After two years of little or zero growth, retailers interviewed by The Gourmet Retailer (TGR) are feeling more optimistic and seeing an increase in sales.

For Taste Unlimited, a specialty food retailer with six stores in the Norfolk and Virginia Beach, Va., area, 2010 was a year of positive changes. Since last March, the privately held retailer has posted year-over-year increases and is even beating its pre-recession numbers.

Taste Unlimited took advantage of the dismal real estate market and invested in a new store, shown. CEO Jon Pruden also was able to renegotiate more favorable leases for several of his six stores.

"We're not just clawing back," says Jon Pruden, CEO of Taste Unlimited. "It's real growth."

Across the board, sales are picking up for Joan's On Third, a gourmet marketplace and catering company in Los Angeles. Three years ago, the business expanded its footprint by 2,000 square feet. With more space, the 6,000-square-foot store expanded its grab-and-go cases of prepared foods as well as its cheese selections and opened for breakfast.

"It started slowly, but now we have lines of people waiting for tables," Store Owner Joan Macnamara says.

Located between Hollywood and Beverly Hills, the retailer caters to a diverse clientele of shoppers from all demographics. Macnamara, who works with her daughters Susie Hastings and Carol McNamara, has noticed that customers buying less, but sticking with quality items.

"We seem to have more customers," Macnamara says. "... Instead of people going out to a restaurant, they're coming here for quality that is the same or better."

Eating & Cooking More at Home
For kitchenware retailers, the past three years have not been all bad. With consumers eating out less, they're cooking more, and many of them are turning to local kitchenware retailers for tools and advice.

Lori Atrops, owner of Habitat Housewares in Anchorage, Alaska, says 2010 "was the best year yet" for her 8,000-square-foot kitchenware store. December sales were the second highest in her seven years of ownership.

For the first nine months of 2010, the store was "maintaining a little growth," she adds. For 2008 and 2009, her store averaged a 2 percent decrease and 2 percent increase in sales, respectively. "To me, maintaining (was) a way of growing," Atrops says.

With unemployment at 7 percent, Alaska wasn't as hard hit by the recession as other U.S. states, points out Kathy Johanknecht, buyer for Habitat Housewares. But for the first nine months of 2010, the store's sales increased 6.75 percent year-to-date — to which Atrops credits advertising, the buy-local movement and the store's well-publicized, well-timed, 35th anniversary celebration; in September, all Alaskan residents received a Permanent Fund Dividend Check for $1,300 from the state's oil holdings.

In general, Habitat Housewares' selection of small electrics — panini presses, slow cookers, waflle irons, Vita-Mix blenders and more — are in demand. Atrops and Johanknecht agree it has been "back to basics" the last couple of years as more people are cooking more at home. Shoppers are looking for items that "take the arduous out of cooking," Atrops says.

Like Habitat Housewares, K.C. Lapiana, owner of In The Kitchen, a 4,000-square-foot gourmet kitchenware store in Pittsburgh's Strip District, has seen more consumers cooking more at home for everyday meals, entertaining and special occasions. And they're investing in quality items.

"Shoppers will spend more than $100 on one Le Creuset pot instead of going out to dinner," Lapiana notes.

But two years ago, In the Kitchen, which opened its doors eight years ago, did notice a decrease in traffic.

K.C. Lapiana, owner of In The Kitchen, has noticed her customers price-checking items with their smart phones. 2010 was Habitat Housewares' best year yet, says Owner Lori Atrops.

"When the economy did take a nosedive, they hunkered down," Lapiana says. "Now when they come in here, they ask, 'What is the best? What can I use to make this better?'"

Quality at a Fair Price
When it comes to buying kitchenware items, customers are increasingly price-aware and price-sensitive.

With smart phones and applications that read barcodes, shoppers instantly learn which retailer in their area has the lowest price.

"The thorn in my side is the attention customers are giving to price-checking," Lapiana says, adding that shoppers are mostly price-checking the larger ticket items, such as cookware and small electrics.

"I have to be on my toes to make sure we are competitive," Lapiana continues. "And the minimum advertised price (MAP) items we carry make us competitive. On other items, we might be a dollar more or a dollar less."

Consumers flock to online shopping because of convenience, price and selection. And that's a major concern for kitchenware retailers, including Atrops.

According to the State of the Gourmet Retail Market 2010, 65.6 percent of respondents agree that online retailing is the biggest threat facing their business.

Shoppers at DeCicco's Family Markets are increasingly looking for local foods. They're concerned about where their foods come from and often seek exotic ingredients, such as mullet roe, that they've read about or seen a celebrity chef use, says Joe DeCicco Jr.

Time to Save
Retailers of all sizes took advantage of the dismal real estate market to negotiate more favorable leases. Kitchenware retailer Willams-Sonoma, which operates more than 250 stores under its namesake brand, is negotiating more favorable leases, CFO Sharon McCollam said in a March interview with the Wall Street Journal.

In New York, DeCicco's Family Markets took advantage of the real estate market, and opened its largest and seventh store to date in Brewster on Nov. 12. The family owned company was cautious and had its eye on the 37,500-square-foot, a former Linens 'n Things location, for more than a year before signing the lease, explains Joe DeCicco Jr. While its other six stores range in size from 7,000 to 23,000 square feet, "with this one, we had plenty of room to let imagination run wild," Decicco says.

Unique features include a woodfire oven for made-to-order pizzas, an Italian gelato counter and more than 20 craft and local microbrews — available on draft and, thanks to local liquor laws, in 64-ounce take-home growlers. All its stores are known for their local produce, gourmet deli, meats and extensive offerings of cheese, organics, specialty foods and gluten-free items.

In Norfolk, Va., Taste Unlimited's Pruden took advantage of the record-low real estate market and re-evaluated the stores' real estate positions. He was able to renegotiate several of its six store leases, getting favorable rates or perks such as a repaved parking lot. Five years ago, landlords would not have been amenable to such discussions, Pruden notes.

The company also purchased a property for its corporate offices and warehouse. In August, Taste Unlimited relocated its Norfolk store to a newly renovated 13,000-square-foot space. The new location, which has a more modern look, is the chain's flagship. About half the space is dedicated to a café that has seating for 64 patrons. With the additional space, the store expanded its cheese selections and now offers more prepared foods.

Future plans include adding coffee and gelato bars. The specialty retailer has invested in improving customer service; it has adopted ZingTrain's customer service tools as part of its employee training program and added a staff position — the director of first impressions — that oversees customer service.

"We have not let our standards go down, "Pruden says. "We're maintaining excellent levels of quality and service. "Our customers get it. When we interact with them, they're appreciative that we're around."

Lapiana's customers, even the ones who are price-checking, understand they're getting more customer service at In The Kitchen and are willing to pay a little more for that, she says.

Those gourmet retailers that focus on offering quality items at a fair price — coupled with outstanding customer service — are in a good position to compete in 2011 and beyond. No wonder they're optimistic about their futures.

Editor's Note: For a copy of The Gourmet Retailer's study, the State of the Gourmet Retail Market 2010, featured in the November/December issue, e-mail Anna Wolfe at awolfe@stagnitomedia.com.