Shop till you drop: high unemployment and low consumer confidence dash chances of spending our way out of a slump.

• Position: RETAIL

When the going gets touch, Americans tend to go shopping. Consumer spending has pulled the U.S. economy out of many tight spots. But this time, it might take lot more than that. With unemployment rates rising, retail sales started to slip after kids went back to school. Even Mooresville-based Lowe's Cos., the state's largest publicly owned retailer, is bracing for tougher times. In September, it said it would open only 80 hardware stores in 2009, down from 120 last year. Recessions often drive shoppers to discount chains, and Raleigh-based Variety Wholesalers Inc.--Owner of Roses, Bargain Town, Value Mart and Others--is one of the state's largest. Art Pope is chairman and CEO.

BNC: Rough year for you?

Pope: It was fair, but we didn't meet all our goals for expansion and increased sales. We did get a pop in retail sales from the stimulus checks in June and July, but it didn't hold up after that. Family Dollar and Wal-Mart did fairly well, too, but stores selling high-end discretionary items had it tough. This will be another year of uncertainty.

Why?

Consumer confidence is low, and it won't turn around overnight. It could be a year of more downward spiral, higher unemployment and of consumers holding onto their savings. That will be good for long-term economic growth, but it reduces retail spending now. Retailers have to be quick on their feet. They have to closely manage inventory and pricing.

Who will and who won't prosper?

We know from past recessions that discounters tend to benefit from people shopping down. But even if something's a great value, if you don't need it--you're concerned about your job or your expenses--you're not going to purchase discretionary items. Obviously, you're not going out and buying new appliances if your washing machine or dryer will last another year. When fewer homes are being built, appliance retailers and stores that sell things to build and furnish them will feel the ripple effect.

Is there too much gloom-and-doom talk?

To an extent, yes. When consumers fear losing their jobs or fear not having enough money for the mortgage, they spend less. In some ways, the economy--God forbid that I'm saying this--is fundamentally sound. Unemployment, while higher than last year, is not terrible, and productivity in American manufacturing and the service industry is still high. A lot of what we're seeing in retailing is fear.

Is it justified?

One real concern was gasoline prices. They increased retailers' costs, which...