Retailers fight to survive Merchants: The owners of small businesses must withstand numerous blows from without -- and within -- as many of their woes are caused by their own poor management.

THE BALTIMORE SUN

The merchant moves from one task to another like a shark that can survive only in perpetual motion. No lunch buy merchandise track inventory ignore fatigue. Go, go, go.

But in a lull at 12: 08 p.m., Judith Taylor Orlinsky eases into a smile. Over are those desperate days when she hired a young man to stand at the side of a busy Baltimore thoroughfare, dressed as a samurai, wielding a katana killing sword and a tanto knife, waving at speeding cars -- anything to catch the attention of potential customers.

"We were in trouble," she said, "right from the beginning."

From a $58,000-a-year salary as a state lobbyist to a self-imposed $600-a-month wage as a small retailer, Orlinsky has come to this: $145,000 in the hole. But hers are the ordeals of small merchants nationwide -- a series of mishaps heaped on top of calamities snowballing into disasters, all in the name of profit, independence and the simplicity of sweeping the proverbial door stoop.

In a pyrotechnic age of big business, shopkeepers have sustained their way of life, remaining a vital cog in the economy. Small businesses, the bulk of them retailers, employ almost 60 percent of the nation's work force, account for about 54 percent of sales and contribute 40 percent of gross domestic product. "In short," President Clinton said in a 1994 address, "a great deal of our nation's economic activity comes from the record number of entrepreneurs living the American dream."

But the merchant's dream is pursued at a greater risk than ever before. Facing the relentless march of mass merchandisers, small retailers are shrinking in numbers, and those that survive typically do not hang on for long -- nearly a third fail within 36 months.

Japonaji, Orlinsky's Japanese crafts boutique, is especially vulnerable in Baltimore even as it marks its three-year anniversary this month: The South Atlantic region absorbed the sharpest rise in debt -- 135 percent -- associated with business failures last year, according to widely followed figures compiled by Dun & Bradstreet Corp. Maryland felt the brunt with 466 merchants failing, up nearly 50 percent over the previous year.

"No one disputes that failures for small businesses are much higher," said Frederick C. Scherr, editor of the Journal of Small Business Management. " It's pretty tough."

DFor Orlinsky, it's an unending trial -- 60 hours a week in her shop, another 10 to 20 hours when she pulls down the storefront shades, always a synapsis away from error. Even at 12: 12 p.m., when she fires up the computer: "These things are wonderful if you know how to use them," she said.

Orlinsky didn't. And the computer -- an elaborate system linked to the entire operation -- crashed, wiping out all her inventory and pushing the store to the brink of collapse just before its grand opening in August 1993. The toll: more than $70,000 in equipment, consulting fees and a yearlong court battle with the computer supplier.

"It was OJT -- on-the-job training," she said. Suddenly, there were bills, orders, promotions and mailing lists. Perhaps worst of all, she was her own boss: "I'd yell at myself all the time."

For good reason. Before moving to Fells Point in May, Orlinsky had set up shop on Falls Road, on a heavily traveled but hardly accessible strip on the city outskirts. She dished out $47,000 to knock out a brick wall for a front door and glass window, but her landlord reimbursed her at a $17,000 loss. She spent $60,000 in her first year on advertising, including an 800-toll-free number and a 24-hour secretarial service to field orders for Japanese water gardens. She sold five, maybe six.

And then there was the store sign, a black metal-framed behemoth planted on the edge of the road -- but in the way of another retailer's sign. Hauled to a second spot, the sign promptly blocked another retailer's sign. Moved a third time, the sign stayed clear of other businesses -- and the view of virtually every potential customer.

Every mistake that a small retailer could make, Orlinsky seemed to stumble into, picking a poor location, buying costly and sophisticated equipment and misplacing advertisements. All cardinal sins. All self-inflicted. And all too familiar to the industry: "Bad management is 90 percent" of the cause of business failures, said Joseph W. Duncan, Dun & Bradstreet's chief economist. "It's not fraud, it's not economic forces. It's bad

management."

'A losing proposition'

Orlinsky, however, has survived her mistakes -- so far. And the distance of time is reassuring, even at 12: 52 p.m. on a day with a trickle of customers, few sales and an occasional call from that bane of retail existence, the bill collector.

But it could be worse. It could be the spring of 1995 when her accountant Ronald Ellison prepared her taxes and noted: "Maybe this is a losing proposition."

