Verandah in Orlando, said things weren't much better there, even though his store draws customers from Isleworth Golf & Country Club, one of the city's toniest residential communities. Even the customers who live there, he said, tend to be focused on prices.
“We had one guy on a $2,000 deal tell us he'd checked prices and we needed to come down $20 to make the sale,” Jenkins said. “I couldn't believe it. I've never seen anything like this before and I've been in business for almost 40 years. I've been through some downturns but nothing of this nature.”
Baker would love to say the economy has bottomed out and the worst is over, but he doesn't dare.
“Six months ago, if you asked me if the economy could get worse, I would have said, 'No,' and it did get worse,” he said. “But based on what we're seeing and hearing now, homes are selling and people are coming back into Florida from the North and people from Europe are spending money. That's all good, because we have to get Florida back.”
Florida isn't likely to come back quickly, and that may be a good thing.
“It's going to be a slow transition, which is healthy for everyone,” Tim Newton said. “If the economy snapped back to 2005 levels, inventories wouldn't be high enough to sustain that kind of growth. I'm excited to see it turning in a gradual sense.”
For now, the signs of a turnaround are mostly anecdotal.
Baker said he sees fewer “for sale” signs around Fort Myers and more order activity from his Florida customers. He also sees a lot of foreign money pouring into the state thanks to favorable exchange rates. Like Newton, he favors a gradual increase in business so manufacturers can keep pace with demand. A down year has compelled retailers to streamline their inventories.
Jenkins said he has cut back on inventory in the last year. So has Lewis, although he said his store has always been lean.
“We do our early buys then try to do a lot of special orders, which got a little difficult for a while because so much comes from China,” Lewis said. “But we want customers to feel that this is a big deal. We want them to take time and pick out the right stuff. Instead of them coming in, picking out a set and having it delivered tomorrow, our philosophy is to do more special orders and write bigger tickets.”
While manufacturers fret about a supply-and-demand issue in Florida if sales pick up this winter, few can blame retailers for cutting back. Not only have consumers cut back on spending, they mind every single dollar they spend. Tim Newton said Leader's Casual retail stores don't negotiate prices, even though he admitted consumers have become extremely knit-picky over the last year.
“We used to give our stores some leeway with pricing, but as we grew we found our stores began to compete against themselves,” Tim Newton said. “But we did some things with our delivery charge structure. Delivering is expensive, but we bit bullet and reduced fees to give our salespeople tools we normally wouldn't have given them.”
Other retailers have had no choice but reduce pricing, and Terrana said he worries that will be the lasting legacy of the economic downturn.
“There are deals all over the place,” Terrana said. “Unfortunately, we've trained people in these down years to expect exceptional buys. That's going to be an adjustment for all of us in sales. We have to toe the line a little bit and keep those prices up to help people climb back on board.”
Most Florida-based retailers and manufacturers expect that will happen eventually. They just aren't sure when. But many believe they can accelerate the process by keeping a positive outlook with customers.
“A lot has to do with attitude and the way the customer feels when he or she walks into the showroom,” Tami Newton said. “If retailers are listening to the news all day and getting themselves down, they'll drive their customers away. The conversation with customers, the ice breaker, will be negative. It's up to that retailer to put the customer into the right frame of mind to buy casual furniture.”
“You just have to be positive,” Lewis said. “That's all there is to it.”