Right: Even in difficult economic times,
three of North Carolina's biggest retailes -- Lowe's, Belk and Family Dollar --
have been able to keep their parking lots full
Consumers' desire to feather their nests
leads to growing sales at many retailers
By Jerry Blackwelder
workplace layoffs emptying everything from corporate suites to factory floors, a
shaky stock market and skyrocketing trade deficits, many North Carolina
retailers these days are scratching their heads and saying, “What
From household cleaners to leather sofas and upscale ladies apparel to lawn
mowers, North Carolinians are still shopping, allowing more than a few retail
companies to emerge from the latest economic storm unscathed. In fact, retail
giants Lowe’s, Belk and Family Dollar — each headquartered in the state —
actually came out ahead. All have launched aggressive expansion into new,
The downturn officially began in March of last year, according to government
agencies. Joblessness in North Carolina became contagious. “We are still more
dependent on manufacturing than the nation as a whole, and this recession hit
manufacturing,” explains Gary Shoesmith, a professor in Wake Forest
University’s Babcock School of Management.
Layoffs spread to construction and even invaded finance, insurance and real
estate. Unemployment in Charlotte, the Triangle and the Triad eclipsed the
recession of the early 1990s. Yet in the midst of such bad news, retail sales in
North Carolina showed only a five percent drop from 2000 levels.
“Like everyone else, we would prefer to be operating in a strong economy,”
says George Mahoney, executive vice president of Charlotte-based Family Dollar
Stores. Nevertheless, he added, “we’ve had a very good year. We continue to
open new stores and generate additional sales from existing stores.”
As of May, Family Dollar operated 264 stores in its home state, 10 more than in
the previous year. The new stores were part of a significant expansion strategy
to add 525 stores before the company’s fiscal year ends in September. The
additions will mean Family Dollar’s presence in the retail marketplace extends
to more than 5,000 storefronts in 40 states from Maine to Florida and Arizona to
Family Dollar also recorded substantial gains in sales and earnings during the
downturn. Sales rose 12 percent in the first six months of their fiscal year,
and earnings mirrored that growth.
Mahoney says three factors contributed to Family Dollar’s ability to prosper
while the economy shrank. First is the strategic decision made long ago to
operate small stores, ranging from 6,000 to 8,000 square feet, in neighborhoods
rather than shopping malls or retail centers.
Convenience of shopping is paired with an everyday low price philosophy to keep
consumer costs down. The average shopper in a Family Dollar Store spends $8.60
The third component of the winning formula is simple, Mahoney explains.
“Regardless of the economy, we sell goods that people need.” Household paper
products and cleaners lead the list of low-cost products people use every day.
As the economy strengthens Mahoney expects sales of Family Dollar’s
discretionary items, such as giftware, candles and artificial flowers, to pick
Feathering the Nest
Sales of products for the home overall have fared well even as the economy faded
last year. Furniture sales, long a key component in North Carolina retailing,
have seen a surge in recent months. “It’s been an incredible swing for
furniture retailers,” says Britt Beemer of America’s Research Group, a
national consumer research firm that regularly conducts surveys of shopping
habits across the country.
Many furniture stores, Beemer notes, struggled last year just to equal sales
levels from 2000. Furniture fortunes turned, though, and Beemer’s Consumer
Mind Reader findings in May of this year saw shoppers spending 19.6 percent more
than the same month a year ago on home furnishings
That statistic is a good omen, both for furniture retailers in general and the
North Carolina economy in particular. “North Carolina continues to be
recognized nationally as the furniture shopping capital,” says Beemer, who has
interviewed more than four million consumers since launching his Charleston,
S.C.-based research firm in 1979. “I doubt that will ever change. There’s
too much infrastructure in North Carolina to take away the furniture retail
base. The Hickory Furniture Mart wouldn’t be built anywhere else.”
Leroy Lail, chairman of the Hickory Furniture Mart, agrees. He even investigated
the possibility of branching out, but concluded that Hickory indeed was the
place to be.
In 1959 the mart opened to allow area furniture manufacturers to showcase their
goods, primarily during the semi-annual furniture markets that draw tens of
thousands of wholesale furniture buyers to the state. By the early 1980s the
manufacturers had begun relocating their showrooms to High Point, the home base
of the world’s largest furniture trade show, to make it easier for buyers to
see and order their goods.
In 1985 the doors of the Hickory Furniture Mart opened to the general shopping
public for the first time. It had been transformed into a retail shopping Mecca
for home furnishings, an entire shopping mall devoted to furniture.
The concept took hold, and the mart became one of North Carolina’s top tourist
destinations. Today the mart is home to more than 100 retailers of home and
office furniture, accessories, fabrics, lighting, rugs and wall coverings.
Hearty shoppers can browse a thousand different product lines spread across a
million square feet of enclosed stores.
Almost half a million shoppers make the trek every year, a significant portion
coming from areas outside North Carolina. “We began to see a slowdown in
travel last March,” Lail says, which was the same time the recession
officially took hold. It appears, though, that the bulk of those who stayed home
were the window shoppers. Those now coming to the Hickory Furniture Mart have
done their homework, compared brands and prices, and essentially made the
decision to buy. “Today’s furniture consumer is definitely more educated and
aware,” he says.
