Predicting U.S. retail spending and consumer confidence trends right now is a headache-inducing exercise.
Breathless headlines predict nightmarish inventory shortfalls, lack of workers and soaring prices for the 2021 holiday shopping season. They are followed by counterpoint data showing consumers shopping and spending with gusto despite those headwinds.
And then there’s the “where” of all that spending: Is it just big-box stores and large-ticket items, or are smaller retailers also faring well?
Unsurprising, there’s no single, clear answer or data point. For smaller merchants, it seems to boil down to what’s being sold and how well prepared the seller is for a complicated landscape.
Tennessee’s small retailer experience during the pandemic months is instructive. By late summer, business owners across the state knew the 2021 holiday shopping season would be a challenge, as was 2020’s. The COVID pandemic, despite hopes earlier in the year, was resurging heading into the fall. Political battles, including a special session of the Tennessee General Assembly, were being fought over mask-wearing requirements and related public health issues.
And national high-profile media stories about supply-chain shortages were providing plenty of heartburn concerning inventory, or the lack of it.
Retailers responded by controlling what they could, planning as best they knew how and connecting with their customers and communities.
Toy retailers stockpile
The specter of a joyless, toyless Christmas is a favorite of some pundits. It’s certainly an image that Patrick Holland, owner of Learning Express Toys & Gifts of Chattanooga and Mountain Top Toys in Chattanooga, has done all in his power to avoid by stockpiling goods early then making sure customers knew what was available and when.
“I’d describe 2020 as ‘not fun,’ but surprisingly Mountain Top Toys had its best year in 28 years, although Learning Express was down,” says Holland, who owns the stores along with his wife Joanna.
“I think the difference is that, although the stores are only about a 15-minute drive apart, Mountain Top is on Signal Mountain, which is a small community that really got behind its local businesses, whereas Learning Express is more downtown.
“We were also able to shuttle inventory between the two stores, which also helped.’’
Mountain Top Toys also benefits from being a longtime local destination that will mark 30 years in business during 2022. Holland purchased it in 2013, soon after opting out of a telecommuting career that saw him in New York a part of every month.
By 2017, the opportunity to buy the local Learning Express franchise store had come up, and soon he was operating both sites.
Then came 2020 and 2021.
“It’s been scary for everyone who owns a business,” Holland acknowledges. “There were mask mandates, and then those went away; the whole thing has been politicized and that has caused some confrontations, including us getting our first one-star online review ever.
“That was disappointing, because everything we’ve done has been to protect our employees and customers, but we got through it. This has easily been the most difficult thing we’ve ever navigated through.”
Difficult but successful also defined 2021, which was good for both stores, thanks to a return to in-store shopping as well as new collectible toys driving interest. Staffing at both stores hasn’t been a huge issue to date, Holland says, adding that his bench of fill-in personnel is not as deep as it once was.
“I used to have two or three people to call if someone was sick, and now we’re working the stores ourselves if that happens,” he adds. “It’s the challenge happening across the country at businesses of all sizes; just for us, it’s harder.
“We began reviewing wages last year, and we have been fortunate in that we could provide a couple of bonuses throughout the year, as well as an incentive program during the holidays. Employers are going to have to be more generous if you want to control retention.
“We’re so grateful for the staff that have stayed with us, and hopefully things are going to get better.”
And despite a raft of stories showing container ships floating in the sea off California, Holland isn’t staring at bare shelves. Thanks to being part of a franchise network, as well as serving on the board of the American Specialty Toy Retailing Association, or ASTRA, he was able to leverage multiple connections and buy “a ton of stuff” earlier this year ahead of the shipping crunch.
“Our back rooms are full, my basement is full, I took out a storage unit,” he notes. “In many ways, being a smaller retailer makes you nimbler than the big-box stores. They place giant orders a year out, whereas we are faster and ordering less. They have entire ships stuck out there, where we can find other vendors on land who have options.
“We may wind up with something different than what we were after, but it’s still appealing, and people will still want to buy it.”
Heading into 2022, Holland is wary of making any predictions. It’ll likely be more of the same, at least for a while, and he’ll be putting lessons learned into practice regardless.
“I learned how important it is to communicate with other stores in our industry, to share what’s going on, and to communicate with the other stores in your neighborhood. A small-business owner can feel like they are on an island, and when you can connect with others you find solutions to your issues, and that’s key.”
