Local economy has ups and downs

In the first installment of our series on the economy, the Herald speaks with several local business owners to see how things are going.

By: Chris Karmiol and Scott Morgan
   Sam and Dipti Sanyal are a month away from celebrating a first anniversary, but the honeymoon is long over.
   The anniversary is for their Indian restaurant Suruchi in East Windsor, which, as is the story with many other start-ups, is struggling.

   Struggle is natural for a new business and ensures, as Darwin’s theory outlines, that the fittest survive. But the Sanvals are coming into business at a time when it seems there is more struggle than might ordinarily be expected.
   Many economists are now saying recession, though it’s also been called a correction. Adjustment and softening also are terms that are bandied about, and whether the nation is on the front or tail end of it is another question altogether.
   Whatever the terms and whatever the economy’s position, the facts look like this:
   • The Dow Jones Industrial Average dropped 15.6 percent since its Jan. 14, 2000, high. It reached a low point of 8,903.397 on Sept. 18, 2001, one week after the terrorist attacks on the United States.
   • According to the federal Department of Labor, unemployment in November rose to 5.7 percent, up from 5.4 percent in October and 4.9 percent in September. A year earlier the number stood at 4.0 percent. The labor department also said New Jersey’s unemployment rate was at 4.8 percent in October, 4.5 percent in September and 4.3 percent in August. The number in October 2000 was 3.8 percent.
   • For the first time in eight years, the national gross domestic product decreased in the third quarter of 2001. The rate dropped 0.4 percent.
   • The National Bureau of Economic Research announced in November that the United States is in a recession that began in March 2001. The NBER is a private, nonprofit, nonpartisan research organization dedicated to promoting a greater understanding of how the economy works. Its research is conducted by more than 600 university professors around the country.
   Just how all that translates to area businesses still is being determined. But there is a situation, that much is certain, and as it affects the national economy, so it affects the local.
   "The restaurant business is affected the most," said Mrs. Sanval, sitting in her empty restaurant before it opened for lunch.
   Still working as a banker at PNC, Mrs. Sanval watches economic trends, and she’s not thrilled with what she sees. When the Sanvals fulfilled their dream, and opened their own restaurant, business initially was good. Of course, last year was another species altogether, as far as the economy is concerned. This past summer the climate shifted.
   "I don’t know what happened," Mrs. Sanval said. "The economy took a sudden turn. The drastic and worst thing happened Sept. 11. I feel as a business person everything took a radical change."
   An already faltering economy, combined with a crippling blow like the fallout from September’s terrorist attacks, leaves a new, unknown restaurant gasping for breath. The Sanvals are confident, however, their business will turn around and that better days are ahead.
   "So many people have been laid off from jobs, they don’t want to go out to eat," Mrs. Sanval explained. "They stay home to cook."
   That’s why, at the Super Fresh supermarket in the same shopping center in East Windsor, business hasn’t suffered in the least.
   "Food is a necessity," said Joe Black, Super Fresh Food Markets store director. "Somebody who normally buys a steak may buy ground beef instead, but they still have to put ‘x’-amount of dinners on the table every week."
   And so the 13 registers at Super Fresh continue ringing. Business remains steady even in the face of stiff competition from nearby McCaffery’s, ShopRite and the new Genuardi’s.
   "Competition is always tough," said Mr. Black. "You have to stay sharp."
   The trend in grocery shopping appears to be leaning toward private labels, or store brands, which Mr. Black said offer the same quality as national brands at a lower cost. Prepared foods also are taking off, as families work more hours and time becomes a more precious commodity. Another marked trend in spending habits, as Sandy Hotchkiss, a customer service representative, explained, is that "people don’t buy their groceries with money anymore." Debit cards and especially credit cards have become the norm.
   That worries Ken Forgash, owner of the 99 Cent Outlet in East Windsor.
   Though business is brisk right now, he worries that credit card-driven spending habits will come back to bite consumers after the holidays.
   "(Customers) still want to buy the Christmas gifts, but they don’t have the spendable cash, so they put it off," Mr. Forgash said as he rapidly tallied item after item for his growing line of thrift-shoppers. "They’re going to have to pay interest rates. That’s why I think it will be slow in January."
   As for now, though, Mr. Forgash is "pleasantly surprised" by the Christmas rush.
   "We’re doing better than I anticipated," he said. "We’ve had to reorder merchandise three times."
   At the other end of the spectrum, small, single-proprietary businesses suggest the topsy-turvy economic climate may be simply confused. While "necessity" stores, such as supermarkets, which purvey food and living goods churn along, small specialty shops along Hightstown’s Main Street are marching to an aberrant — but still profitable — drumbeat.
   At Lisa Marie’s Cards and Unique Gifts, Lisa Brown stands among walls and shelves festooned with color, glitter and cheer. But no customers.
   "Foot traffic has been very slow," Ms. Brown said. Down since last December. Down significantly since October.
   The reason? Simple.
   "People are not spending," she said.
   And while that may seem a dour description of her business, especially in light of the observations of Sun National Bank Branch Manager Eva Teller, who admitted customers are tending to hold onto their money rather than withdraw it, there is a curious upside — parties.
   "The parties are keeping the store going," Ms. Brown said.
   Therein lies the unusual state of many business owners in the borough — down in volume, but up in revenue. It is a state that stems from a lack of low-dollar gifts beside a spate of higher-dollar expenditures.
   Such is the case with Nick Chaffer, owner of the Step Back in Time antiques shop. While overall dollar figures are up since last holiday season, Mr. Chaffer said the items that normally sell the most in the pre-holiday months — the "small, gifty knickknacks" priced between $25 and $100 — have barely moved. Rather, he said, his business is doing well from sales of high-dollar items, such as furniture. It has been the affluent and the enthusiast who have stayed financial gloom thus far, Mr. Chaffer said. The only thing missing, he said "is the casual shopper."
   Judging by business in other specialty shops, Mr. Chaffer’s observation would seem true. Keith Bergmann, owner and "engineer" of DK&B Railway Supplies, said shoppers of specialty items such as model train supplies still need stores like his, since they cannot get such merchandise at large chain stores.
   The ironic thing, according to Mr. Bergmann, is that a recession would benefit his business.
   In times of recession, he explained, people do not spend large amounts of money for entertainment. Instead, he said, they tend to get nostalgic. In remembering those model trains in the attic, Mr. Bergmann said, shoppers drop by and spend maybe $20 instead of $150 for movies and video games and dinners. And they come back because of the personalized service.
   For the small-business owners, at least along Main Street, commitment to serve the customer seems to be what keeps their doors opened and their storefronts free of real estate signs.
   For Viswanadham Gadey, owner of the Hightstown Pharmacy, such conclusions are simply obvious.
   "I don’t compete with (chain pharmacies like CVS)," Mr. Gadey said. "I don’t make this a discount store where you can buy cigarettes and sodas. This is a real pharmacy."
Managing Editor T.J. Furman contributed to this report.