Those who shop the mart aren’t greeted with a dozen sofas end-to-end on a
warehouse floor, but rather displays of how the sofa might look in their living
room, accessorized by lamps, tables and chairs. That’s how manufacturers
originally displayed their products for wholesale buyers in the mart, and the
technique of room settings obviously appeals to retail customers as well.
Manufacturers began promoting the showroom gallery display concept to their
dealers in the early 1980s, and offering the shopper the opportunity to
visualize how furniture might actually look at home has spread throughout the
“Home, hearth and family,” Lail says. “Those are the things driving retail
Likewise, those same priorities are propelling other home-based product sales.
“We’ve seen a resurgence in interest in and focus on the home in the last 18
months or so,” says Chris Ahearn, spokesperson for Lowe’s Home Improvement
Stores. That resurgence translated into the most aggressive expansion program in
the entire history of the Wilkesboro-based national retailer.
“We’re having a great year,” Ahearn says, citing as evidence annual sales
exceeding $20 billion for the first time, the company’s debut on the Fortune
100 listing, and the launch of 46 new stores across the country.
Lowe’s is now an established industry giant, the 13th largest
retailer nationwide and the 30th largest around the world. Seven
million people a week shop the aisles of nearly 800 Lowe’s Home Improvement
locations in 43 states. In the mid-90s the company shifted its new store
strategy toward major metro markets and now residents of Boston and New York
City can shop Lowe’s stores just like homeowners in Albemarle and Boone, small
towns where stores opened earlier this year.
Belk: ‘We Feel Good’
Nationally, at least one segment of the retail industry has taken a hit. The
recession prompted many budget-conscious American consumers to tell Britt
Beemer’s interviewers that they had abandoned or reduced their visits to
department stores. The effect was so great that only one department store
company in the nation showed an increase in comparable store sales.
The industry exception would be Charlotte-based Belk, which defied the trend and
opened five new stores last year. The largest privately owned department store
chain in the nation is adding nine new stores this year to bring its total to
more than 210 locations in 13 Southeast and mid-Atlantic states. “We haven’t
seen a slowdown at all,” says Steve Pernotto, spokesperson for Belk. In fact,
he adds, “We feel good about the short term and the long term.’
The model Belk store is around 60,000 square feet offering branded merchandise
and apparel at moderate to upper price points in medium-size and smaller towns.
But that hardly tells the whole story. The key to bucking the industry and
prospering lies in more than just the direction the economy is headed, Pernotto
“We have a number of things working in our favor at Belk,” he notes.
“We’ve made some strategic merchandising decisions, we have dedicated
employees, and probably most of all a loyal customer base.”
Belk has also been helped by its strategy of locating in small and medium-size
markets in the South. While many national and regional department store chains
suffered from losses in major metro areas in other parts of the country, Belk
was able to grow its presence in existing service areas in the region.
Even so, in the midst of continuing success the company is paying attention to
the bottom line. Pernotto says a grass roots initiative among Belk’s employees
generated more than a thousand ideas for identifying and eliminating waste in
Consumer Confidence Rises
It’s clear that not all retailers have fallen prey to the economic slowdown.
Hickory Furniture Mart’s Lail calls the current retail climate home, hearth
and family driven, and Lowe’s Ahearn agrees. “People are staying closer to
home and family,” she says. “For most people their home is their greatest
investment, and now they’re remodeling the kitchen they had planned for two
years or building a deck or landscaping the yard.”
The return to home and family, first appearing when the recession began,
intensified after the terrorist attacks last Sept. 11. People began simplifying
their lives, Ahearn says, traveling less and desiring to come home to a
comfortable, secure environment. Homeowners today, she feels, want to create a
haven from the world’s stress for their family and friends who visit.
Clearly many of those retailers
experiencing growth today are the ones who were poised to take advantage of the
“return home” trend with a ready supply of needed merchandise at attractive
Retail spending has also been fueled by last year’s federal tax refund and the
refinancing of mortgages by homeowners, which occurred in record numbers last
year thanks to low long-term interest rates.
For those retailers who have suffered along with other economic sectors, Wake
Forest University’s Shoesmith says help is on the way. He notes that growing
consumer confidence and increased retail sales indicate that a modest economic
recovery with low inflation is already under way. He cites first quarter growth
of 5.8 percent in real gross domestic product, personal consumption rising 3.5
percent and low inflation at 1.2 percent as indicators of an uptick in the
Good news especially for North Carolina is a gradual turnaround in unemployment.
Shoesmith says joblessness should have began to drop this summer, culminating
with only a .3 percent decline in overall employment for the year. This should
be followed by a 1.3 percent increase in jobs during 2003, he believes.
“Overall the data indicate that the United States economy is turning the
corner,” he says. “We saw positive job growth in the first quarter and this
summer we should pull out of the brief recession.”
He predicts retail sales overall will begin a growth trend once the economy
rights itself. And that’s more good news for North Carolina retailers.
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