The Economic Slowdown Arrives in Tulsa

The following account was written by our frequent lurker in Oklahoma. He often sends his observations on life, politics, and the posts on Gates of Vienna. His reflections are frequently cogent and always entertaining. He can’t be lured into commenting live, however.

This chronicle of his business activities is informative. With some minor differences, it reflects the larger reality of commerce in this country at the moment.

I would tell you to read it and be concerned, but you already are. So may I suggest that we look at it and request a new reading at the end of next year? It may be the case that liquor stores are exceptions to the rules of the rest of the world of trade. If things are down now, will they not go up as folks get more and more despondent? Or will spirits be viewed as a luxury, something to be pruned from the household budget until “things improve”?

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Russian for 'be happy'

I’ve wanted to write this for some time. It is basically a description of some of the sales patterns of my store and what I think those patterns say.

My store, with an approximately 1600 sq.ft. sales area, is small by most standards for liquor stores. Stores built lately are about 5000 sq.ft.

I went into business in October 1994, and operated the store with part-time help until finally taking over on a full-time basis in December 1999.

When I first opened, my sales were pretty much split evenly among the principal forms of payment: cash, check, and credit card. But times change, and with them customer buying, and thus, payment options change as well.

But first allow me to digress and give you some background.

My store is in a small corner shopping center in far southeast Tulsa. It is located in the northwest quadrant of a four-way intersection bordering three communities. Broken Arrow is the southeast quadrant, Bixby is the southwest quadrant, and Tulsa is the northern half of the four-way intersection. Up until 1992, this area was considered rural with very little development.

In the vicinity of my store, one mile to the east is a private club and golf course. Two miles to the north is another private club and golf course. Two miles south and one mile east is yet a third private club and golf course. People who come into my store are news/weather/sports people on local television stations. Others own some of the bigger car dealerships in the city of Tulsa. Some of my customers are doctors & lawyers. Two regular buyers own interstate trucking companies.

What I am attempting to portray is an affluent area and neighborhood. Using hard numbers on median house prices wouldn’t be reliable as those vary so much from state to state. However, looking at customers’ jobs and professions gives you the context of this place.

Returning to the store itself:
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When I began full operation of the store, I started to pay closer attention to some of the finer details and some of the changes over the seasons. I’d noticed that the percentages of each method of payment would shift. Credit card and cash payments each comprised 40% of my income; checks accounted for the other 20%.

This pattern held through all months with the exception of December. In December, cash sales were about 50% of the total. Checks were still 20%, while the credit cards had dropped to 30% of total sales. It appeared to me that my customers were more frequently making Christmas purchases for liquor in cash, with money they had in hand. I am assuming here that they were using the credit cards for the really big stuff.

This pattern continued for several years. With each passing year, however, there was a change within the pattern of payment choice. This in itself was a pattern: payment by check decreased, with a corresponding increase in credit card sales. Cash purchases remained the same.

In mid-2004 I stopped accepting checks for two reasons. First off, too many checks were bouncing for insufficient funds. Second, customers were beginning to use the procedure to “kite”‘ checks – for example, writing the check and then requesting that I hold on to it until payday. It was more than inconvenient.

So with checks gone from the equation, the payment methods were pretty much evenly split now between cash and credit cards through the rest of the year and continuing into 2005 through most of 2007.

In December of 2007, an abrupt change occurred within the sales pattern: credit card sales increased substantially. Reviewing my numbers from that month two years ago, I can see that 64% of my sales were credit card purchases.

In January of 2008, this December 2007 sales pattern continued. Instead of being a seasonal fluke, credit card payments continued to dominate. The method of payment has never returned to an even split.

By December of 2008, another pattern emerged. Credit card sales increased yet again, this time to 76%. Cash now accounted for only 24% of sales.

The sales pattern reverted in January 2009 to a modified version of 2008. Now 66% of my sales were paid with credit cards, the remainder in cash. This pattern has varied little all year. Credit card sales are never below 64% and never above 70% of total sales.

These sales patterns are what I wanted to tell you about when you began writing the financial essays you posted at the end of 2008 and the beginning of 2009.