The shop itself spoke volumes then -- $50,000 worth of contemporary women's clothing still on the racks, the result of too little market research and too few sales. Or $100,000 in inventory with a third of it in storage. Or seven sets of $35 crane earrings, which took two years to sell. "We weren't sure what was going to sell," said Brenda Mace, Orlinsky's 31-year-old daughter. "She did not have a clue with that stuff. She would buy what she thought would sell."

When that didn't work, Orlinsky turned to the professionals -- her psychiatrist who recommended a business consultant. And Nick von Zoll, a 33-year-old martial arts expert, was hired to throw on a samurai outfit and serve, he said, as "a living mascot." Anything to boost business.

"We really underestimated the amount of walk-in traffic we needed," said Orlinsky's 25-year-old stepdaughter, Judith. "We had sunk so much money into it, and it seemed like we were spinning our wheels."

Judith, a 50 percent partner in the shop, wanted to pull the plug and walk away from her $100,000 investment -- most of her inheritance. Even Orlinsky, unshakable in her faith and her own $100,000 outlay, wandered around her Calvert Street rowhouse, talking about going back to work -- for someone else. By February, she realized it might be over, and she wept.

"I did not want to call it quits," Orlinsky said. Japonaji was supposed to be a legacy for her children.

But there was more behind the shop -- a need for change in her life, fond memories of the time she lived in Japan in the 1960s -- the kind of things that drive thousands of shopkeepers to risk everything, to pursue "the psychic rewards," said Charles Ingene, editor of the Journal of Retailing. "The pleasure of doing it yourself."

Antediluvian

Or not doing it. Which happens to be the pleasure for Stan Modjesky at 1: 45 p.m., when he closes his shop around the corner, the Book Miser, and waltzes into Orlinsky's for some conversation.

Not that he can afford an afternoon siesta on his take-home pay from the bookstore. But it suits him fine: "I consider myself unemployable in the corporate sense," he said in the splendor of a T-shirt, shorts and sneakers.

Such is the charm of small retailers in Fells Point, a loose confederation of establishment dropouts and risk-takers tied together by their collective struggle to get by. This is the life they choose, an antediluvian way of doing business carried on before retailers talked about maximizing profit, or selling deep and narrow.

Such familiarity is increasingly becoming a rarity as big retailers only get bigger, consolidating their hold on the consumer: Nearly 40 years ago, establishments with fewer than 100 employees ruled the day, controlling 65 percent of all retail jobs. Now, their share has been reduced to little more than 44 percent. And as small retailers go, so goes a way of life.

"That sense of community, at least for the time being, is deceased," said Barbara Rackes, chairwoman of the small stores board of directors of the National Retail Federation. "Or heading

toward the senior citizens center."

List of tasks

Retirement, however, is not an option for Orlinsky, especially not at 2: 46 p.m. as she stares at her albatross -- two pink tablets with things to do, one long-term, the other for tasks due yesterday. "Did that, did that," she said, crossing out in pencil yet another enumerated chore.

But the list, as if defying some law of physics, only grows: "Glass 69 X 19" -- a shorthand reminder to replace a broken glass counter top. "Bus. cards" -- order a new set of business cards. "Sumo Promo" -- promote store products on the Internet.

At least there is still a list to cross out. In February, after an abysmal Christmas, bankruptcy seemed a certainty. Then, there was only one item on the list: A family meeting to decide whether the business should go on. Orlinsky was no longer a maternal figure but a business partner, pleading to keep the shop open, sitting at a long table in a law-office conference room in a skyscraper downtown.

Which left this: Give the shop three more months. That was Orlinsky's pitch. Don't buy anymore merchandise. Launch a moving sale and pay off as many bills as possible. Of all people, Ellison, the accountant and resident skeptic, concluded that Orlinsky's plan made sense; after all, even if they closed shop, they still had about $50,000 worth of inventory to sell off.

The family agreed. And the rest fell into place: Judith, her stepdaughter and partner, left the business, but winter turned to spring, customers came, the mailing list grew, and an optometrist agreed to assume Orlinsky's Falls Road lease, paving the way for her move to Fells Point. "If it doesn't work here," she said, "it's not going to work."

There is hope. Even as merchants like Orlinsky are diminishing in numbers, those that survive continue to help drive the economy: Small businesses, composed mostly of retailers, created the majority of new employment between 1988 and 1990. And they are expected to lead job growth into the 21st century. "The numbers," said Baylor University marketing professor Robert Straughan, "point out that they haven't lost their place."

Wishes and dreams

There will always be a place for stores like Orlinsky's as long as there are customers like Linda Meakes, drawn here at 4: 05 p.m. by the memory of eight years as a marine biologist on the Bering Sea off the coast of Alaska.

