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Barry Nabatian of Market Research Corp. (Etienne Ranger, OBJ)

Why consumers should feel optimistic in 2009

Last month, Statistics Canada released nationwide figures on the level of Canadian retail sales during October's acceleration of the financial crisis.

Stats showed that Canadians, when taking seasonal adjustments into account, spent $35.9 billion at retail outlets during that month, down $300 million from the $36.2 billion posted in September.

But Ottawa has been somewhat insulated from the retail downturn, argues Barry Nabatian, general manager of Market Research Corp. And though the city hasn't been immune, he also says the gloomy retail outlook could right itself by 2009.

OBJ: Why have retail sales in the region pulled back somewhat lately?

NABATIAN: I think that is strictly fear on the part of consumers as a result of the economic situation, despite the fact that really, we haven't had any significant reason to have fear. But people are anticipating that more bad things will happen.

In our region, we do not have a lot of manufacturing jobs and we certainly have almost no resource-based jobs – everything is technology and government.

A few high-technology companies have laid off 50, 80, 100, (people) but that has been part of the normal process. Governments, hospitals, schools – they haven't really laid off anybody, and things are generally slow at this time of the year anyway. So there have been no significant layoffs that result in people pulling back. It's just negative psychology.

OBJ: What do you think is going to happen in 2009?

NABATIAN: This is an extremely difficult question – there are so many proposals that have a lot of hope associated with them, but we are not certain whether or when they will happen.

In the U.S., (president-elect) Barack Obama and others have been working on a number of things and, as I understand it, the day that he is sworn in (Jan. 20), they will start implementing a number of programs – including handouts or bailouts for various companies.

The Canadians are willing to bail out the auto industry and also want to spend a lot of money on infrastructure – roads, bridges, and hospitals, et cetera. Depending on how much or how fast that will go, the economy can turn around slower or faster.

I can give an optimistic or a pessimistic view. On the pessimistic side, I think 2009 could see a decline of 10 per cent across the board. Most of the places that would be impacted would be stores or businesses that sell furniture, jewelry, cars, and discretionary things – things that people can live without or postpone.

But there are also stores that will gain from this pessimistic time: liquor shops, entertainment, home video stores. People will cut back further on the more expensive type of entertainment and do less expensive (things).

On the positive side, we would expect 2009 would be – at best – as good as 2008. The first seven, eight months of 2008 were pretty good, actually. It's just the last few months that are bringing it down. In terms of the stores that sell necessities, drug stores will do better in either case.

In the U.S., sales of antidepressants have been skyrocketing because people are feeling anxious.

OBJ: Is there a positive we can pull out of the economic situation right now?

NABATIAN: Every time a business goes down, they always have assets and they sell their assets at very low prices. And when that happens, there's a turnover. Somebody may have invested a million dollars in a store, (then) undervalue (it) at $200,000. So a new person takes over and his expenses are $200,000, rather than a million. So he will be able to operate profitably at a lower level of sale and do well.

So there is a silver lining. Some businesses will go under, but some will be in a much stronger position because they start from a lower expense base.

OBJ: Is there anything else that you would like to add to this discussion?

NABATIAN: I think that recovery in the retail industry is primarily linked to the recovery in jobs. So far, as recently as November, our region has created 900 jobs – which is amazing. But in December, given the (transit) strike, I think we probably will see it go down and then the numbers go up in January.

We are going to see some losses. But as soon as there is more employment in our region ... that is when we will see the fear factor diminish and people start to spend again.