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Windows of Success: Why Are Some Businesses Booming in This Economy?

The headlines paint a bleak picture: Unemployment is at 8.5 percent and expected to rise in the months ahead. For people 55 and older, it was 6.2 percent in March, the highest since 1983. Home sales—and values—are shrinking. And consumers continue to curb their spending, prompting almost daily announcements of new layoffs.

Yet for some businesses, the news is not all bad. In fact, some are actually benefiting from the recession. The steep drop in new car sales, for example, means a brisker business at many auto repair shops as drivers try to make their cars last longer. Movie theaters are reporting a box-office boom as consumers seek relief from economic stress. Perhaps for the same reason, chocolate sales are holding steady, while sales of domestic table wine and value-priced liquor are up, though sales of pricey imported wine and cognac are—not surprisingly—down.

Shoppers may no longer be looking for new Prada bags at Neiman Marcus and Saks—two stores that have reported large sales drops—but they’re snapping up used versions at thrift stores, where business is booming. Meanwhile, for new goods, consumers have turned to discounters and warehouse clubs, such as Wal-Mart, Costco and B.J.’s Wholesale Club, all reporting healthy sales. While many banks and other businesses have announced reductions in annual stock dividends, Wal-Mart increased its dividend by 15 percent in March.

The new thriftiness has been a boon for McDonald’s, whose profits continue to grow along with the popularity of its Dollar Menu deals. Last year, the company earned more than $4.3 billion, an 80 percent increase from 2007. That’s quite an achievement in this struggling economy, but other, far smaller businesses are also prospering as consumers turn to them in their efforts to cut spending and relieve stress.

Shoe Repair Shops

It used to be a rare occasion when Eton Llewellyn saw a pair of Gucci shoes in his Washington, D.C., repair shop. But no more. These days, he sees everything. Customers beg him to fix their shoes because they can’t afford new ones. “Some will come in with shoes bursting on their sides; as long as it’s leather or suede, I fix everything,” says Llewellyn, who deliberately keeps his prices low, he says, to keep his customers happy in these tough times.

Jim McFarland, a third-generation cobbler in Lakeland, Fla., says business started to spike in November. “It kind of hit overnight,” he says. The workload at the shop went from about 200 pairs a week, and a three-day wait at most, to 250 pairs with a 10-day backlog. “I’ve got so many shoes in my store, I can’t get it all done,” he says. The recession has helped prompt a startling turnaround for what has long been considered a dying industry. During the Great Depression there were 100,000 shoe repair shops; that number dwindled to 63,000 in the 1950s and stands at about 7,000 today.

Beauty Schools

Beauty has always been considered recession-proof on the theory that women want to look good even if the world around them is falling apart. Such vanity is proving a boon for cosmetology schools, which typically offer hairstyling and skin treatment services at half or even one-third the prices charged by regular salons.

Business has gone up more than 10 percent in the past few months at three salons owned by the Long Island Beauty School—where it costs $7.50 for a shampoo, cut and blow-dry, and $15 for a color treatment. The Graham Webb Academy in Arlington, Va., has seen a similar jump. It charges $18 for a shampoo, cut and blow-dry and $32 for a color retouch—far less than nearby salons, which charge about $45 for a cut and $75 to $95 for color.

“The increase started in September and has continued into 2009,” says co-owner Christine Gordon. Gordon also reports a 15 percent jump in new students. Among them, she says, are people who have lost jobs and are interested in a new career as well as “SAHMs”—stay-at-home moms seeking to reenter the workforce.

Car Service Centers

In the face of a recession, most businessmen tighten their belts. But Jim Dykstra of Dykstra Auto Service in Hudsonville, Mich., recently opened his second location in anticipation of increased business as sales of new cars slump. “People are still hanging on to their vehicles,” says Dykstra. “Anytime they do that, as the car ages, there will be increases in maintenance and repair.”

“We are consistently busy,” he says. Car owners are still doing oil changes and “doing the best they can to keep their car in the best shape possible and protect their vehicle investment.” But, he adds, “when it comes to more expensive maintenance, such as transmission service, people are just holding back.”