Imbued with the ways of Japanese fishermen in the 1980s, the 35-year-old Harbor Shuttle captain comes to Japonaji to steadily pay off the price tag of a white silk kimono hanging from the wall. "You sort of get immersed in their culture," she said.

In Orlinsky's shop, the connection to another culture is tangible. The small Japanese merchant, born alongside the samurai in medieval society, still holds sway. Despite the postwar sweep of Westernization, Japanese consumers have stubbornly kept to tradition, shopping daily at the local fishmonger, the flower shop, placing a premium on fresh goods. The sanctity of the merchant was even written into law, restricting the growth of mass merchandisers. The tradition continues there.

And it remains here -- at least in a small way by a little American shopkeeper. But at 5: 12 p.m. the day winds down and tradition will have to wait. Orlinsky counts out her register -- pennies, nickels, dimes, quarters. She muses about the lessons learned -- that the shop must grow slowly, inventory must be bought gradually, and cost estimates should be conservative, then doubled. And she looks ahead to the future, of an expanded store with a noodle bar, classes in flower arrangement, calligraphy, tea ceremony.

First, however, her wish must come true -- she must turn a profit. Then, she can carry out Japanese tradition, painting in the blank eye of a Daruma, a one-eyed papier-mache monk sitting on a back shelf of the store. And then, Orlinsky can seek her modest dream, a beach house. Yet she knows, "There are no guarantees. You can have the best-laid plans of mice and men, go by the book, but you just don't know."

At 5: 31 p.m., Orlinsky turns off the computer and shuts the lights, clutching her two pink tablets, still filled with things to do. Off to her first meal of the day, she emerges into the bright afternoon light, locks up and exhales, "All done."

+

Retail business failures

.. .. .. .. .. .. .. .. ..Number .. .. .% change .. .. ..Rate per

Retail store category .. .in 1995 * .. .over 1994 .. .. ...10,000

Building material,

garden supplies .. .. .. ...587 .. .. .. ..-1.7 .. .. .. .. ...62

General merchandise .. .. ..191 .. .. .. .-18.0 .. .. .. .. ...78

Food stores .. .. .. .. ..1,059 .. .. .. ...0.5 .. .. .. .. ...54

Automotive dealers,

service stations .. .. .. ..949 .. .. .. ..-1.7 .. .. .. .. ...43

Apparel .. .. .. .. .. ...1,631 .. .. .. ...9.4 .. .. .. .. ..125

Furniture, home

furnishings .. .. .. .. ..1,470 .. .. .. ..-4.7 .. .. .. .. ...85

Eating and drinking .. ...3,750 .. .. .. ...7.1 .. .. .. .. ..92

Drugstores .. .. .. .. .. ..126 .. .. .. ..-4.5 .. .. .. .. ...43

Liquor .. .. .. .. .. .. ...133 .. .. .. .-18.9 .. .. .. .. ...40

Used merchandise .. .. .. .223 .. .. .. ..54.9 .. .. .. ... ...39

Sporting goods, bike shops .377 .. .. .. ..54.9 .. .. .. .... .78

Books .. .. .. .. .. .. .. .131 .. .. .. ..26.0 .. .. .. .. ...77

Stationery .. .. .. .. .. ...75 .. .. .. .-21.1 .. .. .. .. ...77

Jewelry .. .. .. .. .. .. ..202 .. .. .. ...3.6 .. .. .. .. ...59

Hobby, toys & games .. .. ..117 .. .. .. ..-5.6 .. .. .. ... ..59

Camera, photographic

supplies .. .. .. .. .. .. ..20 .. .. .. .-13.0 .. .. .. .... .74

Gifts, novelty,

souvenirs .. .. .. .. .. ...444 .. .. .. ..-1.8 .. .. .. .. ...62

Luggage, leather goods .. ...19 .. .. .. ..-9.5 .. .. .. .. ..100

Sewing needlework,

piece goods .. .. .. .. .. ..30 .. .. ...-37.5 .. .. .. .. ....30

Non-store retail .. .. .. ..377 .. .. .. ..23.2 .. .. .. .. ..132

Fuels .. .. .. .. .. .. .. ..40 .. .. .. ..25.0 .. .. .. .. ...35

Other .. .. .. .. .. .. ..1,001 .. .. .. ...2.0 .. .. .. .. ...61

Total retail trade .. .. .3,315 .. .. .. ...3.0 .. .. .. .. .. 62

* Preliminary number

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