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LOS ANGELES — Fear and uncertainty have affected West Coast retailing and manufacturing sectors as much as other areas of the country, compounding difficulties in some pockets, like Silicon Valley and Hawaii, where business was already hurting from recession and dot-com failures.
This story first appeared in the September 11, 2002 issue of WWD. Subscribe Today.
Many believe that widespread anxiety of additional attacks and economic mayhem has caused as much damage to local retailers and vendors over the past year as the actual immediate loss of business after Sept. 11. But some positives, like a resurgence in local manufacturing, were also a result of the aftermath.
In the months following the attacks, tourists stayed away from the region’s prime vacation spots, jittery Hollywood studios shut down tours and lines accumulated at the parking garages of local malls as armed guards searched trunks.
Certainly, in Los Angeles — where the entertainment machine drives business at retail, restaurants, hotels and local manufacturing — fear manifested in ways that hinged on the surreal.
Bomb-sniffing dogs were among the attendees at last year’s Primetime Emmy Awards, delayed from its September telecast to November and nearly canceled over concerns that the event could be a terrorist target. And, in an effort to lure tourists, the city made an unprecedented $250,000 gift to the Museum of Contemporary Art to bring the Andy Warhol retrospective here. While not the blockbuster it promised to be, the show turned a profit for the museum and tourist-driven businesses, thereby helping the local economy.
Nervous financial lenders, anticipating defaults, put choke holds on vendors’ credit lines. That limited manufacturers’ ability to build inventories and regain lost business, industry analysts noted.
Brien Rowe, managing director with Sage Apparel Group LLC, a firm specializing in mergers and acquisitions, said psychological factors can’t be overestimated.
“Given how New York-centric our industry is, the apparel sector was perhaps harder hit than others,” he said. “A lot of national decisions for goods allocation come out of New York and the big retailers making guiding decisions had flagships in Manhattan. Their fear started rolling across the country.”
On an up note, though, Rowe expects the first anniversary to herald strong comparisons: “It will be easy for stores and producers to show positive gains year-over-year. As much as that seems simple, it’s positive news and it feels good.”
In some cases, fear about global security worked in the region’s favor. Local contractors, who saw orders yanked away after the attacks, were suddenly flooded with work four months later. The reasons varied: last-minute orders, a return to the comfort of domestic sourcing, an unwillingness to risk customs delays or to send staff abroad.
Patriotism initially fueled a mountain of star-spangled merchandise. But most contractors believe the continuing urgency for local goods is a matter of expediency rather than national pride.
“Vendors calling me? I haven’t had that in 10 years,” said Jimmy Macias, owner of sewing contractor Ja-Mar Apparel Manufacturing in Irwindale, Calif. “It’s nice not to have to jump at whatever they’re offering you.”
Textile companies lost between 10 and 30 percent of orders after 9/11, estimated Ira Pinsker, vice president of Bank Leumi USA, which lends to local textile importers and vendors.
But about six months ago, textile prices started rebounding, he said, estimating most of his clients will end the year with slight gains.
Local sales reps also discovered their worst fears unfounded. Instead of empty hallways and mute phones, buyers flocked to November and January markets, opting to skip New York trips.
Market traffic has since leveled off, but the consumer’s “stay home, hunker down” mood lingers, according to showroom owner Lynn Girard. Her accounts in towns like Fresno and Stockton, Calif., and Omaha, Neb., are booming, while more glamourous destinations remain slow.
“Wealthy customers that would go to New York or Europe are staying put to do their shopping. And they’re buying early,” Girard said. “I can’t believe my reorders.”
Meanwhile, at retail, Western region store executives maintain they are standing on fairly solid ground, but acknowledged things were shaky.
Like airline companies, retailing was not the business to be in immediately following the attacks — especially in hot tourist spots such as Las Vegas, San Francisco and Hawaii.
As consumers viewed shopping as superficial or an irresponsible use of money after the attacks, inventories piled up. Some larger stores panicked, slashing merchandise up to 80 percent, thus forcing small specialty stores in the region to follow suit.
Department stores, troubled well before 9/11, continued to stumble. But the once recession-proof luxury market took the biggest tumble.
This year, the disappointing back-to-school season notwithstanding, the junior category fared better than most. Teens didn’t harbor adult fears and kept up a healthy appetite for the next trend. Pacific Sunwear of California, suffering last year, found itself notching a 13 percent comparable-store sales increase this August.
John Martens, vice president and general manager of Neiman Marcus Beverly Hills, noted the lack of Saudi and Kuwaiti tourists he usually sees in August: “I drive up and down Rodeo. I see lots of cameras, but I don’t always see shopping bags.”
Immediately following the attacks, the Rodeo Drive Committee developed an advertising campaign to lure local shoppers. “We have gone out of our way to service the locals,” said committee president Peri Ellen Berne. The effort paid off in the short run, turning last December into a strong month, but traffic has been spotty since then.
“Tourists are still less than we have seen historically,” she said.
Luxury businesses in Hawaii, once bolstered by Japanese tourists, were already ailing from the Japanese recession last Sept. 11. Regardless, luxury executives remain bullish on the region. “Even when times are difficult, Hawaii remains a very viable market and still has very high volumes,” Gucci Group chief executive officer Domenico De Sole told WWD in June.
Las Vegas rebounded, too, with hotel occupancy levels now back to pre-Sept. 11 levels. The country’s second most successful shopping center, The Forum Shops at Caesars Palace, was back to reaping $1,300 a square foot by summer.
Sales in northern California consistently lagged behind the southern end of the state from September through November 2001, Jeremiah Sullivan, former chairman and ceo of Macy’s West, told WWD last December.
That’s still the case in the Bay Area, which was already reeling from the dot- com bust.
“General optimism is down,” said designer Deborah Hampton, who’s closing her San Francisco boutique this month to focus on wholesale. “It makes me wonder if we’ve reached a saturation point.”
Overall, retailers had to work much harder to maintain same levels of business, doing everything from lowering prices to revamping selling floors. Jeri Rice, owner of a namesake boutique in Seattle, said: “We had a great spring by keeping inventory moving and maintaining levels you can keep filling.”
Ron Herman, owner of Ron Herman at the Fred Segal complex on Melrose Avenue here, said the store has a concerted effort to freshen its presentations and keep the atmosphere inviting.
There’s also more tolerance.
“When people have come in the store,” recalled Herman, “I’ve said, ‘Bring your dog in. Go ahead and put your baby there on the floor. Hey, you don’t have to move your car.’”