“We’re concerned,” Kathie Morolda, president of Borough Merchants for Princeton and owner of Cranbury Station Gallery in Palmer Square, said of the local economic environment. “I don’t want to be negative, [but] it seems like things have changed.”
Consumer spending can be quickly affected by an economic downturn, economics professor Yuliy Sannikov said in an e-mail, explaining that people become more cautious with their money and spend less in such an environment.
Morolda explained that while economic uncertainty has been building for a few months, her store was not affected until quite recently.
In the “last week or so, things really did slow down,” she said, though she noted that the Jewish holidays and Columbus Day may also have played a role.
Merchants in town have noticed that “people are holding off,” Morolda said. She added that even though sales are down at the moment, she hopes that consumers are shopping around for ideas for future purchases.
Not only are consumers shopping less, they are also cutting down on dining out.
Vincent Comunale, general manager of Teresa’s Caffe in Palmer Square, said that he has noticed patrons opting for less expensive meals.
“[Customers] won’t have that second glass of wine or won’t have dessert, and instead of leaving 20 percent gratuity, they’ll leave 17 or 18 percent,” he explained. “They’re trying to cut back wherever they can.”
He also noted that people are “trading down” for less expensive items, opting for the Margherita pizza instead of the Americana pizza, which includes more toppings and is more expensive.
Comunale said that he has noticed a slight shift in the type of customers frequenting Teresa’s, explaining that there are more high-end customers who may be choosing pizza and less expensive cuisine over more “elaborate dinners,” he said.
Moderately priced restaurants, such as Teresa’s, may be faring better than specialty-type shops.
“Fortunately we’ve been able to weather the storm a little bit better than most,” Comunale said. “[It has to do with] the menu and cuisine we offer being a little bit more palatable in terms of price point.”
Sannikov explained that, in times of economic uncertainty, “luxury/discretionary goods get hit harder than basic goods.”
Toy sales, however, may not be affected as much by the economic downturn, said Joanne Farrugia, owner of jaZams Toy Store. “I think people will [still] spend on their children.”
Though it is difficult for her to evaluate the effect of the economy on her sales, as she recently moved her shop to a larger location on Palmer Square East, Farrugia said that overall revenues are up.
“[It seems like] the new space is getting more traffic than the old space,” she said.
She noted that her other store in Pennington, where Merrill Lynch has a large presence, is seeing a drop-off in sales. The economy, she said, is “definitely affecting customers there.”
The credit crunch has taken its toll nationwide, as businesses struggle to fund their operations especially as consumers reduce spending.
“Financing … and operations … are important for businesses, and both are affected by bad economy,” Sannikov explained.
Farrugia, who has a revolving line of credit, said she has not had any issues yet, but she noted that she applied for the line in May before the economy hit its most recent low.
“Since [the] current economic slowdown is caused by the credit crisis, financing is probably the most immediate effect felt, with businesses having a harder time getting loans,” Sannikov said.
Despite the slowdown in business, Comunale said he remains optimistic. “I think Princeton is more resilient than most local economies,” he said.
Though Morolda seemed a bit more uncertain about the future, she said that “Princeton is a good town to do business in.”
“I’m hoping that local residents understand how important it is to [shop locally],” she said. “We want to be here next year.”
While Farrugia called herself “an eternal optimist,” she did have some concerns, including the potential for a weak holiday shopping season.
Morolda noted that some small businesses may not be able to withstand tough economic times. She added, however, that it is still important to give back to the community, even in this time of uncertainty.
To bring residents out to their shops, Cranbury Station Gallery and the Original Soup Man are planning a gallery after-hours event that will feature food-themed art and samples from the Soup Man.
Part of the proceeds from this event, as well as Soup Man bread and soup, will be donated to a local soup kitchen.
“This is to remind people that if we’re doing badly, the soup kitchen is worse,” Morolda said.
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