Though tucked away from the increasingly corporate atmosphere of Midtown, longtime small business meccas Harlem and Morningside Heights are coming to grips with a new economic reality.
The recent Wall Street collapse has made waves in the 2008 presidential campaign, and forced companies large and small to cut jobs. It has also reached the safe-boxes of small-business owners in Upper Manhattan. Today, passers-by on such major thoroughfares as Broadway, Amsterdam Avenue, and 125th Street encounter rows of boarded-up storefronts, and even the stores that remain open are hurting.
Business “is not like it used to be,” said Ari Koukladas, the manager of Flowers By Valli, a florist shop located on Broadway between 112th and 113th streets. “I’m here 25 years, and I remember years back, there were three flower shops, and all were very busy. Now I’m the only flower shop, and it’s not as busy.”
A number of managers and owners expressed concern that as the economic downturn leaves thousands of people unemployed and causes others to fear for their own job stability, their businesses will be among the next to go.
Tighter Budgets, Fewer Customers
Wassim Malaeb, the owner of Samad’s Gourmet on Broadway between 111th and 112th streets, stands behind the counter of his small shop, which specializes in organic Middle Eastern fare. Every few minutes, he pauses and turns to ring up a customer’s order, his young son tugging at his shirt.
The numbers that flash on the register are missing a few digits.
“If you used to buy five cups of coffee, you buy one now,” said Malaeb, explaining that with less cash to spend, even regulars are cutting down on the foods they once habitually purchased.
“It’s not the number of customers—it’s how much do they spend compared to what they used to spend,” he said. “People lost their job, now they are thinking twice about where they spend their money. They’re not buying organic—they go to a regular supermarket.”
Malaeb’s words, brisk and matter-of-fact, echo the predicaments of many others whose livelihoods depend on the sale of non-essential items, such as cosmetics or flowers.
“People think two or three times before they spend their money,” Koukladas, the florist, said with an air of resignation. “They have more important bills to pay. Food is more important than flowers.”
But food locales have lost business, too.
Jose Ramirez—the manager of Tropical Sensation Restaurant, located on Amsterdam Avenue between 106th and 107th streets, which opened six weeks ago—has fought an uphill battle to establish his tapas bar in an economic climate that is far from ideal.
“We might set up some specials to get more people to come,” Ramirez said. “When the economy is bad, it has to be done more often.”
“All the restaurants are feeling a pinch,” said Peter Arndtsen of the Business Improvement District for Amsterdam and Columbus in Manhattan Valley. “People are not coming out to eat as much.”
Shifting Spending Priorities
As buyers become more aware of each dollar they spend, the traditional definition of a necessity may be changing. For instance, along with gourmet food shops and beauty salons, venues selling more utilitarian goods, like hardware stores, have also suffered.
In Harlem, “there’s no money on the street,” said Luis Nuñez, the owner of Hardware Supply Inc. on 125th Street between Amsterdam and Morningside avenues. Nuñez estimated that he sees only half as many customers as he used to.
As a result, certain items have made a surprisingly quick departure from the typical shopping list. In Nuñez’s case, wrenches and sockets—once household staples—have largely fallen by the wayside as locals struggle to pay rent and other day-to-day expenses.
Consistent with historical norms of economic depression, the only two industries in the area that appear to be successfully weathering the storm are hair salons and bars.
Rosa Manitas has worked at Three Star Haircutting for decades and said she can recall much worse fiscal times. Business at the salon, located on Amsterdam Avenue between 107th and 108th streets, “is still the same—it hasn’t changed,” she said in Spanish.
“Food, beauty, and funeral homes” always survive in periods of recession, she added with a laugh.
Bars and liquor stores in the area also reported better numbers.
The popularity of such venues may reflect a common inclination for people to seek temporary relief from external stressors.
“When people are depressed, what do they do?” asked Daniel Silva, an employee at Liquors on Broadway between Tiemann Place and LaSalle Street. “They resort to alcohol.”
While his clientele has remained stable, Silva detects hints of the crisis’ hitting the larger industry. Liquor establishments tend to make increased profits over time, he said, but this year, business has stagnated.
“We’re not doing as bad as everyone else, but we’re also not doing as well as we expected,” Silva said.
Most entertainment venues, on the other hand, have not been so fortunate.
At Harlem Lanes, a bowling alley on the corner of 126th Street and Seventh Avenue, management is searching for new ways to appeal to people who have had to tighten their purse strings or close the doors to their own businesses.
“People are starting to look for entertainment that is more affordable,” said Sharon Joseph, Business ’97 and CEO of Harlem Lanes. “Entertainment is definitely down in terms of people’s budgets.”
Even among those who continue to frequent the lanes, “we’ve definitely had a decrease in our food sales,” Joseph said. “People will still come [to bowl], but maybe instead of buying food, they’ll wait until they get home.”
Another Challenge for Minority Businesses
While the issue is not at the forefront of discussion, the economy may affect businesses disproportionately based on ethnicity—a trend that would hold significant import for Harlem.
