Chicago is a strong economic machine even during periods when some employers use the term “downsizing” to excuse layoffs and “no help wanted” signs. The strength of the city’s economy is the bellwether of our well being and Chicago’s economy is pretty much reflected in how business is doing on the Magnificent Mile. Inside
wanted to test those economic waters and get an insider’s view on how the shops and stores along the Michigan Avenue corridor, from the River North area to Oak Street, are doing in the wake of pessimistic reports on the national economy.
To do this, we spoke at length to Russ Salzman, President and CEO of the Greater North Michigan Avenue Association (GNMAA), the trade group that numbers most of these shops among its membership. There are several different categories of retail businesses that call the Mag Mile home, including the national department stores—Nieman Marcus, Lord and Taylor, Marshall Field’s, Nordstrom. Then there are the specialty shops like Nike, Sony, Ralph Lauren, Tiffany and Gucci. Another group includes more typical mall stores like Bed, Bath and Beyond and Crate and Barrel, while still another is the boutique shops on Oak Street.
“During the past three years, retail sales along Michigan Avenue, much like the full U.S. economy, have been showing extraordinary gains—something like 15 percent increases from year to year,” Salzman said. “Beginning in early 2001, there were signs of an economic slowdown across the country that were paralleled by Michigan Avenue.
“There was slower growth,” Salzman continued. “Then, September 11 cast the entire country into an economic slowdown and in particular those urban areas that have a great deal of business travel and tourism. Cities like Boston, New York, San Francisco, Chicago, and Orlando all faced serious economic slowdowns that were propelled by the lack of air travelers for both business and leisure travel. It’s been a slow recovery.
“The first quarter in Chicago is always typically slow,” Salzman explained. “There’s not a great deal of convention and business or leisure travel to Chicago. That’s why we worked out the ‘Winter Delight’ program in conjunction with the city’s Office of Tourism and the Convention and Tourism Bureau. We developed some discounting of hotel rates and we offered special promotions. And we are seeing that a turnaround is beginning now during the first quarter and a we’re expecting a good recovery during the high spring and summer tourism seasons in Chicago.
“What I’m saying is that growth during 2001 was very small—two to three percent. And we’re hoping that we can improve that increase during 2002,” Salzman said.
Diane Swonk, chief economist for Bank One in Chicago, has a view that is similar to Salzman’s. “Contrary to popular belief, this will not be a ‘profitless’ recovery.” By that, Swonk meant that though business volume and profits are down, they haven’t turned into losses. “Chain store sales held up well in early January. Consumer spending is expected to reaccelerate after a first quarter lull, fueled by a recovering employment situation.”
Swonk believes that inventories have been depleted and that people who had been laid off from jobs will be rehired as retailers and manufacturers have to replace those inventories. She went on to say, “The market for furniture and appliances is expected to remain relatively robust, given the recent resilience of the housing market ... It takes a year for consumers to fill and remodel the homes they just bought.”
This is consistent with Salzman’s assessment of the economy which, admittedly, is limited to the retail sector. “We have seen, for example, some items in higher end ‘cruise wear’ doing very well, meaning that people are spending money and are planning to travel,” Salzman said. “We do know that the airlines and hotels that are competing on price are having some slight improvements. The airlines were down by 18 percent in the post 9/11 period, and they’ll be improving and their volume will be down only 10 percent from a year ago as the second quarter approaches.
“The sense of an improved number of air travelers is very important to the Michigan Avenue economic mix,” he explained. “Christmas sales volume this year was about even with 2000. What we found was that those people who tend to travel more came into the city from the regional feeder markets (like South Bend, Milwaukee, Michigan, Iowa, downstate Illinois and the collar counties and Iowa.) We had an increase in drive-in business and in the end, a strong showing from the people of the City of Chicago itself.”
The outlook for retailing, according to those who should know, is positive. This is important to the economic well-being of the entire city. After all, Chicago is no longer the “hog butcher to the world.” And while we may still be the city of broad shoulders, those shoulders are toting computers, and arranging deals on the international financial markets.
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