Amid Marin economic recovery, small businesses struggle [The Marin Independent Journal, Novato, Calif. :: ]
(Marin Independent Journal (CA) Via Acquire Media NewsEdge) June 01--Ed Tumazi lugged a stack of 4-foot-tall posterboard to the cash register at Ideal Stationers' going-out-of-business sale in San Rafael Thursday.
"This is a great store," he said. "Everyone goes online now, but I appreciate being able to see and touch the things I want to buy."
The San Rafael resident appears to be in the minority, as Internet sales diminish the market share of Ideal and other small businesses in Marin and across the country. Some other factors that make the going tough for Mom and Pop companies are its slow recovery from the recession, high rents and burdensome regulations, business owners and experts said.
"Look at your desk. What do you see?" said James Patrick III, the grandson of James M. Patrick, who founded the Patrick & Co. office supply store in 1873. "You don't see the items you would have seen there years ago.
"The paperless office ultimately has its effect. If you don't print the report, you don't need paper to print it on. You don't need a file folder to store it, or the guides to keep the folders organized, or a file cabinet to put them in," Patrick said. "All you need is a thumb drive."
The San Rafael Patrick & Co. stationery store closed after decades in the city, though the company still has stores open in San Francisco. Patrick also cited regulations imposed by the Department of Weights and Measures as a factor in his decision to shutter the Marin store.
With regard to Patrick & Co., "people are buying more stuff on the Internet," while the costs of doing business --regulatory cost, logistics --have gone up, said Robert Eyler, head of the Marin Economic Forum.
"Small businesses will be facing two squeezes in the next 12 to 18 months," Eyler said.
"Interest rates may go up. If they do, the cost of a line of credit will rise and this will make it tricky for small businesses to hang on," Eyler said.
The other factor is Internet buying, Eyler said.
"The consumer is more and more shifting toward becoming more value-oriented. They are going to shop for the best deal, and many places are offering free shipping. People say, 'If I can get this delivered straight to my house, why should I continue to drive downtown?'
"It's going to be a challenge for Mom and Pop stores that are commodity-focused," Eyler said.
Ideal Stationers is closing its San Rafael store at the end of June, its Novato store at the end of July and its Mill Valley store at the end of September.
"We're not closing for lack of business. Ron (Clare, who co-owns the business) wants to retire and couldn't find anybody to purchase," said Martha Beardsley, Ideal's purchasing manager and a 31-year employee.
"Retirement may provide another incentive for those folks (small business owners) to just walk away if they are eligible to pull from their investments," rather than struggle to survive in the face of increasing rents, Eyler said.
One of the few remaining video rental stores in Marin, Silver Screen Video, is also closing its doors. Silver Screen is in the same part of the Northgate One center as the San Rafael Ideal Stationers.
"I like seeing the covers and reading the text on the container," said Dalia Beebe of San Rafael as she browsed in Silver Screen Friday. "Not all of us are on Netflix." Beebe started visiting the San Rafael store after the Silver Screen in Montecito Plaza shut down, she said.
"Netflix is the key," Eyler said. "I can get a Netflix account and rent for around $10 a month. The Mom and Pop, brick and mortar style video rental business is all but dead."
As commercial rental space shrinks in Marin, rents are going up, Eyler said, further squeezing small businesses.
While 20 percent of Marin's commercial real estate space was still vacant at the end of 2013, vacancies are steadily decreasing and the average rent for top-of-the-line commercial space jumped nearly 6 percent to $2.78 a square foot in the third quarter compared with the previous year, according to Brian Eisberg, senior vice president at Cornish & Carey Commercial.
The small business struggles don't mean that Marin is in bad economic shape, Eyler said. Chris Stewart, Novato's economic development manager, agreed.
"Marin and the Bay Area are on a faster recovery thanks to the growth of the high-tech industry," Stewart said. "Most Central Valley and some cities along the coast are still experiencing high unemployment and slower retail sales growth."
Stewart said that while Marin is recovering, "small businesses are the first to see their sales drop at the beginning of a recession and the last to see their sales grow during a recovery."
"There's general parts of the market like office supplies, electronics, bookstores, toy stores that have seen closures," said Tom Adams, an economic development specialist with the city of San Rafael.
"Interestingly enough, some of the smaller more independent bookstores and toy stores have been doing well, partially because the competition is not there any more." Adams mentioned bookstores like Copperfield's Books, which opened in San Rafael recently, and Book Passage in Corte Madera as examples of surviving independents.
"They create a literary community. That's why they sponsor book clubs and make their stores a gathering place," Adams said.
Eyler noted one final factor that might cause a small business to cease to exist: Becoming a large business.
"Every business started small," said Eyler. "We know small businesses are an engine of the economy, but we cannot expect everyone to stay small."
(c)2014 The Marin Independent Journal (Novato, Calif.)
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