Food stores, guns, repair shops typically fare better
As an economic climate, recessions affect all businesses differently.
Some businesses are hardy and attractive during a recession. Others are like annual flowers that sprout up, are shocked by the climate and wither away never to be seen again. Still others are persistent perennials that come back year after year — a little worse for wear but ready to take on the next season. There is no set list of recession-proof businesses because it changes with every market downturn. However, there are a few that are generally considered staples, such as alcohol sales, gun sales, automotive maintenance and repair and debt collection, just to name a few.
Some of these industries thrive during a recession — for example taxes collected from alcohol in 2008 are up 12.6 percent over 2006, according to the Washington State Department of Revenue. At the same time, this recession has taken a huge toll on the housing market, which is reflected in local real estate excise taxes being down more than 26 percent over 2007.
But since businesses are affected by a wide range of factors, The Bellingham Business Journal decided to drop in on a few of these “recession-proof” industries to see what they thought of the label and ask them just how their businesses are weathering the current economic climate.
Gun store sees ‘spike in sales’
Over the last month, gun sales nationwide have gone up nearly 10 percent, fueled by fears of civil unrest from the economic downturn and increased regulation from the new Obama administration. Bellingham is telling a similar story.
Currently, Survival Solutions, a firearms and fire safety company near the Lincoln Creek Park & Ride, is the only place where a person can buy a handgun in Bellingham. Jonathan Johnson originally owned a fire safety and suppression company with his wife, Gina, but they opened the firearms side about three months ago.
“We were asked by local law enforcement agents to get our license so they could shop locally,” Johnson said.
Johnson said although he hasn’t been open very long, his business is seeing a lot of traffic.
“There has definitely been a spike in sales,” Johnson said. “We’ve been extremely busy.”
Johnson said many customers are looking for self-defense weapons in case of chaotic crime or civil unrest.
“We supply a lot of local police and military officers, and several officers from all different departments in Whatcom and Skagit counties tell us that crime is just going through the roof,” Johnson said.
While the gun business may respond well to a poor economic climate, it is susceptible to the cold chill of political will.
Johnson said many of his customers are concerned that the Obama administration will pass bans and increase regulations on guns, much like the Clinton administration’s 1994 ban on assault weapons that outlawed 19 types of semiautomatic weapons.
“It’s been well-documented that he (Obama) is anti-Second Amendment,” Johnson said. “If Obama bans a lot of things, it could hurt the gun industry a lot.”
Auto repair remains a priority
What is more important — dinner or a tune-up for the car?
The dollar is getting stretched pretty thin these days and consumers have to make some tough decisions. Because of this, David Trottner, owner of Trottner’s Auto Repair Service, is seeing more of the price-conscious consumer with an eye for quality.
“They are doing more planning so they want to know what things are going to cost so they can budget for it, which is a good thing,” Trottner said.
Trottner said he didn’t think there were really any recession-“proof” businesses because consumers are cutting back on essentials as well.
“The bottom line is even within food, clothing and shelter — people are pulling back right now and not spending more than they have to because money is so tight,” Trottner said. “They do it here in the automotive field as well.”
Trottner said his sales are down approximately 15 percent over last year as his customers are doing more to budget and prioritize.
“Maybe the battery is becoming a little weak, but if it is still doing the job, they are going to run with it until it leaves them dead,” Trottner said.
Trottner said people are more willing to spend money on items that are safety issues.
“Brakes are a safety issue,” Trottner said. “If that comes around, we find that people will do that before having a tune-up done.”
Trottner said that even though sales have been down, people always need to get to work, therefore automotive service will always be around.
“Right now, it’s just not as robust as it used to be,” Trottner said.
‘Nobody grows up wanting to be a bill collector’
A strapped consumer can easily become a consumer in collections.
While there, the consumer might run into a bill collector like Mike Loyd, president of Bellingham’s North Washington Collections. In times of consumer stress, Loyd said, several bill collectors could be calling a consumer, which can lead to extreme reactions toward the bill collector.
“It could be anger, it could be fear and all those are negative toward us,” Loyd said. “Nobody grows up wanting to be a bill collector.”
Loyd said he is seeing increased debt from consumers manifested in a surge of accounts from old clients.
“Businesses that used to turn over to us but maybe had not in two years are beginning to send us a few accounts,” Loyd said. “I know of several that I had not heard from in two or three years — since the last recession in 2001.”
But while his company gets more accounts during a market downturn, Loyd said his company sees more payouts during an upturn.
“Monetarily we surge more in an upturn,” Loyd said. “Sure we get more business during this time but not necessarily more money. We are competing with a lot of people for the consumer’s dollar.”
Even though Loyd is seeing increased consumer debt, he said he is also seeing an increase in early payments.
“I think people are cutting back on their unnecessary expenses,” Loyd said. “Maybe instead of going to Cabo, they are paying their account.”
Loyd agreed that his business is, at least, recession resistant.
“It’s a necessary thing,” Loyd said. “We help recover a percentage of lost money that wasn’t going to be recovered unless someone pursued it.”
Growth industries during 2001 recession
While Washington state saw an overall decline of 0.7 percent of gross business income during 2001, the following industries saw growth:
- Food stores (5.7 percent)
- General merchandise stores (4.6 percent)
- Transportation equipment manufacturing (9.2 percent)
- Aircraft and parts manufacturing (11.5 percent)
- Medical and health services (9.5 percent)
- Finance industry (5.9 percent)
- Insurance industry (9.3 percent)
— Information from Washington State Department of Revenue’s 2001 Overview of Business Activity