“Part of it is, the majority[-owned] business might already be in a network where they have the entrée to contractors,” said Lynda Ireland, president and CEO of the New York & New Jersey Minority Supplier Development Council, indicating that minority businesses have historically been at a disadvantage in attracting contractors because of the widespread perception that the returns on their businesses will be lower.
“Some people think minority businesses are synonymous with small start-up businesses,” Ireland said. “To even have any opportunity to compete in the marketplace is more difficult.”
According to U.S. Census Bureau data, retail trade accounts for the most annual profits among African-American- and Hispanic-owned businesses nationwide.
Statistics released in April by the Minority Business Development Agency revealed enormous growth over the past 10 years for African-American business owners. Between 1997 and 2002, the MBDA report stated, “the growth of African-American-owned firms outpaced the national rate, as they grew by 45 percent compared to 10 percent for all classifiable firms.”
Racial disparities are nevertheless vast. Although African Americans lag behind
Hispanics in number of businesses by a mere 2 percent, their gross annual receipts are more than $130 billion less. Among all ethnic groups, African Americans are the only ones whose average gross receipts lie below $100,000.
Recessions, Ireland indicated, serve only to exacerbate existing conditions, including potential biases.
The Larger Picture
The economy has been in a downward spiral for years, but it crashed in mid-September when the investment bank Lehman Brothers declared bankruptcy and financial management firm Merrill Lynch was absorbed by Bank of America to avoid a similar fate. American Insurance Group, one of the largest insurance companies in the country, was compelled to request billions of dollars from the Federal Reserve. Lastly, in the biggest banking failure in American history, J.P. Morgan Chase purchased Washington Mutual.
In response, U.S. President George W. Bush and U.S. Treasury Secretary Henry Paulson proposed an unprecedented $700-billion bailout package, passed by Congress in early October, which authorized the federal government to purchase the assets of troubled Wall Street firms in an effort to avert widespread economic collapse.
Though many people view Harlem as its own enclave that is not immediately affected by city-wide trends, the unincorporated neighborhood has rapidly manifested severe symptoms of the national epidemic.
Many small businesses “had benefited from the growing income of people in that area, and right now, who knows when and how the dust will settle after all of this upheaval,” said Theresa Devine, a senior economist at the Independent Budget Office of New York City. “The bottom line is, spending is going to be going down, and small businesses have already been hit.”
Columbia owns many of the buildings in the area, but University officials said they had not noticed a significant number of tenants defaulting on rent payments since the economy soured.
“Columbia provides competitive rents for retail and commercial space which we prefer to fill with locally-owned businesses instead of chain stores,” University spokesperson Victoria Benitez said in an e-mail. “These valued tenants are generally in good standing and we believe they will remain in good standing.”
Local politicians have been forced to face the crisis, working more closely with businesses to keep them afloat.
“Small businesses are the backbone of the community,” said Lynette Velasco, a spokesperson for City Council member Inez Dickens (D-Morningside Heights and West Harlem).
Velasco emphasized that the problems confronting such businesses are not new, but rather took root in 2001, at the start of President Bush’s tenure.
“Especially in smaller communities, distressed communities, businesses were struggling before the Dow plunged,” she said. “We’ve had eight years of a downturn—it didn’t just happen.”
Programs have also debuted within the city government.
Teaming up with Mayor Michael Bloomberg, the Department of Small Business Services—which runs educational, hiring, and legal support initiatives for retail—plans to expand its programming through NYC Business Solution Centers.
“We know that operating a business can be challenging even during the best of times,” Larry Scott Blackmon, the department’s deputy commissioner, wrote in an e-mail. Blackmon added that “we are aggressively contacting business owners to share information on options and resources.”
In addition to the direct blow local businesses have sustained due to fewer customers and smaller purchases per customer, Devine noted another major obstacle—decreased access to credit.
Since profits have plummeted, small businesses are relying more heavily on loans to cover basic costs like rent, payroll, and overhead, Devine explained. But in light of the recent Wall Street downfall, obtaining loans has become more difficult.
“They [small businesses] are unable to expand without access to credit, and Harlem is going to be affected,” Devine said. “Whole strips of stores on 125th Street are shuttered now.”
“Most often, we think of the impact [of the economic crisis] on spending, and consumer credit is tied up, but the access to credit for small businesses is also very important,” she said. “They’re borrowing at less favorable terms and are dug deeper and deeper into the hole.”
Zeroing in on the credit crunch, U.S. Sen. Charles Schumer (D-N.Y.) urged the Bush administration earlier this month to provide direct government loans to small businesses in New York City.
Such businesses “need credit in order to make payroll payments and for other miscellaneous expenses, or they could risk going out of business,” Schumer spokesman Joshua Vlasto said in an Oct. 5 press release.
Joseph commented on what many local business owners see as the need for federal intervention on their behalf. Amid the government’s highly publicized outreach to large corporations, locals may feel they have been left out.
“I wish there was a bailout package for local businesses, because local businesses are what give money back to the community,” Joseph said. “When we fail, it really has an impact on the community.”
Sara Vogel contributed to this article.
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