Wayne Sipe, owner of Interstate Mufflers, with two outlets in western Virginia, says his business has been steady, and even increased since winter. “This is the time when people tune up the car to repair winter’s damage and prepare for road trips,” he says, especially if the price of gasoline remains relatively low.

What’s more, if the auto industry continues to contract and dealerships close, auto repair shops like those owned by Dykstra and Sipe could be seeing even more business.

Massage and Yoga Practices

Massage therapist Maureen Moon wondered if her business would drop when the economy started to falter last fall. But, in fact, her practice boomed as clients started booking more frequent appointments to combat stress. “I have two 80-year-old clients who used to book every six weeks,” reports the Boulder, Colo., therapist. “They’re now coming every two weeks.”

Marilyn Kier, an orthopedic massage specialist with an office north of Chicago, has had a similar experience. People she hasn’t seen in years are calling for appointments, complaining of stress-related pain like backaches and headaches. Many are on fixed incomes but are willing to spend more than $110 for an hour of relief. Overall, her business is up about 20 percent.

Stress is also good for yoga. At Cyndi Lee’s Om Yoga in Manhattan, classes are sold out—even after she renovated her space to add another practice room. “We now have five studios—each holds 25 people—and some nights we still have to turn people away.”

Lee said she wasn’t surprised that longtime yoga students hang on. But even her beginner classes are sold out. One man, she says, “just started three times a week because it was his stress buster.”

It may be that consumers are putting stress relief before other needs, says Moon. “They might not get their nails done as often or they might start cleaning their own houses, but they’re finding ways to make stress relief worth keeping in their budget.”

That’s probably the same reason why sales of wine and chocolate are doing just fine, thank you very much.

Thrift Shops

Some retailers, like Circuit City and Linens & Things, have closed their doors; others, such as Macy’s, are laying off thousands of employees. But at Collage Designer Consignment, a three-store chain in Birmingham, Ala., business has picked up so much since last fall that owner Tracy True Dismukes had to nearly double her staff, from seven to 12. Admittedly, that’s a far cry from the big-box chains, but it’s indicative of what’s happening around the country at resale stores (which thrift stores now like to call themselves).

A survey by the National Association of Resale and Thrift Shops shows that sales by its member stores increased by 30 percent last fall as hundreds of consumers bought used goods priced at a fraction of their original cost.

“People shopping nowadays had never heard or thought of resale stores; it wasn’t in their vocabulary,” says Chris Cowman, owner of One More Time in Columbus, Ohio. The reason for the change: “I just sold a Prada bag for $165; it would have been $700 to $800 new.” Cowman owns two stores in Ohio; her sales rose 7 percent in 2008; this year, sales are already running 10 percent over last year.

Pawnshops

Pawnshops used to be the bank of last resort, says Jordan Tabach-Bank, head of the Beverly Loan Co. “Nowadays, we’re the bank of only resort. People come to us because—where else are they going to get money? They can’t find credit at the bank like they used to.” Tabach-Bank says it’s not unusual for people to seek cash to cover health costs and mortgages. What’s new is that some customers are pawning items to fund their businesses or meet payroll expenses.

Pawnshops have long been a favorite for quick, short-term loans. Customers pledge property—such as jewelry or electronics—as collateral, and pawnbrokers lend money, usually for a 30-day period, although that can be extended. When the loan is repaid, the property is returned to the borrower. There’s no credit check, little paperwork and the transaction can be completed in minutes. Generally, 80 percent of all pawn loans are repaid and the items returned. The rest are foreclosed and sold on the pawnshop floor—though some shops across the country are reporting problems because fewer people have the money to buy.

Nationally, the average pawnshop loan is $75, though Tabach-Bank’s company makes considerably larger loans. That’s probably because it’s located just a block from Rodeo Drive in Beverly Hills, a posh neighborhood that caters to the well-heeled. Yet even in the heart of luxury, Tabach-Bank observes, times are tough: “We’ve never before made so many large loans to white-collar customers—doctors, lawyers, accountants, hedge fund managers, businessmen and -women and other professionals.”

Caroline E. Mayer is a consumer reporter who recently added yoga to her life.

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