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Retail
Cautious optimism is the mantra of Florida retailers across all categories as they survey mixed results from 1996 and gear up for the next 12 months. If they can match 1996's sales, most retailers will be happy. If sales edge up a percentage point or two, they'll break out the champagne. Though the economy is humming along at a steady pace, retailers know that, except for the very upper class, Floridians are keeping a tight grip on their wallets.
And retailers know from experience that it wouldn't take much more than another flare-up in the Persian Gulf or a hike in interest rates to make sales slip. A slowdown in retail activity reverberates throughout the state's economy because retail is big business in Florida. Retailing accounts for one of every five jobs in the state, paying more than $15.4 billion in wages annually and collecting more than 90% of the state's sales tax. That makes retail - from restaurants to department stores to auto parts dealers - Florida's second biggest employer and the largest revenue generator in the state.
Consumer spending
Predicting how this gigantic money machine will do in the coming year is tricky because it comes down to guessing how and where consumers will decide to spend their hard-earned cash. Harry Katica, a retail analyst and VP of research for Raymond James & Associates in St. Petersburg, refuses to make predictions. But based on 1996's results, he's hardly looking for a banner year in 1997.
"While the overall economic environment is decent, it hasn't presented a tide that has lifted all boats," says Katica. "Most retailers have had fairly sluggish years. The fact is, you're dealing with a consumer that's mature, whose income is increasing at three percent or four percent, and he's very careful what he spends his money on. No one's rolling in the dough unless they invested in the stock market."
Dr. David Denslow, an economist with the University of Florida in Gainesville, monitors the state's residents monthly with a consumer attitude survey. In the last quarter of 1996, there was good news: Those surveyed showed increasing confidence both in the nation's economy and in their own personal financial situation. "What we're seeing are good solid numbers that indicate consumers are ready to keep on spending," says Denslow, who has been conducting the survey since 1983. "Nothing suggests a recession is on the horizon, so we expect the economy to keep chugging along."
Behind the high consumer confidence ratings, Denslow detects a couple of trends that will affect which retail sectors grow and which ones slow.
First is the growing disparity between Florida's rich and poor. Despite the recent boost in minimum wage, Denslow says the absolute level of wages has been stagnant in Florida since 1973. "And the relative pay of workers in less skilled jobs has been declining," he says.
The rich getting richer is good news for high-end stores and shopping centers. At West Shore Plaza in Tampa, which has been attracting a new group of higher-end retailers, healthy sales at FAO Schwarz, Nine West and Ann Taylor have enticed Saks Fifth Avenue to negotiate for space in the center. Saks opened four stores in Florida in 1996.
And at Burdine's, which has 46 department stores in the state, the amount of space devoted to high-priced designer lines just keeps growing. "Tommy (Hilfiger) just introduced a women's line. Ralph (Lauren) is getting stronger in the home category. And Calvin Klein's CK business is just beginning to mature," says Carey Watson, Burdine's senior VP marketing. "We've come off three really strong holiday seasons, and we feel that trend will continue."
A second trend observed by Denslow is that improved technology and computerization in retail will fuel the expansion of large discounters like Wal-Mart and Target to serve the lower end of Florida's economic spectrum. The same types of operating efficiencies have contributed to the success of a raft of "big-box" retailers, such as Toys R Us, Bed Bath & Beyond and Circuit City, that sell a single category of merchandise at high volume and low prices.
But the success of these chains has led to cut-throat competition, over-expansion and, ultimately, consolidations or bankruptcies. This retail life-cycle will be repeated in 1997, especially as retailers feel the pressure on margins of a higher minimum wage.
"We're still going into 1997 over-stored," says Cynthia Cohen Turk, a Miami-based retail consultant. Florida has 21 square feet of retail per capita compared to a national average of 18. "We'll see a continuation of the great Pacman game where the strong eat the weak."
Retail tumult
In 1996, there were plenty of examples of retail closings and consolidations. In November, JCPenney, owner of Thrift Drug Stores, gobbled up Clearwater-based Eckerd Corp. to become the nation's second-largest drugstore chain. Baby Superstore, which started the year on a hot expansion track, ended 1996 as a part of giant Toys R Us. Office Depot, the Delray Beach-based office supply chain, merged with Staples, its former competitor.
Among chains closing stores or going out of business completely last year were Clothestime, Shoe World, Fayva, Stuarts and Fashion Bug.
Nor do observers expect the retail tumult to end. "I think January will bring us a new wave of filings for bankruptcies from less successful and less well-capitalized retailers," says Stephen Bittel, president of Terranova Corporation, a commercial real estate advisory firm in South Florida. "And intense competition will mean more consolidations."
Bittel says the linen and housewares superstores are ripe for consolidation. Another candidate is the large appliance/electronics category, where sales are expected to continue to be sluggish.
The only sure bet for Florida retailing in 1997 is change, fueled by consumer demand for something novel and plenty of capital available for successful retailers and developers. Look for more entertainment retailing, that potent combination of fun and profit spearheaded by chains like Warner Brothers and Planet Hollywood. Rainforest Cafe, a new entry into the themed restaurant arena, opened its first Florida location in Orlando in August, its second in Sunrise in November and two more are slated for South Florida in 1998. Virgin Records Megastore plans a Miami area debut this year, and NikeTown in 1998.
Stores focusing on health and wellness will be another fast-growing niche in the coming year, says retail consultant Turk. General Nutrition Centers, which has been selling vitamins in malls for years, is experimenting with Alive, a new specialty store in Orlando that offers a mix of aromatherapy, vitamins, exercise videos and on-site massages. Turk also boldly predicts that 1997 will see the resurgence of women's apparel, a category that's been in the dumps for five years.
"Manufacturers are finally recognizing women's lifestyles and how they want to dress, versus how Seventh Avenue thinks they should dress," says Turk. People like Old Navy and the whole Gap organization have reminded retailers of the casual lifestyle women want to lead."
Though chains like Gap and TJ Maxx have been turning in better results lately, other observers are skeptical about major improvements in clothing sales. "I think any increases that occur in 1997 will be as much a function of improved operations as increased sales," says Herbert Leeds, a Miami retail consultant. "The best thing that could happen in 1997 is a steady increase in sales in the middle single-digit range."
The problem, and ultimately the opportunity, in retailing in 1997 and beyond, say the experts, is that the consumer is changing. "I think the consumption society is going away," says Yaromir Steiner, president of Steiner Associates in Coconut Grove. "Our material needs have been fulfilled and in some cases overfulfilled. We have 20 shirts when we only really need five, and we're buying shirts that last longer so we have to buy them less often."
Instead of seeking out new shirts, consumers are seeking a sense of community when they go shopping, Steiner believes. That's why his company and a handful of other developers in the state are building retail projects that cluster shops selling books, records, housewares, art and apparel around plenty of restaurants, fountains and plazas. "The environment of new retail projects is as important as everything else," says Steiner, who is overseeing redevelopment of the Streets of Mayfair in Coconut Grove. "We are creating villages and including retailers that cater to those villages," Steiner says.
