-By Bob Gatty

Alexandra Cha no longer works at the National Aeronautics and Space Administration designing optics for space; nor does she teach physics and astronomy anymore at Bryn Mawr College, her alma mater, despite holding a doctorate in astrophysics and years invested in that demanding field.

Cha quit that "high-level, dead-end job" to do what she loves -- be involved with food and cooking, and helping others do the same. Last year, she and her husband, Henry, opened Casual Gourmet, a 3,000-square-foot shop in Glenwood, Md., that sells specialty and gourmet food, and high-end kitchen cook and bakeware, utensils, and supplies.

"We wanted to have something of our own where people couldn't push us around and we were the boss, and I've always loved to eat and enjoy food," Cha said during a visit to her store in an upscale rural community in the Baltimore-Washington, D.C., corridor. "I've always felt I could do anything, so I decided to take the plunge."

In fact, Cha says Henry was so enthusiastic in the beginning, he wanted to open two additional stores -- even though he also operates his own new software and technology consulting business, where she also helps out. "But as we were building this store," she said, "the bottom fell out of the economy. So those plans went away quickly."

Despite the economy, Cha is enthusiastic about her business. "We knew it would be a slow build," she said. "We were right."

But as she discussed her store with its dark wooden floor, white gondolas and shelving, and blue Corian U-shaped counter where specialty sandwiches, soups, coffee and hot chocolate are prepared and served, she paused to greet a couple of customers. "Hi Joe. Hi Libby. How are you?"

"This is a small community and we know most of our customers by name," she said. "We know what they like and what they are looking for."
How does she decide what products to carry?

"I select food because I've eaten it and enjoyed it. Unless I have multiple requests for something I don't like, I don't carry it, because then I can't say that I've tried it and it's good." The same goes for the hardgoods. They have to be something Cha would personally use.

Brand recognition is important, she says, noting that lots of her customers like Stonewall Kitchen products, so she makes sure she has them on hand. On the kitchenware side, Casual Gourmet sells All-Clad, for example, competing with several Macy's department stores in the area, among others, as well as Nordic Ware, and Kyocera and Shun knives.

Her customers expect quality, and they love the service they experience in her store. "They make you feel welcome and special," said Jackie Cristiano, who lives in nearby Sykesville, Md., and often stops by on her way home from work. Cristiano has purchased several All-Clad pans from Casual Gourmet, even though she might save a little money when they go on sale at Macy's.

"It's worth it," she said. "I love this store."

Another customer asked Cha about some frozen par-baked sesame seed bread in the freezer. "It's wonderful," the shop owner said. "Just put it in the oven, and it fills your house with all of those wonderful smells of freshly baked bread. And it's delicious."

Meanwhile, in Grapevine, Texas, Tony Boulton is scratching his head trying to figure out how to deal with sales that have plummeted by 30 percent since last September at Design & Grace, his "European-style kitchen store."

"I was looking for a substantial increase this year, so this is a big shortfall from my objective," he said.

But today's economic climate, which has seen retail sales plummet and forced major layoffs at such stalwarts as Macy's, Pier 1 and Starbucks, has not been kind to Boulton's four-year-old upscale store that sells products favored by Boulton, who is from England.

"The economy has created a difficult situation," he said, "although it's no different than anyone else in our industry is facing. It seems like only the dollar stores and Wal-Mart are doing well."
Will he try to compete on price?

"I'm reluctant to go down-market," he said. "I don't think that would work. I think we have just got to hang in there and look for whatever support we can get from our vendors and our customers, and keep things as tight as we can."

One of the difficulties, Boulton contends, is that some of his larger chain competitors are being forced by their lenders to tighten up on their inventory, and so they are cutting prices to move product out the door. That places stores like Design & Grace at a competitive disadvantage. Worse, he says, some larger high-end retailers are marking down items that usually never go on sale.
"Suppliers are just looking the other way," he said.

A Silver Lining
Some experts contend gourmet and specialty shops can weather the deep and darkening recession easier than many mainstream competitors because their customers typically are better off financially and have more disposable income. Cha is not so sure.

"With all of the media, people's purses are a little bit closed," she said. "Even if they have secure jobs, it doesn't matter. They may not be as affected as others, but they feel affected. You can't turn on the radio or TV without hearing doom and gloom. People's net worth is down because of the market and housing values. It makes them cautious."

However, experts such as Michelle Barry, senior vice president at The Hartman Group, Inc., a Belleview, Wash.-based consulting firm, say the economic climate that is seeing consumers dramatically cut spending actually offers opportunity for gourmet retailers like Cha and Boulton because increasing numbers still want fine food without paying restaurant prices. So, if they can find the right ingredients and the recipes, they will cook at home.

"In the long term, more people who used to eat out will be cooking more and entertaining more at home, and instead of buying lunch at work, they will be bringing their lunch from home," she said. "But they will still want something good. So I see it as an opportunity for gourmet retailers."

Housewares industry consultant Dan Raftery, president of Raftery Resource Network, Inc., Antioch, Ill., agrees that gourmet retailers stand to benefit -- if they embrace the right strategies.

