Small US Retailers Fight for Survival Amid Gloomy Signs

Traffic is heavy along Maryland's Rockville Pike, outside Washington, DC. But the look of this commercial zone has changed over the last three years. Many large and small stores, restaurants, and other retail establishments are gone. In their place are vacancies and signs advertising space for rent.

"In the last two years, from big brand stores to the little guys, I would say 20 percent of them are gone," said Paul Phan, a small business owner.

Paul Phan owns a home furnishing store on Rockville Pike. Although his showroom is full of merchandise, there are few customers these days. He says sales this year are down 30 percent. He and his wife had to lay off workers, reduce inventory and stay open longer hours just to remain in business.

"We needed to look at all the avenues to reduce our costs and the number one, of course, is our rent, and I asked the landlord to help me out, which they agreed," he added.

Developers who own shopping centers have slashed rents in an effort to keep tenants. But finding new shopowners to fill empty space is increasingly difficult.

The space next to Paul Phan's has been vacant for three years. Phan says when shoppers see empty storefronts, it reminds them how tough the economic environment is and they feel less inclined to buy.

Phan doesn't see the trend changing anytime soon.

"I wish I could give you the good answer, 'Yes, tomorrow will be a better day'," said Phan. "The thing is that consumers' habits have changed -- or the way they are buying has all changed already. So for us to go back to the good old days is going to take years to rebuild."

Ellen Davis, with the National Retail Federation, notes that smaller stores have been harder hit than large retailers. "Right now for the American shopper, it is all about low price," she explained. "And because small retailers don't have economies of scale to be able to order a lot of merchandise at once, they are not able to negotiate the best prices or offer the best deals to their shoppers."

Small storeowners like Paul Phan have begun to slash prices. But for him and others that means making little or no profit. He also says he cannot get a business loan from the bank.

"I want to put more money into advertising to bring more customers in," said Phan. "I want to put money into bringing in more merchandise to give the customers more choices. However, I don't have the resources in terms of the capital."

President Obama, after a White House meeting with bankers whose firms received government bailouts, said the banks should help the economy by lending more. "So I urged these institutions here today to go back and take a third and fourth look about how they are operating when it comes to small business and medium sized business lending," the president said at a news briefing.

Paul Phan says if he can make it through the first two quarters of 2010 he might be able to survive through some of the hardest times retailers have ever faced.