Recession and Retail and Real Estate & Retail and Small Business

Companies selling indulgences find ways to get by

January 5, 2009
As anyone with even a passing acquaintance with financial planning knows, a "need" is something essential, while a "want" is everything else. For instance, gasoline is a "need," while a caramel macchiato grande from Starbucks ($4.09, with tax) is most definitely a "want."

Which is why, as the recession deepens, the formerly invincible coffee vendor reported an 8-percent drop in same-store sales in its latest quarterly report.

Of course, the case could be made—and no doubt has been by numberless Starbucks addicts—that some people need a huge blast of caffeine and refined sugar to get going in the mornings. Without it, they risk chronic lateness and, perhaps, a pink slip. Thus their macchiato remains a budgetary sacred cow.

But what about the Indianapolis-area folks who sell products and services that can't, by even the most tortuous logic, be described as "needs"? What about the people who sell things so far on the fringe of "need" that they seem almost whimsical?

You might be surprised to hear that many are weathering the recession quite well, thank you. At least for now. And they're doing it with a combination of fiscal restraint, increased emphasis on marketing, price cuts, and providing more bang for consumers' increasingly tight bucks.

"People are putting their money into things that not everybody else is doing," said Clare Welage, owner of The Whimsical Whisk, A Dessert Revolution. "Something that makes their gift exceptional, rather than some everyday manufactured item."

Welage's claims to fame are her extremely high-end, often-customized baked goods. Right now, her hottest sellers are mitten- and stocking-shaped holiday cookies, which go for $3.75 a pop.

"I've done a lot of those," she said. "I've had requests from people who want them monogrammed."

She figures consumers still buy her custom work because a cookie is a relatively small-ticket purchase compared with other indulgence items. Yet if done right, it can make a splash far out of proportion to its price tag.

"I've had people tell me that if they're going to spend money they're going to put it into something that's nice, that leaves an impression on family members or whoever's receiving the gift," Welage said. "So that's why they call."

The Indianapolis company's list of corporate clients so far has held steady. The other day, Welage even furnished her wares for a lavish Christmas function that harked back to the go-go '90s.

"They put a lot of money, an excessive amount of money, I think, into their party," she said of the out-of-state client. "But it's just something they do, and they wanted really nice desserts to put the bow on the entire evening."

Cleaning up

Plainfield entrepreneur Phillip Wade has no illusions about putting the bow on anybody's evening. But his super-specialized company, Poopy Puppies, is riding out the recession by offering a service—poop-scooping the lawns of dog owners—that some people definitely find essential.

"I have well-to-do customers, but also customers on limited incomes who either can't do it or don't want to," said Wade, whose 3-year-old business serves about 100 Indianapolis-area clients. "I had one lady who said she'd eat Spam and macaroni and cheese before she gave up the service."

Truth be told, the spike in gas prices a few months back hurt him worse than the economic slump. It cost him more to make his rounds, and some of his customers dropped him because they had to choose between driving and canine waste removal.

Wade is helped by the fact that his service isn't very expensive. It costs only $10 for a weekly cleanup for a one-dog family, and there are discounts to be had, to boot (you can find them at poopypuppies.biz). That's not surprising, considering his equipment consists of a scoop and a bucket.

"My biggest overhead is advertising, plus vehicles and gas," he said.

For some businesses, the recession has created chances to, if not exactly expand, at least to comfortably tread water. For instance, last year Suzanne Avery Lee, owner of Corporate Touch Massage & Wellness, saw a decline in the number of businesses asking her to bring her massage chair to their offices. However, she has since staunched some of that erosion.

"Even though I may have lost some corporate accounts to downsizing, I'm also getting new ones," Lee said. "There's somebody else who's in a position to want this because the staff that's still with them is overworked and stressed."

Lee hopes to weather the storm through skillful marketing and targeted specials. Right now, a one-time office visit will set you back $75 an hour per therapist. To no surprise, her roughly 50 long-term corporate and private clients get sweeter deals.

As long as times stay tough, she figures she'll find plenty of work keeping still-employed employees healthy and happy. Or at least, calm.

"In some ways, people look at massage therapy as more of a luxury, but with things going the way they have gone, it's become a necessity in order to keep doing the work," she said.

Some businesses are profiting from the fact that, even though things are tighter than they were, their customers still insist on seeing yesterday's "wants" as today's "needs." It's hard to find any other way to explain the continued success of Indianapolis' Three Dog Bakery locations—a success punctuated about two months ago when the national franchise's local operators, Scott and Stacey Petcu, opened their third (and largest) store at Hamilton Town Center in Noblesville.

"The bank was very behind it," Scott said. "They know we've been doing this for nine years and that we've got a good little niche. We haven't seen a dip in sales. We'll know a bit more after the holidays, but we're real happy with the way sales have been going."

For now, the biggest issue is keeping the case stocked with goodies such as snickerpoodles, pup tarts and Boston terrier cream pies for holiday shoppers.

"I think that dogs are now such a part of the family, people are more willing to give up going out to eat once a week, or maybe their $4 cup of coffee, rather than skimp on all-natural treats for their dog," Scott said.

Rewarding austerity

Businesses like Three Dog Bakery have a saving grace: The "wants" they provide aren't all that pricey. Which means that, while some consumers may mercilessly excise bigger-ticket items from the budgets, there's a chance they'll hang onto smaller indulgences as a "reward" for their austerity.

"I would think that large-ticket superfluous items are much more at risk," said Kyle D. Cattani, associate professor of operations and decision technologies at Indiana University's Kelley School of Business. "Things like vacations in the Bahamas or condos on the beach. But even if I'm feeling like my job is threatened, I might still think that I deserve my $3 cup of coffee."

Things could still get rough for purveyors of less-than-necessary goods and services as the recession drags on, but Cattani isn't convinced the sky is falling—for the well-run outfits, at least.

"This [downturn] doesn't mean they're going to go away," Cattani said. "It just means they need to tighten their own belts and think about how they can still be profitable if their sales go down."

Marilene Isaacs, a psychic for 38 years, has seen enough recessions to know she has nothing to fear. Seeing the future helps, too.

These days, a lot of her clients have financial problems, from retirees whose 401(k)s have been nuked to people who've seen their formerly ample trust funds shrivel like raisins.

"Lots of people of course are very depressed and down," said Isaacs, proprietor of the Center of Peace healing center. "For two or three years, I've been telling lots of people in the financial world to get out of the stock market. I knew they were just being set up to take the fall. I saw that a long time ago."

Today, she's advising people on how to cope with the fallout—including small-business owners anxious about their prospects.

"I always tell people to use their intuition," she said. "My experience is that anybody that's very successful in whatever field they're in, they have what I would call the intuitive edge."

Her own intuition is telling her that, in spite of the downturn (or more likely because of it), demand for her services ($100 for a half-hour personal session, $180 for an hour) will remain recession-proof.

"A lot of people are buying gift certificates for people to come and see me," she said. "It's been huge this year." 
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