"The economy's contracting is not all bad for those folks," he said. "Their client base is generally at the upper end of the scale, and when they cut back, they'll cut back on restaurant meals, which means more meals at home. So the gourmet retailer has an opportunity to extend his client base by providing what they need, what will satisfy their desires."

According to David Biernbaum, senior marketing and business development consultant at David Biernbaum Associates, Chesterfield, Mo., 2009 is the "year of the existing customer."

"I strongly believe this is an excellent occasion for existing retail stores to win over new consumers and new customers, as well as to keep their own loyal base," he wrote in a commentary for RetailWire. "This is a time for differentiation. Not all retailers should approach the perceptions and issues of the economy the very same way. Consumers do not want fewer choices; they want more differentiation and greater choices. Excite them into spending more!"

Some Strategies
Both Raftery and Barry advise gourmet retailers to take advantage of social marketing, using Internet groups and e-mail newsletters to reach out to their customers. Boulton has built up a newsletter list of about 600 customers who signed up, and Cha has nearly 500 names on her e-mail list.

"Our strategy has been putting together meal promotions, bundling multiple items with a special deal, like with bread, buy two and get one for half price. We're focusing on easy meals and giving out coupons at checkout for free coffee with their next purchase. The idea is to get foot traffic in the door," she said.

Once every two weeks or so, Cha sends out "our tasting e-mail," in which she invites customers to come in and try a dish she's prepared, and offers a recipe -- and, of course, the items needed to prepare that meal at home.

All of that is part of Raftery's two-pronged solution to survival today. The first is "Build a community," and the e-mail newsletter and in-store tastings are part of that. He also recommends sponsoring cooking classes, wine tastings, special event nights, taking full advantage of the store's Web site and even opening a small in-store restaurant "so you can still do something for the dine-in crowd."

Raftery's second component: "Be a resource." That includes providing recipes and information online and being able to take -- and fill -- special orders. "If one of your weekend warriors wants some special spices, you should be able to get them," he said. "High touch, great service. That's what it's all about."

Furthermore, Raftery says gourmet retailers should consider expanding housewares and kitchen SKUs to take advantage of the new focus on in-home cooking.

"To be able to do all of that, you have to scout out new and different items," he said, advising retailers to attend trade shows like the International Housewares Association's show, held earlier this March in Chicago, and the Fancy Food Shows sponsored by the National Association for the Specialty Food Trade (NASFT).

Cha has already attended one Fancy Food Show in New York City. "We use their Web site and check out their exhibitors. We request information or look at their catalog. It's a great resource," she said.

Barry believes it is "a little bit of a fallacy to assume that only upscale consumers are good targets for gourmet retailers.

"The lower socioeconomic population is often more loyal to certain foods -- organic, for example," she said. Moreover, the dramatic increase in cooking and home meal preparation is encouraged by the media, she says, including magazines, TV cooking shows and the Internet. It's a major influence on the consumer and dovetails with current economic necessities.

"We would say, stay the course," Barry advised. "Continue telling your stories. Continue reaching out. Maybe rely more on the social network types of marketing to tap into people's sense of value. That would make a lot more sense than just hunkering down to try to ride this out."

Internal Solutions
Still, Jerome Patterson, chief marketing officer at Acorn Systems, Houston, Texas, a business "profit improvement" consultancy, cautions gourmet retailers not to ignore their expenses and the true costs of each of their business processes. "I encourage retailers to take a serious look at the expense side and truly understand the costs related to any dimension of their operation," he said.

Carefully analyze SKUs, he advises, and pay attention to category management to make sure the inventory being carried is the right inventory for that particular location. Carry more of the fast-moving items, he says, and cut down on those that lag.

"Economically, it's a tough time," he said. "How do we hunker down? The age-old reaction is layoffs and store closures. But we would encourage retailers to not only explore those options, but figure out what best practices might be implemented to improve performance."

Staffing is important to keep under control, Patterson stressed. "We would want to look at applying a thoughtful analytical approach to the staff. Understand where the labor capacity is being spent. If it is a single-store model, write down what people are doing and identify the non-value-added activity. Then look at how to make improvements. Eliminate steps whenever possible. Streamline the process. Control costs without eliminating people, but still save money," he advised.

He also urges retailers to work with vendors to find ways to reduce costs. "If even the small retailer will just go back to the supplier and ask for help in finding ways that can benefit both parties, it would help," he said. "We can all ask for a lower price, but maybe there is a way to cut the cost of the process as well."

Overall, Patterson says many gourmet retailers need to "think more analytically and look for creative ways that might even fly in the face of conventional wisdom instead of just saying, 'Times are tough, let's close stores.' Sometimes, even that isn't enough to stop the bleeding."

Certainly, careful analysis and attention to costs is essential to a successful business at any time, let alone when store owners are scrambling to survive. But the gourmet retailer has an edge that must not be discounted, the experts say.

"Human interaction is more important than ever," said Barry. "People want human contact. They want to know their food was prepared with human hands, not on some industrial assembly line. The further you remove yourself from that concept, the less relevant you become to your customers."