No blanket solutions
One common thread among small retailers, even in the face of mounting supply and staffing issues, is an unwillingness to sacrifice quality for the sake of sales. The workarounds created to keep quality merchandise coming in, support longtime vendors and keep talented staff have been difficult, but are also offering lessons in what to do in the face of an unseen obstacle.
For instance, The Nashville Blanket Project, a business which donates and sells blankets, opened its first brick-and-mortar store in Nashville in May.
Although inventory could get tight, the shop wasn’t having trouble getting blankets. Many are made in Mexico, others in North Carolina, so overseas shipping wasn’t an issue – or so the operators thought.
“The labels we sew onto the blankets got delayed by a few weeks recently,” says Chris Barrett, co-founder along with his wife Marissa. “That put us in a bind. The company we order from is based in Pennsylvania, but apparently those labels are made in the Netherlands and shipped from there. So, our labels are European. Now we know, so we can plan accordingly.”
The company ordered its blankets early, and in larger quantities than usual, so it could keep inventory on hand. Even so, demand has outstripped supply in recent months so there are some inventory gaps when it comes to the most popular color combinations. The business has also begun manufacturing its own blankets, which is done stateside, and that is also allowing for more options.
“Even so, our turnaround time is a few weeks, so when someone posted our smiley-face blanket on social media it went big, so we had to get more ordered to keep up,” Barrett says. “It’s not a bad problem to have, but with the unknowns we are still having to scramble more than we’d like.”
Nearby, Manuel Delgado, a master luthier and owner of Delgado Guitars, looks back over almost a century in this family-owned business and says while supply and staff issues aren’t new, because they are affecting everyone now they are harder to tackle and overcome.
“We’re a storefront for instruments and accessories, as well as the custom guitars we make, and we also work with a lot of school programs,” Delgado adds. “We’re dealing with wholesale to retail to government contracts, and so we are hitting issues in a lot of places.”
As production lines get snarled in shortages, he’s having trouble meeting market demand for the lower-priced instruments schools need, for instance. And price hikes mean that right now, those instruments are being priced out of schools’ budgets.
“If a 40-foot container of low- to mid-range instruments coming out of China normally costs about $6,000, it might be as much as $32,000 now,” Delgado notes. “That means a student-model guitar that normally retails for $200, in a container that hold thousands of them, is going to be four, five times that cost. I can’t offer it at the old cost unless my goal is to lose as much money as quickly as possible.”
He’s also having to tackle staffing issues, as there’s not a line of skilled, custom woodworkers and guitar builders outside his door.
“Companies who build on an assembly line, they have a model where they train people in ways that take the guesswork out of what they are doing,” he says. “We’re doing very high-end instruments, all by hand. People with these skills are almost impossible to find.”
And as an example of how interconnected the raw-materials world is, he points to the boom in housing construction as something else that’s constricting guitar and other wood-instrument creation.
“If the wood our manufacturers need, which comes in sheets, is going into houses, that’s going to trickle down in higher prices, as well,” he says. “It’s all connected. I don’t think people realize how tied together – and in how many ways – all industries are.
“I’m not sure what’s going to happen next year, but I think it’s not going to get better soon. We’re insulated and fortunate because we do so much custom work, but even so I’ve got strings to buy, and the price has doubled. It’s hard to remain competitive when things like that keep happening. I want to be hopeful, but it’s hard.”
Niche retailers serve service
Another challenge facing small retailers is a bit more niche. What of those who, in addition to selling mass-produced merchandise, also are storefronts for local or regional artisans?
That added a whole new layer of complexity to supply issues in 2021, says Jodi Bowlin Eades, owner of Knoxville Soap Candles & Gifts.
“This is a 20-year-old business that I’ve owned for 15,” Eades says. “At the time, soap was being made in the store. Then the 2008 recession hit, and I had to come up with something different to offer. I made a pact with myself to community outsource the space, so I was creating a ‘maker store’ and didn’t know it.
“Now I have 40 to 50 local artisans in the shop, most of whom have been with me since the beginning. Their items are exclusive to the store, and so we’re about 80% local, handmade and one of a kind.”
What that means now, she says, is that if one of the three families making candles, or the five making soaps, can’t get their ingredients, they can’t provide product. Ditto the jewelers and others who are scrambling to adapt and repurpose their creations to meet market reality.
