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Fiscal spiral has merchants cutting back on imports

Shelves showing more US-made alternatives

Email|Print|Single Page| Text size + By Jenn Abelson
Globe Staff / June 16, 2008

The fancy French goat cheeses, Italian olives, and imported chocolates are harder to find at Formaggio in the South End. Around the block, bankrupt Voila, a small boutique selling French home furnishings, shuttered its doors weeks ago, crippled by the soaring euro, sinking greenback, and hefty fuel surcharges.

From local cheese shops to national department stores, US merchants are finding ways to deal as the dollar spirals downward and demand for foreign luxury goods wanes. Some merchants are raising prices just to break even on many imports that once brought big profits. Others, including Louis Boston and Neiman Marcus, are cutting back on European products, shifting merchandise to include more American designers. And some shop owners say they are making shorter, less frequent buying trips to Europe.

Since the beginning of the year, the volume of shoes imported from Europe plunged 26 percent compared with the same period last year, chocolates fell 21 percent, high-end Swiss cheeses dropped 15 percent, and sparkling wine declined 14 percent, according to the World Institute for Strategic Economic Research, a nonprofit research group at Holyoke Community College.

"It's quite a mess," Ihsan Gurdal, Formaggio's co-owner, said. "We're buying less and more carefully from Europe."

Over the last several months, Gurdal said he has tripled the number of American cheeses available at his South End and Cambridge shops and begun replacing Italian olives with ones from California. The stores dropped several French and Italian jams and expanded its line of "Bonnie's" jams, made locally in Cambridge, that are nearly half the price. Olive oils from Tuscany that cost $47 six months ago are now selling for $57.

Owners of shops like Formaggio and LuxCouture, a luxury handbag merchant in Wellesley, say they have to be mindful of how much they raise prices because there is a point at which customers, even wealthy ones, will stop shelling out money for goods that cost significantly less just months ago. In the last year, the dollar has declined 13.6 percent against the euro, adding hundreds of dollars to handbags at LuxCouture, where imports represented 80 percent of the merchandise last year.

These days, owner Sari Brown is trying to slim down to 40 percent imports, bringing in new American designers like Sang A and Rebecca Minkoff, whose leather purses sell for $600, and shedding bags from European collections such as Pauric Sweeney and Michael Teperson.

Amy Schlager, who counts luxury purses from Gucci and Louis Vuitton among her collection, said she has noticed merchants touting more American designers and has purchased several such handbags recently at LuxCouture, including ones from Jennifer Alfano ($1,195 for a python clutch) and LAI ( $1,750 for a python totebag). Similar European styles would easily cost more than $2,000.

"I don't care how much money you have. Nobody wants to throw their money away frivolously," said Schlager, of Weston. "I've opened my mind to other brands out there. I'm not just buying a name to buy a name."

Meanwhile, some European designers have taken steps in recent months to ease the strain on American consumers. Michael Teperson, an Italian designer who started his handbag business several years ago, said the strong euro has made it difficult to break into the American market. So, over the last year, he has lowered prices to $1,000 for bags that really should cost $1,500 with the exchange rate.

"People are really complaining about the euros and taxes being so high and they're not willing to take the risk," Teperson said. "We're not making money in the US. We're just breaking even, but we're a new company and it's important to be in the US."

Ginger Reeder, a Neiman Marcus spokeswoman, said: "The bottom line is that European goods are more expensive than before. That means we have to be smarter when we are buying in the marketplace - we have to be picking the very finest merchandise in terms of style and quality."

During a buying trip to France and Belgium last September, furniture Heidi Thiede purchased for her shop Voila increased in price by 10 percent during the nine-day stay because of the falling dollar and transportation surcharges.

Over the last six months, Thiede tried to offset costs by importing less frequently and looking for local suppliers. She shortened buying trips and raised prices. But by April, Thiede realized her business model of selling European imports for the South End home furnishings shop was no longer viable. With nearly $450,000 in debt, according to bankruptcy protection filings, the business liquidated.

"There was a limit to what we could do. I tried to adapt and tweak but I didn't want to change the vision of the shop," Thiede said. "It was difficult to see something you nurtured from zero go under. But it was time to step back and stop."

Last week, Thiede's entire collection of carefully selected merchandise - French lithographs, Italian pewter candles, an 1840s French farm table - was auctioned off before a crowd of hungry bidders looking to pounce on a rare European bargain.

Eduardo Caquias of South Boston walked away with four sleek metal chairs for just $325. What he would have paid if Voila was still in business: $1,100.

Jenn Abelson can be reached at abelson@globe.com.

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