Local businesses tough out slump

Landon Kangiser, 3, and his mom, Stephanie Kangiser of Shelton, decide on their dinner orders during a birthday party for Stephanie Kangiser's sister, Julia Taylor, background, at Lemon Grass restaurant Thursday in downtown Olympia.
Landon Kangiser, 3, and his mom, Stephanie Kangiser of Shelton, decide on their dinner orders during a birthday party for Stephanie Kangiser's sister, Julia Taylor, background, at Lemon Grass restaurant Thursday in downtown Olympia. The Olympian

Downtown Olympia's Lemon Grass restaurant will open its new location in Tumwater next month, one of the few businesses to expand in an economy that many South Sound business owners say has been the worst in decades. Although the economy is improving, it still has a long way to go, they say.

Longtime business owners at Lemon Grass; Mud Bay, a retailer of healthful food for dogs and cats; Desco Audio & Video; and Big Toys, a manufacturer of playground equipment, say they quickly adjusted to the slower economy by cutting costs, exploring new markets or diversifying services.

Lemon Grass owner Nicole Pham finally will open a restaurant in Tumwater next month after trying for five years to secure a building permit for her second location. She eventually ended that pursuit and decided to move into an existing building at 5801 Capitol Blvd., formerly home to Uptown Organics. Pham acknowledges she is taking a risk in this economy, but her customers have been asking her to do this for some time. She also wants to follow many of the state workers who used to work in Olympia, but now work in Tumwater.

“We did it for our customers,” she said about the decision to open an additional location.

The timing could be better. Business at Lemon Grass, a 12-year-old Thai restaurant at 212 Fourth Ave., is down 25 percent from last year. Pham said she sees fewer regular customers and tourists, and fewer families traveling to see their children at one of the colleges or universities in South Sound. This year’s shorter legislative session also didn’t help, Pham said. Still, she said she’s not complaining. The business is holding its own and she’s trying her best not to raise prices, even as the price of noodles, rice and coconut milk continues to rise. As for the national economy, Pham doesn’t see it improving for another five years.

But the Thurston County economic recovery might already be under way, according to new data.

The good news for consumer and business spending in the county is that retail sales were flat in the first quarter of this year from the first quarter of 2009. That might not sound like an accomplishment, but consumer and business spending had been down for eight straight quarters until that point. Thurston County home sales also are off to a better start, up 13 percent through June of this year from the same period last year, and the county’s jobless rate fell to 7.3 percent last month, the lowest in the region, according to state Employment Security Department data. Residential foreclosure notices also fell 8 percent through June of this year from the same period last year. Still, personal bankruptcy filings in the county are up 10 percent through June from the same period last year, according to U.S. Bankruptcy Court data for the Western District of Washington.

Marisa Wulff, the co-CEO of Mud Bay, a retailer of food for dogs and cats, said 2009 was the most challenging year for the company in its 22-year history. Following the economic meltdown in the fall of 2008, the company realized it had to re-evaluate its expenses after sales growth fell into the single-digit range rather than the double-digit growth the business had experienced for years, she said.

“We combed through everything and learned how to do more with less,” Wulff said.

There were some tough decisions, including trimming its staff by three positions from 170, the first layoffs in the history of the business, she said. Still, the business took advantage of the slower economy by locking in lower lease rates for new stores in Belltown, Ballard and Sumner, and more stores are opening in Mercer Island, Redmond and Gig Harbor this year, Wulff said. By the end of the year, Mud Bay is expected to operate 21 stores throughout Puget Sound. Its two stores here are in Olympia and Lacey.

“Each month we are gaining sales momentum,” she said, but she also calls it a “slow grind.” The business continues to be mindful of its expenses, and company officials get together every two weeks to look at its numbers. Although the business cut expenses, it increased its marketing.

“You have to keep awareness up and keep people through the doors,” Wulff said.

Desco Audio & Video in Olympia, in business for 41 years, has watched its expenses carefully, too, said longtime owner Dick Scott. In this economy he’s thankful he owns his own building, and the business has tried to specialize in residential and commercial audio and video installations, Scott said. That can have its downside, too, because when the housing market started to slow, so did business at Desco.

Sales still are down about 25 percent from three years ago, and Scott calls this economy worse than when President Jimmy Carter took office, a period of extremely high interest rates. As bad as it was then, it didn’t affect the housing market like the current recession has, Scott said. “People just quit building big, fancy new homes,” he said. “Half your market goes away.” Controlling costs at Desco has meant trimming the number of installers from nine to five to give the business a staff of 16, he said. “I hope by this time next year we will see some improvement,” Scott said.

Big Toys’ president and owner Tim Madeley said his business had to adjust, too, because a quarter of its business was tied to spending by local and state governments, which have seen their budgets affected by the downturn in the economy. “Thurston County doesn’t even have a parks department,” Madeley said. “I don’t ever recall where local government spending was impacted this much. We coasted through previous recessions and even grew in some of them.”

Instead, the business has focused on the early childhood market, making and selling playground equipment to daycare centers and preschools. The 40-year-old company also has expanded overseas into South Korea, Singapore, Australia and the United Kingdom, the thinking being that business might be up in one part of the world if it’s down in another, Madeley said. “We’ve spread our eggs in more baskets and that’s helped as well,” he said.

Sales growth recently has been flat at Big Toys, which occupies space at the Port of Olympia’s New Market Industrial Campus, where the business employs 30 people. “It’s hard to feel good about being even,” he said about sales growth, “but with all things considered, I do.”

Rolf Boone: 360-754-5403