Small Business Forecast 2013

2013 Small Business Forecast

Overcast with clearing skies: That’s the business forecast from economists as retailers enter a new year. Drizzly conditions will remain at least for the first half of 2013 as consumers mostly hold tight to their pocketbooks. By the summer, though, light should break through the clouds as the resolution of critical national uncertainties encourages corporate hiring, capital investment and consumer spending.

For retailers, the New Year’s mood can be characterized as hope tinged with wariness. “Looking to 2013, everyone has to be optimistic,” says Greg Worden, co-owner of Vermont Artisan Designs in Brattleboro, Vt. “We’re expectant, no matter what happens.”

As for the wariness part, retailers have had plenty of time to appreciate an operating environment marked by false promises. “The economy is still in a weak recovery and hasn’t come back with as much gusto as people had hoped,” says Diane Sulg, co-owner of Maddi’s Gallery in Charlotte, N.C. “Retailers and crafts people are saying that business has gotten a little better, but not by much.”

Sluggish Recovery
Professional economists don’t believe the coming year as a whole will bring much relief over 2012. “We expect the recovery to remain lackluster,” says Sophia Koropeckyj, managing director of industry economics at Moody’s Analytics (www.economy.com), a research firm based in West Chester, Pa. “The pace of growth will be too slow to meaningfully bring the unemployment rate below eight percent.”

The numbers tell the tale. Moody’s expects gross domestic product (GDP) to increase by 2.4% in 2013. That’s not much of an improvement over the 2.3% anticipated for 2012 when figures are finally tallied.

Moody’s forecast might not seem all that bad, given that the GDP increase for an economy in average growth mode is 2.5%. However, a nation recovering from a recession needs a more robust expansion. “By most measures, this recovery is among the weakest in the past 50 years,” says Koropeckyj.

For the foreseeable future, then, retailers will deal with a consumer troubled by continuing high unemployment. “We expect the environment to be difficult in 2013, with core retail sales growing at some 2.3 percent,” says Scott Hoyt, Moody’s senior director of consumer economics. That pace represents a de-escalation from the 3.2% anticipated when 2012 figures are finally tallied. To put those figures in context, average annual core retail sales grew at 4.6% prior to the 2008 financial crisis. (Core retail sales exclude volatile revenues from auto sales and gas stations).

Staying Creative
Not all the news is bad: Large corporations have managed to thrive, piling up mountains of cash ready for a fresh round of capital and labor investment when the time is right. That can only spur consumer spending.

Retailers looking for a rebound in 2013 need to get ready for better times by staying creative without letting the sluggish environment give them the blues.

“We’re constantly looking for new things to do,” says David A. Brooks, co-owner of Appalachian Spring, a five-store gallery operation headquartered in Falls Church, Va. “We’ve tried to focus on the fact that we need to add value for customers. So much of retail today is based on price, or a revolutionary product like the iPhone, or something that’s cheap like Chinese imports. We feel we need somehow to create a feeling of greater value.

“Looking to 2013, we’re still working on that concept of value,” Brooks adds. “We plan to spend more time telling stories about the products, communicating on why it is such a wonderful thing to buy hand-crafted items and buy American.

“We also need to make things more convenient for the customer. That means focusing on multi-channel. The consumer is not single-channel anymore. We will need a mobile website as well as an e-commerce one.”

Banding Together
Cooperative marketing can help. As co-chair of American Craft Week, an annual project of Craft Retailers & Artists for Tomorrow (CRAFT), Sulg says the national event offers retailers good promotional opportunities.

“The most successful retailers participate in events in conjunction with their friends and neighbors in the crafts field,” she explains. “Sometimes retailers will band together to promote a gallery walk or an arts fair, and everyone chips in a reasonable amount of money, such as $40 or $50, to print a rack card. Other times they work with the Chamber of Commerce to get a raffle going where people can enter at each retail location.”

But what if a retailer is isolated in a location with few such venues? “One approach is to draw a circle around your best customers and another around your best products,” advises Sulg. “Where the circle overlaps identifies where the best customers buy the best products: That’s what you should market.”

The bottom line, then, is that retailers must get going to get the green.

“You can’t just sit back and say ‘I hope the year will be good’,” says Worden. “You have to take proactive steps to make it better.”


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