Sunday, March 11, 2001
Luxury goods still selling
Area dealers in cars, furs, jewelry doing well
By Elizabeth Oakes Pegram
The Cincinnati Enquirer
The slowing national economy has yet to make much of a dent on in sales here of furs, luxury cars and other high-end goods, several area dealers and retail observers say.
The Federal Reserve reported Wednesday a higher-than-expected increase in borrowing by consumers in January, with outstanding debt rising $16 billion to $1.5 trillion.
With interest rates down, big-ticket items that are often financed will be very attractive, said Dr. Bob Premus, an economist at Wright State University who has assisted the Miami Valley Economic Development Coalition in Dayton, Ohio.
Said Dana Hackney, general manager of Mercedes-Benz of Cincinnati: It's early for us to tell if the national downturn is starting to kick in here. We ended the year up over (1999).''
Helen Buford of North Avondale takes a look at the Mercedes-Benz line. Jude Skove (right) is sales manager at the dealership in Montgomery.|
(Gary Landers photo)
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In January, the dealership sold 55 models versus 52 during January 2000, he said. That's typical for the first part of the year, Mr. Hackney said; the monthly number of cars sold at the Kenwood dealership climbs into the 80s during spring and summer.
The slowdown in our region is mostly at the manufacturing level with cutbacks in production jobs, Dr. Premus said.
For example, 250 workers at the former International Paper plant in Hamilton learned last month they had lost their jobs at the B Street mill in the ownership change to Smart Papers LLC.
The lower middle class will be reining in their budgets with heavy credit-card debt, Dr. Premus said, but they're not out buying the furs and the expensive jewelry.
At the upper end, incomes are still growing, he said. I don't see that market shrinking.
Luxury retailers will be all right, simply because if there's any recession it's going to hit the middle-income group rather than the high-end consumer, said Sheldon Kopin, president of JBS Associates, business consultants in Cincinnati.
Business has been good the last year at Fettner-Friedman Furs. Harvey Camins has worked with the firm for 25 years.|
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Even with higher heating and gasoline prices, the wealthier can withstand that without having to cut back on their purchases, he said.
The psychological effect
Still, some middle-income buyers might now cut back based on the perception of a potential recession, said Dick Starr, senior vice president of Chicago-based Economics Research Associates, who has done research in the Tristate.
For those who thought they were moving up the ranks ... there's a reaction, said Mr. Starr.
At Bob Williams Jaguar in Montgomery, sales have been staying level, Bob Bailey, vice president of the Bob Williams Auto Group, said. It's not as strong as we'd like to see it.
Mr. Bailey predicts that the dealership's revenue will go up in 2001 with this summer's rollout of a new Jaguar in the $35,000 range that will compete with the C-Class Mercedes. We expect a pretty healthy increase this year in total sales, he said.
Research has shown perceptions of a slowdown, Mr. Starr said, which can cause consumers to defer the luxury car or exotic vacation. Some people have started pulling in their horns a little bit, he said.
How one local company fared this past year had a measurable impact on Mercedes customers here, Mr. Hackney noted.
For the six weeks following last year's Procter & Gamble stock tumble in March, he said, the dealership was definitely measuring a slowing down in (customer) traffic.
Alonzo Jones, 47, who owns Family Deli in Walnut Hills, said he's keeping one eye on his business while he contemplates replacing his 1999 sport-utility vehicle with a Lexus or PT Cruiser. I'm self-employed, so it's more or less the economy, seeing which way it's going to go, he said. I'm pretty much going with my finances right now.
Another small-business owner, Richard Loflin, 52, of Hyde Park, runs Waterx Corp. in Madisonville, a manufacturer of water-filtration equipment sold through high-end kitchen appliance dealers. He said technology breakthroughs are more likely to determine whether he's going to trade in his car.
For private-business owners, the car is part of the business, both in terms of quality and styling, he said.
He checked out the controls of a platinum XJR Jaguar listing at $69,950 at last month's Cincinnati Auto Expo at the Albert B. Sabin Cincinnati Convention Center downtown.
I like to see some real improvements in technology before I'll spring for a new car, Mr. Loflin said. At his company, we're not as affected by the ups and downs of the economy. ... We've got plenty of business.
Mr. Hackney said he has seen a 3 percent to 4 percent decline recently in the number of people the dealership has talked with, but he said colder weather this year could very well be the culprit.
That's normal to be off that much, he said.
Another factor that has helped insulate upper-end businesses here is the even keel of the local economy, retailers and researchers said.
The Cincinnati area is a very stable economy, Mr. Starr said, without the ups and downs of the East and West coasts.
Chris Kotsovos, owner of Kotsovos Furs & Fine Apparel in Montgomery, agreed.
The people there in Cincinnati, they are more conservative ... but they still have a lot of money to spend, Mr. Kotsovos said.
This is even-steven. You go 10 percent up or 10 percent down.
For furriers, the chilly weather has heated up sales.
Actually, we did very well because of the cold weather this winter, said Mr. Kotsovos, adding, The only problem we faced in the year 2000, it was the shortage of help good help.
This past holiday season was the best ever for his business, with about a 7 percent increase in sales over the year before, he said.
Harvey Camins, who has worked more than 25 years in the business at Fettner-Friedman Furs, downtown, said fur retailers did better overall in 2000 than in 1999, and we generally follow the fur industry.
Designers have been showing off a lot of fur, he said, which translates into better sales in the industry. The designers promoted us more than we did ourselves. They all put fur trimmings on their garments (in 2000), he said, as well as on muffs and hats. That has helped his business in particular; it also offers fur accessories.
Sales from $200 to $2,000 (are) my bread-and-butter, Mr. Camins said. You don't always have to sell fur coats to make money.
So far, so good
Employees at Ethan Allen Home Interiors in Symmes Township are all a little nervous, store manager Robin Good said, but in the 13 months that she has overseen the store, the business has been making all its sales-goal increases and sometimes even going well above them.
Ms. Good said she hasn't noticed the store's shoppers worrying about the economy. "No, we're not redoing the living room now,' period, end of story I haven't heard anything like that, she said.
The Symmes store's customers tend to be in the higher-income brackets, and most of them are in it for the long haul, Ms. Good said.
At Montags in Blue Ash, I haven't noticed a downturn since the first of the year, said Gail Montag, who helps run the family-owned store. We had a good year last year, and we're certainly expecting a good one this year based on how it started out.
Several furniture shoppers said they haven't been scaling back.
Barbara Stinson, 54, of Anderson Township stopped by Lazarus Furniture Gallery in Kenwood recently to look for new family-room furniture. The reason the economy hasn't cut back her family's spending plan? Because we can afford it.
Whether high-end retailers are ultimately hurt depends on how long the economic slump lasts, retail observers said.
Everybody is counting on it being short, over by the end of the year, Dr. Premus, the economist, said. If the slowdown lasts a year or more, then luxury retailers could see sales sag, he said.
Another problem for all retailers is the glut of retail space, along with the growth in Internet and catalog shopping, Mr. Starr said. America is grossly overretailed, he said, with a fallout to come at some point.
Where the ripple will occur first, it's hard to say, he said.
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