CityBusiness Reports on Magazine Street Retailers

The following article appeared in the November 12, 2007 New Orleans CityBusiness. It reports on the struggles of retailers in post-Katrina New Orleans. Read the end of the article about the successes of Silk Road Collection.
Fizzled frenzy
Uptown stores report sales slump after post-K surge
From New Orleans CityBusiness, November 12, 2007 - by Jaime Guillet
Tobi Payne shops for clothes for an ’80s theme party at Funky Monkey. (Photo by Frank Aymami)
Tobi Payne shops for clothes for an ’80s theme party at Funky Monkey. (Photo by Frank Aymami)

Fading foot traffic and slumping sales have some Magazine Street retailers limiting inventory ahead of holiday shopping.

Retail revenues declined on Magazine after what many retailers say was a banner year following Hurricane Katrina. Declining sales didn’t stop about 50 new retailers from setting up shop in the Uptown shopping district, primarily located from the intersection at Sophie Wright Place to Henry Clay Avenue.

Roxanne Candebat, membership coordinator for the Magazine Street Merchants Association and a Magazine Street retail business owner for 17 years, said many businesses have lower profits in a year marked by low turnout for the Oct. 6 Capital One Art for Arts’ Sake. The open house for galleries encourages other retailers on Magazine to stay open late and is considered by many business owners as the kickoff of the holiday shopping season. Candebat said she did half the normal sales at her antique and gift store, Country at Heart.

“There’s more (retailers) trying to get to Magazine but actually business is not up right now,” said Candebat. “Saleswise, we’re not there but new-business-wise, yeah, we are getting more.”

David Perlis, vice president of Perlis Inc. at 6055 Magazine St., said sales are down 4 percent year-to-date. He anticipates revenues will drop approximately 6 percent for the year from $9.5 million in 2006 to $9 million.

“Our business had been tremendous in 2006, much bigger than the same time pre-Katrina and it continued to be like that until February,” said Perlis. “Now we’re starting to trend down. The weather has been very warm except for this week so it makes it harder to know when our fall business will begin.”

Perlis benefited from the surge of demand for New Orleans-inspired items but the rush has waned, said Perlis.

Fewer tourists are traveling to New Orleans and spending money, said Greg Dombourian, MSMA chairman and owner of Dombourian Oriental Rugs.

“Thirty to 50 percent of our business is tourist-related,” Dombourian said. “Locals can make up more of that but not all. That’s why the French Quarter has been feeling it, because they’re like 90 percent tourist-based.”

Business owners believe residents drove the 2006 boom, said Dombourian.

“We’re grateful to local people,” he said. “They are what brought us back.”

Residents have changed their spending priorities, said Candebat.

“People have said there are just too many situations with the city such as with the (property tax) reassessments. People are hoarding their money — I’ve actually heard that word used — to see what happens,” Candebat said. “I’m concerned. I’ve got two properties in the city. I’m not going to buy any additional stock (for the store) until January and that’s only if I have a good season.”

Candebat, Dombourian and other retailers say they don’t want to sound an alarm about business on Magazine Street yet revenue is less robust than in 2006.

The city collected $9.1 million in September sales taxes, a 7 percent decrease from the $9.8 million collected in September 2004. But many Magazine Street retailers say the drop in business is much more dramatic.

Tax collection levels remain solid but business profits have diminished because of post-Katrina inflation, said Jerome Lomba, finance director for New Orleans. Business owners are more interested in profit than volume, said Lomba.

“The cost structure is a lot different post-Katrina,” Lomba said. “They may be getting squeezed with higher labor costs, utility costs and insurance costs. So sales from our revenue collections may look good on our side but not so good from their side.”

Perlis acknowledges higher costs are a big factor.

“Expenses are dramatically higher,” he said. “Our insurance (premiums) have more than doubled, for less insurance. Then there are utility and labor costs.”

Business owners Donald St. Pierre and Robert Turner adapted by tweaking their business model to include more Web-based commerce and it helped. St. Pierre and Turner own Silk Road Collection, an Asian-inspired antique furniture store.

Eighteen months after instituting their Web site and an e-newsletter, Turner and St. Pierre are averaging about 375 Web hits a day, which outnumbers the number of actual tourists in a given week, said St. Pierre. Internet sales now make up 20 percent of their business, said Turner.

“Donald and I have made a concerted effort to figure out how to reinvent ourselves,” Turner said. “I think a lot of businesses that will survive will have changed their focus of business. That has worked for us.”

Silk Road’s owners say the Web is not a profit cure-all. In December 2006, sales peaked at $30,000. Revenues at the low point in June and July came to roughly $7,000.

Turner and St. Pierre remain undeterred. August’s sales reached $25,000. St. Pierre said they can’t be defeated by post-Katrina conditions.

“It’s no longer about us. This is about the city,” said St. Pierre. “We want to do this for the survival of the city. We’re not going to let another business close.”