“I’ve been affected by the supply chain in terms of the home décor items I carry because they are seasonal and imported. The makers, though, are really getting hit by what’s going on with raw goods,” Eades adds.
“When someone comes into the store, they’re wondering why some products have green lids or red lids, or why some bottles are brown and others are white. It’s because people are grabbing any packaging they can. Wicks, essential oils, fragrance, you name it, and it’s hard to find right now.”
Those who make these products are a passionate group, she adds, and so they are putting their creativity behind sourcing as well as producing.
“I’ve still got plenty to sell and a full store,” she says. “It may look a little wonky, but it’s here.”
Wonky, and also in demand.
Eades’ customers know they can’t get these items anywhere else, so they make do with shortfalls and odd packaging. They also line up for a line of antifungal and antiviral herbal products whose sales have skyrocketed in the pandemic months.
“As you might imagine, people are looking for things like that,” she points out. “They are eager to find antibacterial products that are gentle, and we’ve also got a system that burns rubbing alcoholic to purify the air. We keep one of those going in the store; it helps people feel safe.”
She’s also limited the number of shoppers allowed in at any given time, cleans constantly and offers curbside service. Her goal is to “give people space, keep a distance, have our shields up and not judge them about mask wearing or not wearing.”
As 2022 looms, Eades says she expects more of the same when it comes to operational challenges. She’s sacrificing her time off by not hiring part-time staff during the holidays since she’s unsure of how inventory and sales volume will play out. The winter months are her slowest, other than an uptick around Valentine’s Day, so caution is her watchword.
“I hope by spring we’re more normal and I can take some time off, but right now I need to power down and make sure I get the winter rent covered,” she says. “I hope the supply chain issues lighten up so my makers can get the items they’re counting on to create their products.
“I know they will create with what they can get, so we’ll have things in here for Valentine’s Day and leading up to Easter. It may not look like what it usually does, but we’ll have products for people to buy and enjoy.”
At the nearby CitiFid-O and Tea & Vine stores, owner Terri Karlsson also is taking a measured, pragmatic approach to what she can and can’t control.
Given that her two businesses are very different – Tea & Vine is a gourmet foods and food-related products enterprise, while CitiFid-O caters to canines and other pets – she’s seen supply chain and other challenges from all the angles.
“We have the two stores – one for people, one for dogs,” says Karlsson, who along with husband Paul set up shop in the 400 block of Gay Street about 11 years ago after looking for an expansion city for their Asheville, North Carolina, operation.
They liked the vibe in Knoxville, and after years of holding dog leashes in front of Tea & Vine store so owners could shop, they opened CitiFid-O a little more than seven years ago.
Both stores have done well in the pandemic, with the fourth quarter of 2020 breaking records, and 2021 also being solid. Still, that’s been due to a lot of hard work – and workarounds.
“Staffing has been challenging,” Karlsson acknowledges. “These are not stores where you just causally walk around and pick up things. We are very customer interactive, whether it’s fitting a collar harness on a dog, or talking about cat toys and food, talking to people at the olive oil and balsamic vinegar tasting bar or discussing cookware.
“We need people who know the products and can give that attention, so it’s not just a matter of finding a warm body and putting them out on the floor.”
On the product side, Citified-O carries a wide range of U.S. and Tennessee-made products, so it has been easier to keep stocked than Tea & Vine, which stocks many imported items.
“We used to order $1,000 worth of product from a vendor, and two weeks later it would arrive,” she recalls. “Now we might get $500 of it in, and a quarter of that is broken or the wrong thing.
“My life has become very interesting because as the primary buyer I’m taking four times as long to accomplish what I need to do. I have to email photos, send things back, get credits and so on. Both stores are fully stocked, beautifully stocked and carefully curated, but I’m about to lose my mind.”
Sanity might not return in 2022, she notes, because supply issues are “way worse this year, and this quarter has been the worst.
“One big problem is that manufacturers, even if they are getting goods, are having issues with keeping warehouse personnel. We’re getting all this weird stuff because those workers are new, don’t care or all of the above. We are very particular; we know our producers when it comes to things like olive oil, so we’re getting what we want and need. But when it comes to gadgets and cookware, it’s going to be a problem for a while.”