Back in January, Bill Quinn thought he was being prudent when he decided to stock his online imitation tree business conservatively. After all, the recession was in full force, and consumers were watching their pennies. Today, Quinn fears he may have shot himself in the foot. “If you think back to what the world was like in January, everyone thought we were walking off the financial cliff,” says Quinn, the owner of Christmas Tree For Me. “It was really hard to buy in that environment.”

For the cottage industry of once-a-year businesses that pop up in November and December, the end of the year is not only make-or-break time, it is the only time. In 2009, things are looking especially uncertain given holiday retail sales projections, which are expected to tick down 1% to $437.6 billion, according to the National Retail Federation. While that is better than last year — and overall good news for mainstream retailers — it could be trouble for the seasonal vendors whose merchandise can skew pricier than that of year-round shops. “In a tough economy, people don’t have to buy,” says Larry Chiagouris, a marketing professor at Pace University’s Lubin School of Business.

The problem is a perennial one, but feels especially acute this year with the economy in a fragile recovery. Monica Ball, the owner of a seven-acre tree farm in Sergeantsville, N.J., says keeping up with year-round expenses is the central difficulty. Ball calls her $14,000 property tax bill “a killer.” Tack on another $500 a year in liability insurance payments and the fact that trees in the area, which take 10 to 12 years to grow, fetch just $50 a piece, keeping up with costs is tough. To augment her holiday income, Ball sells holiday wreaths and blankets. And during the offseason, she sells fruits and vegetables in her community’s farmers market — pulling in about $4,000 a year. “It’s hard to make any type of real money doing farming,” she says. “But, in the end, the property is just sitting here. It will cost us $14,000 even if we never sell one Christmas tree.”

Similarly, Beth Walterscheidt, the co-owner of Evergreen Farms Christmas Trees, a nearly 30-year-old tree farm in Elgin, Texas, hosts a pumpkin hunt each October to keep cash flowing. By selling trees and hosting the pumpkin hunt, Walterscheidt attracts around 10,000 visitors and $100,000 in sales each year. “In a three-month time period here, we make all our income off the farm,” she says. “When you have a seasonal business like this, it can be pretty scary.”

Although long-standing businesses tend to become fixtures within communities, marketing — especially initially — is almost always a challenge. For seasonal businesses, location is vital, says Pace University’s Chiagouris. “A shop has to be located where there is a lot of traffic and few competitors,” he says.

To this end, some owners lay down temporary stakes in malls, parks and community centers to make way for the sudden burst of consumer activity that is characteristic of the holiday season. Although high foot traffic is practically guaranteed, rents in these areas are often steep. To occupy a booth in the Holiday Shops at Bryant Park in New York, for example, vendors typically pay between $10,000 and $27,500 for the season, which runs from Nov. 6 until Jan. 3, says Itai Shoffman, the founder of Upsilon Ventures, the New York-based events management company that hosts the park’s festivities.

For service businesses, the equivalent to setting up shop in an outdoor mall is working with a franchise operation that markets itself nationally. For many lawn care and landscaping businesses, the winter months are dismal. To keep cash flowing during this period, many owners have also purchased seasonal franchises like those offered by Christmas Décor, a holiday decorations franchise that has more than 375 franchises operating in 48 states. For a base fee of $9,000, franchisees get their own territory and receive training on how to put up and take down lights, as well as management and marketing techniques. Most businesses could use this type of training says Blake Smith, the CEO of Christmas Décor. “However, in a part-time business, it is just as important — if not more so,” he says.

Write to Diana Ransom at dransom@smartmoney.com

 

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