Now with November 2009 behind me I can see a larger picture and a different pattern of sorts. Not about purchase patterns (cash vs. credit) but about the variations in year-to-year sales.

The area in which my store is located has developed over the years. More and more people are moving here. And with the increased populations comes increasing sales. My usual growth rate was about 7% or 8% per year.

I also keep track of month/month comparisons from preceding years as well. For example, compared to the preceding year, January 2009 sales were up about 20%. February thru April were pretty much level. The period of May, June, July, and August saw increases in sales from 21% to 15% above the preceding year. September and October were back down to an increase of 8% and 7%, respectively.

Sales for the Thanksgiving week were about the same as last year’s Thanksgiving week. However, now that November is closed, my sales were down a full 10% from last year. Being busy with day-to-day operations, I couldn’t see it at the time, but now I know that during the month of November, something bad happened all over Tulsa.

The manager of a Wal-Mart super center comes into my store, and his black Friday was 10% lower than last year.

The general manager of a major air cooled exchanger manufacturer just came in. He bought a half-gallon of whiskey he said he was going to drink tonight because he’d just written an annual report to the owners in Germany and told them the truth. All he told me was, “it ain’t pretty”.

As I said, my store is a very small store. And I’m sure that the people on Wall Street couldn’t care less what I say is happening in my store.

However, it doesn’t matter what they think or what they think they know. Small businessmen across the country can tell them what people like me know without a doubt: the economic slowdown has finally arrived.

Hard times are headed to Tulsa.

3 thoughts on “The Economic Slowdown Arrives in Tulsa

  1. Well, I listened to Obama today in his latest summit explaining that small businessmen were not doing their part in hiring. He also infomed me that cost-cutting was a mania in America and had embedded itself in the culture.
    Inotherwords, Tulsa, raise your prices and hire a few people. Obama says.

  2. This analysis seems to leave out an important factor, namely, the definition of “credit” cards. When I shop at my local, I use a debit card. They even give me a discount to do so. The card says “Visa” on the front, but it is not a credit card … it’s effectively a check. By not distinguishing Cash vs. Credit vs. Debit, your poster may well be drawing erroneous conclusions. If, on the other hand, his only point is
    that year-on-year is down, why the digression into types of payment?

  3. @UK Houston–

    When I first posted this, I wondered if people would look only on the surface. IOW, should I add editorial comment for what I *thought* the author was pointing to. However, to do so would’ve required checking it with him and since I was too sick to do so I just went with it.

    There is more than one point being made here. Hope I’m lucid enough to enumerate them:

    1. The nature of his clientele changed. Moved from rural patrons to professional types. They have different buying habits. This is an important point. Generally when that happens, sales increase and they continue to increase over time. That happened in his case until very recently. I find the downturn telling for the rest of small businesses.

    2. Checks are becoming obsolete. With merchants like him, this started earlier than other places. Some folks installed those machines that treat checks like debit payments from your card, only you get the check back as sooon as it goes thru the machine and clears your bank. I think it was smarter just to get rid of one particular hassle in book keeping.

    3.What would be the point in differentiating between debit and credit cards for his story? They are pieces of paper and he pays a set amount for each transaction. If he broke it down to debit/credit/cash, I don’t think there would be any difference in the outcome of his story.

    4.Cash is down and has stayed down. It did this suddenly.

    5.In sum, for this particular business, liquor sales, you would not ever expect sales to drop, all other things being equal. Especially since he’s a magnet in a higher end area that boasts several golf/country clubs.

    He was trying to explain not only the drop but the factors which preceded it. A reader finds it interesting or he doesn’t. I found it interesting enough to post because I fear for this endangered specied, the small, sole proprietor businessman.

    I forgot to ask him if he’d have hired any help if it weren’t for all the government (state and federal) red tape, expense, and uncertainty. When we had a business we needed help but we couldn’t afford to pay anyone what the government demanded. And people wanted to work for us “under the table” and under the minimum wage, but we were a new business and we simply could afford them legally adn weren’t willing to take the risk for illegal help.

    That is the shame and the pity of government “help” with the minimum wage. People who are litterally begging for work can’t get it.

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