STAR-BULLETIN / SEPTEMBER 2001 Retailer Crazy Shirts said it didn't cut advertising as the war with Iraq built, figuring any cutbacks would hurt it during this summer, when it needed exposure the most.

Retail execs advise
sticking with plan

Don't make radical business changes
during economic downturns, they say

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By Russ Lynch
rlynch@starbulletin.com

Retailers who had good marketing policies in hand before the Iraq war needed to make very few changes to deal with the economic slowdown, some top tourism-related businesses said yesterday.

Cutting advertising because of the fall-off in tourism would have saved money, but would soon backfire because advertising has to be planned months ahead and wouldn't be there during a recovery, when it is most needed, retail executives told a luncheon of Sales and Marketing Executives of Honolulu.

The businesses made subtle changes, such as rearranging work hours of employees to be sure they were there when needed but not sitting around when business was slow. The retailers made the changes without cutting overall hours or trimming staff.

John Geppert, director of Tiffany & Co., said companies such as his had become accustomed to swings in the market ever since the burst of the Japanese investment bubble in the late 1980s, the Gulf War in 1991 and 9/11.

Tiffany rides through events such as those because it looks long-term and tries to work closely with its customers, Geppert told the SME luncheon at the Hawaii Prince Hotel. The company launches new product lines, concentrates on service and looks to the future, he said.

But Tiffany hasn't cut staff and hasn't touched its advertising budget, he said.

"It would have been easy to defer advertising to save a little money up front, but it would not have achieved our long-term objectives," Geppert said.

Tiffany's way of dealing with temporary downturns is to keep a close eye on its core business and close contact with customers, he said.

"Strategically, when the war broke out we looked at it and took our best shot and said it's going to be short," Geppert said. That assessment seems to have worked.

Geppert and the others all had the same message -- if you are running your business properly, you shouldn't have to make many changes when the economy heads south.

Recognition of a strong rise in visitor traffic from the mainland helped the retailers adjust their marketing so the loss of a lot of Japanese business did not hurt as much, the executives said.

Mark Hollander, president and chief executive of Crazy Shirts, said his company is doing more direct marketing by way of catalogs and other direct contact with customers, actions begun before the war buildup. Advertising decisions for 2003 were largely made in December, he said. Crazy Shirts didn't change those decisions when war loomed because a cut would not be immediate, but would have affected advertisements already scheduled for the summer, "when we need the exposure most," Hollander said.

The company did move a twice-monthly management meeting to once a week as an effort to get more information out to the stores and let managers and staffers know how the company is doing, he said.

At the luxury perfume, clothing and accessories business Chanel, a big change from a small store on Kalakaua Avenue to an 18,000-square-foot complex in the Honu Group's 2100 Kalakaua complex, caused its own shift in business, said Joyce Okano Reed, Chanel regional vice president.

"We tripled our size" and traffic did drop, "but interestingly our sales went up," she said. Chanel's conclusion was that people had begun to look at the store as a destination, seeking it out as a place where they wanted to shop.

Traffic into the store fell 50 percent after the outbreak of war but sales held up, she said. One of Chanel's ongoing marketing techniques, staying in close touch with its regular customers, is working, she said. Some of Chanel's biggest customers, from Japan and elsewhere, had said they wouldn't come to the annual black tie event that Chanel in Hawaii stages for them, she said. These are people who spend $200,000 to $500,000 a person each year with Chanel in Hawaii.

Direct calls persuaded most to come to the May 2 event, Reed said.

Jewelry retailers Maui Divers said same-store sales were up about 1 percent in March over a year earlier, despite the war fears, and are up about 5 percent for April. Total sales for Maui Divers are up 32 percent year-over-year, he said, because of a rapid expansion in the number of its outlets.

Like the other executives, Robert Taylor, Maui Divers president and CEO, said it was ongoing, long-term attention to marketing that won the day. Since the early 1990s, Maui Divers has cultivated new markets, such as tourists from Korea and the passengers on cruise ships, and that paid off when times got tough, Taylor said.

Per capita sales to Japanese had been falling for some time while average sales to tourists from the mainland kept climbing, he said. The result was that Maui Divers was not hurt badly when Japanese tourist traffic fell because mainlanders were spending more and there were more of them, he said.