Local business: Bucking the trend

The economic slowdown has had a dramatic impact on Craig Buckalew's business.

For the better.

Buckalew estimates that his Hardware Hank store in East Grand Forks is 15 percent ahead of 2008. He credits the niche his business serves.

"I don't have the 'I want' items. I have the 'I need' items," he said. And perhaps with tighter times, "Instead of taking a family vacation, people are staying home and improving their living space or treating themselves to a gas grill."

His store's growth exceeds the local norm. But unlike most of the rest of the nation, local retailers are holding steady or are just slightly behind last year's sales.

"People in the industry now say that flat is the new up," Wade Pearson said.

Pearson, an owner of the Home of Economy in Grand Forks, looked at his computer screen and said. "In this store, we're down $18,000 in sales from the same day a year ago. That's not even 1 percent down."

The six Home of Economy stores in the state are a combined 2 percent ahead of 2008, largely because of the oil boom in the west. That 2 percent is impressive because 2008 was a record year for the company.

So, a sliver of a drop off a record year in Grand Forks, with the national economy in retreat, is equally impressive, Pearson said.

"It's great to be in North Dakota," he said, referring to how the Upper Midwest hasn't been jolted by the recession as other regions of the country.

Buckalew said that's usually the way it works in this area.

"We don't see the real bad times, but when the economy is going gangbusters, we don't enjoy the same prosperity, either," he said.

"We just plug along."

Playing it safe

Twelve months ago, Buckalew was ready to expand his store. He even had the project bids. But then the economy became worrisome.

"I hit the brakes and figured I had to sit it out and see what happens," he said.

Even though his store has fared well since, he's happy that he took the cautionary route. "It would have meant more debt, and I don't know if it would have cash-flowed," he said.

Taking fewer risks is another reason for retail stability. And it should be getting even more stable in the months ahead, according to experts.

The 2009 recession has ended in Fargo-Moorhead, Bismarck, Grand Forks and East Grand Forks according to the latest Adversity Index released by MSNBC.com and Moody's Economy.com.

Brian Walters, president of the Greater Fargo Moorhead Economic Development Corporation said he agrees to some extent. "I don't think we're raging back in a rapid recovery," he said.

But local merchants say they never raged in a downswing either.

Slow and steady

Nationally, a tally of sales at top stores showed a gain in September for the first time in more than a year. The rise was a microscopic 0.1 percent, but it was a pleasant surprise for retailers. And it was significant, analysts said, because sales were expected to keep falling as they had since August 2008.

But the rollercoaster ride hasn't happened in Grand Forks-East Grand Forks. In Grand Forks through nine months, sales tax collections are down only 3 percent. Sales taxes are applied to more than retail outlets, so it's not a complete accurate picture. But it's a reliable barometer.

"Most of our customers are sitting out the recession," Pearson said.

"Our one concern is that farmers may not come out as well this year because ag prices are down. Commodity prices affect us as much as anything."

Brad Westrum, owner of Gerrells, said his store is "slightly, slightly" behind a year ago, "but come back in a month, and I'll probably have a different answer because October has been good."

Like other local merchants, Westrum stressed that the comparisons are being made against a robust year. "In 2008 we broke the record of 2007, which broke the record of 2006, which broke the record of 2005," he said.

In his 21st year as an owner, he said he's learned to be more patient and look at the big picture. "We had a down spring, but was that the recession or was it related to the bad weather we had," he said.

He said he's confident of a last quarter because of October's start and conversations with customers, who have seen their investments on the rebound.

"I've seen a change in their mood," he said. "The mood is that they're not completely out of the woods, but it's a lot better. What I've seen is business that is largely kid-driven. Mom and dad will do without, but they don't want their children to do without."

Looking for bargains

Nationally, analysts say, shoppers are playing hard to get. They're hungry for markdowns, such as automobile buyers experienced with the federal Cash for Clunkers program.

Buckalew said he's reacted with a few more discounts, notably on big-ticket items "so we can move them." Retailers say consumers are more educated on pricing than ever before, but their marketing habits have remained the same. Pearson said his store is running the same margins.

"The Upper Midwest hasn't been affected as pronounced as other parts of the nation, so merchants haven't reacted to the recession like other parts of the nation," Westrum said.

"The chain stores may have reacted with more deals, but that's their whole premise -- a discounter."

Across the country, retailers have been doing about the same volume as they were in 2005. If the Home of Economy was at 2005 levels, "we'd be down about 20 percent; we'd be in trouble," Pearson said.

Greg Schneider, owner of Dakota TV & Appliance, said he was concerned about the late planting's effect on business. "The bottom line is farming still drives our economy," he said.

And the slowdown in new housing construction also affected his business, which does a lot of full packages for new homes. But things have worked out better than he anticipated five months ago. The crops turned out better than expected, and the demand for electronics has continued to grow.

"We're maybe down a little bit," Schneider said. "What's helped us is that electronics has become so much more affordable, especially the high-def TVs."

None of the merchants said that they had to cut staff or their hours.

Reach Bakken at (701) 780-1125; (800) 477-6572, ext. 125; or send e-mail to rbakken@gfherald.com .