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Small Businesses Feel the Pinch


FEDERAL Reserve Board chairman Alan Greenspan thinks the economy is going to bounce back. Maybe Mr. Greenspan should talk to Erik Laustsen of Danica Design Candles, or Les Sackin of Sarsaparilla Deco Designs Limited, or Ann Jeffries of Frontline Sportswear.

``The economy is for the birds,'' says an unhappy Mr. Sackin. ``Mr. Greenspan is not doing enough to prevent a recession,'' states Ms. Jeffries. And Mr. Laustsen, the candlemaker, complains, ``I'm not seeing my old customers.''

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To talk to such small-business people and get a nonstatistical sense of the economy, all Greenspan needed to do was walk the 17 miles of corridors at the New York International Gift show last week. After a day of talking to merchants, one has a sense that business is still soft, orders below expectations. Many retailers are asking for later deliveries, or ordering smaller amounts. ``Caution'' is the buzzword.

Although gifts are a small part of the national economy, they are the types of items Americans buy with their disposable income when they are feeling good. In that respect, the outlook for gifts is not much different from retailing in general. Rosalind Wells, an economist at the National Retail Merchants Association, says, ``We don't have a very exuberant economy right now. Consumer confidence has fallen pretty sharply in January. It does not surprise me that gifts are sluggish.''

(Signs of a slowdown in the general economy remain elusive. Last week the government reported the January unemployment rate was 5.3 percent, unchanged from December. Although there were widespread layoffs in the auto sector, this loss was made up by the gain of 275,000 new jobs - a healthy performance.)

Part of the reason for the slow start in retailing is the financial problems at large department stores. Federated Department Stores, part of the Campeau empire, is in Chapter 11 bankruptcy. ``There is some shakeout in the business, and there may be more to come,'' says Alan Steel, marketing director for George Little Management Inc., which puts on the gift show.

Problems in the department stores have been noticed by Margaret Word, president of Selandia Designs, a Santa Clarita, Calif., company whose products are sold at Macy's, Bloomingdale's, and specialty gift shops. ``Our average order size is down,'' she says, although the company has opened new accounts to make up for the drop-off.

At the same time, many merchants did not have a very good Christmas season. ``Specialty stores at the high end of the price range ended the year with high inventories,'' explains Mr. Steel. David Permut of 'Elan of California has noticed some buyers of his expensive leather wear are over 90 days late in paying their bills.

Mr. Sackin, whose West New York, N.J., company produces art-deco gifts, has noticed the slowdown at gift shows this year in Orlando, Miami, Atlanta, Dallas, and Los Angeles. ``It's the slowest I've ever seen,'' he says.

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Of course, not everyone is having a bad year. Manufacturers who sell to retailers carrying lower-priced lines are doing well. Ann Post of Chicago-based North American Bear Company Inc. says retailers sold out its teddy bears in November. ``They sold the bears they were saving for Easter in December and now are reordering. It's our biggest January,'' she says.

Alice Van Meter of Design Ideas, in Springfield, Ill., says her bendable trash containers are hot sellers. Sales are up 20 to 25 percent over last year. Jane Holly of M.J. Dots, based in McLean, Va., thinks it is helpful to be a small company. ``We have small minimum-order sizes,'' explains Mrs. Holly, whose company sells personalized gifts for children.

Many of the exhibitors at the gift show have their own remedy for the slow economy. Ms. Jeffries, whose company is in Lansdale, Pa., thinks the Federal Reserve Board could help her silk-screen T-shirt business by lowering interest rates. ``It makes a big difference to buyers who purchase on credit,'' she explains.

Steve Gitlin, New York regional manager for the Philadelphia-based Boas Box Company, says merchants are listening to economic forecasters too much. Prophecies about recession become self-fulfilling, he says. ``Just put your head down and go about doing your normal business,'' he advises.

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