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Merchants Worry About US Holiday Shopping - 2001-09-25

U.S. retailers are worrying that sales will be slow for this year's Christmas shopping season. The U.S. economy was already heading for a recession. But it was given another jolt when major U.S. airlines announced tens of thousands of job cuts in the wake of this month's terrorist attacks using hijacked planes. Another example is the Los Angeles retail district where merchants are already feeling the impact of a slowing economy.

In downtown Los Angeles, shops with open fronts and their merchandise on the sidewalk beckon customers, as salesmen try to lure them with promises of bargains. Stereos blare out music: Mexican and American pop tunes and songs by rap artists. The shops feature ladies' skirts, Indonesian textiles and counterfeit name-brand watches. Now, there are also T-shirts featuring U.S. flags to honor the victims of the attacks in New York and Washington.

Along a narrow alley, most shops are run by immigrants from Mexico or Asia. Salesman Martin Melendes says business has not been good. "It's very bad, man," Mr. Melendes says. "All the business here in the alley is very slow. Everybody says that. Maybe what happened in New York? I don't know, really. I don't know."

In the nearby Los Angeles toy district, entrepreneur Charlie Woo says that, in the face of a tight toy market, he had already diversified, selling Halloween costumes in fall and baskets with Easter candies in the springtime. But much of his revenue still comes from Christmas sales, which he worries may be lower than usual. "I think the most important impact is really the consumer confidence and confidence of the business community," Mr. Woo says. "People are nervous about what will happen next, and they seem to hold back. And in this world, business is rapidly changing. You have a rapidly changing business cycle. And once you slow down, it's difficult to catch up again."

Charlie Woo buys most of his toys from China, purchasing them by the container-load. He ships them through the Los Angeles port, and resells them to retail stores in the United States and Latin America. With increased security at the ports and at the border with Mexico, he worries that incoming and outgoing shipments will be delayed. "And if you have additional delay, then you create cash-flow problems because if you anticipate goods to arrive at a certain place at a certain time, you pay in that time frame," he says. "If the goods get delayed, your payment will get delayed and it will create a problem."

A consumer survey released over the last weekend shows U.S. retail sales were down from five to 20 percent, depending on the region. Retail sales were down in Los Angeles by 10 percent.

Economist Jack Kyser monitors business trends for the Los Angeles Economic Development Corporation. Like many U.S. economists, he expects several quarters of slow growth, with a recovery starting late next year. But with the major airlines regrouping, he says the impact is being felt through the entire economy. "You have to say the U.S. airline industry right now is in basic disarray. They're looking at a new way of operating," Mr. Kyser says, "and what we're seeing right now is, business is being cautious. Major trade shows are being canceled. Business is telling their staff, 'if you don't have to go, wait.' But I think, in about a year, you will have sorted the process out. People will know more what to expect."

Toy distributor Charley Woo says transport delays are not nearly as bad now as if they had come in November, much closer to Christmas. And salesman Martin Melendes is waiting, and hoping that business picks up at shops like his in the downtown retail district.