Lessons from a local entrepreneur

When I bought flowers from the local Pike place flower shop yesterday, I had my usual question to the owner, the one I would ask at any place I am shopping , “So, how’s your business doing – Are you seeing some improvement in business?” - Little did I know that this otherwise uneventful chat would end up into an interesting 20-minute conversation, offering me insights that no sell side or market research report typically produces.

James Harvey, a local entrepreneur has been running his flower shop for over 17 years now at unarguably the Seattle’s busiest tourist intersection. If you have ever visited Seattle, then chances are that you have been to Seattle’ Pike Place market. This little colorful shop at the corner of 1^st and Pike is hard to miss, no matter you are into flowers or not. In my discussions with James about economy yesterday, he gave me 2 ground zero indicators that he tracks personally to gauge any uptick in demand.

i)                    Trash turnover at the busiest intersection: Next to his shop are two ubiquitous metallic trash cans. He told me that for the last 17 years, he has been calling the local authorities every single day to pick up trash twice a day as it would start overflowing before the middle of the day.

However, he has not made this call since the last 1.5 years, suggesting a steep decline in trash produced per day. A more than 50% decline in trash produced at the busiest tourist location directly relates to a decline in tourists and a decline in goods consumed by tourists. Note that the shop is directly opposite to Starbucks and there have been no external events such as the closure of Starbucks that can explain this steep decline in trash produced. While Q3 GDP has turned positive and Q4 GDP is likely to be positive signaling an end to this great recession, this indicator is still flat at it’s never before low levels, suggesting an uneven road to recovery.

ii)                   Consumer cash buying pattern: James offers a whole lot of payment options to consumers - from credit cards to debit cards to plain vanilla cash. Over the last 1.5 years, his cash paying consumers have undergone a distinctive pattern change. A year and a half ago, he would make routinely visit to his bank to stack up on one dollar bills as a consumer buying a $2 flower or $7 flower would give him a $10 bill and he would have to offer change in one dollar bills. With the economy taking its toll on consumers, people are coming in with exact change in hand, offering the exact cash while purchasing those $2 or $7 flowers. He no longer goes to bank to stack up on $1 bills. Any change in this pattern would likely suggest an improving consumer confidence and a solid path to recovery, but until now James hasn’t seen this change and is still pessimistic about the economy.

James is a savvy businessman who has kept up with changes in economy and is sure going to survive no matter how the economy rolls in the next year. He has cut down on expense  by not hiring temps, has geared up to offer better customer service, has changed his product mix to reflect lesser impulse purchases, all this while keeping an open eye towards changes in economy.  Only if bankers and investors had closely watched this trend, we surely would have not seen our house values and 401Ks plunge by more than half.

There’s so much you can learn about the economy from people like James on the ground – I treat these conversations far more important than designated leading indicators such as University of Michigan Consumer Sentiment Index.