Robert Klenberg looked for 10 years for a second location for his quirky, family-owned five-and-dime, Richard’s Variety Store.

Yet fear of opening another location — with another lease payment, more stock and additional staff — kept him waiting in the wings.

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Jason Getz/jgetz@ajc.com

The ‘big pretty clock,’ as employees call it, watches over Richard’s Variety Store in the Midtown Promenade shopping center. The owners took 10 years to decide on the location, and they say business is great.

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LOUIE FAVORITE/lfavorite@ajc.com

Steve Smith takes his merchandise to the checkout at Home Depot’s Vinings store. The retailer says 2008 sales may fall 8 percent.

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But last month, he finally did it. He opened a second outpost in the Midtown Promenade shopping center, next to a Trader Joe’s and Tuesday Morning.

It may seem counterintuitive to open a retail store in the midst of a recession. But a shaky economy hides blessings and curses.

On the blessing side, independent Atlanta retailers are finding more pliable landlords, better locations and an eager work force.

“Of course it scared me to open in the middle of the recession,” said Klenberg, 54. He and his wife, Ming Yang, 45, own and operate their two stores.

But Klenberg said the downturn helped him snag a prime location near two well-known retailers, restaurants, bars and a movie theater, right near Piedmont Park.

On the curse side, however, consumers right now are tight-fisted and unpredictable. Combined with the housing crisis and credit crunch, retailers are in for tough times during the holiday season — and beyond.

Circuit City, for example, has decided to pull 16 stores out of the Atlanta market. Many stores that aren’t closing are cutting back on employees, even for the holiday season. The Georgia Department of Labor reported Thursday that retail jobs in metro Atlanta declined 0.8 percent in October, compared with the same period a year ago.

It’s a challenging retail environment, to say the least, for Georgia’s two largest companies — Home Depot and UPS.

Sandy Springs-based UPS, with $49.69 billion in revenue last year, recently reported a 9.9 percent decline in third-quarter profit. And just last week, UPS canceled its annual prediction of how many packages it will deliver during the peak holiday season. It also won’t say how many part-timers it needs to hire — primarily because the company is not sure.

“The holiday season has now become so unpredictable, we just can’t fashion an estimate that we feel comfortable sharing publicly,” UPS spokesman Norman Black said.

In its third-quarter earnings release, UPS predicted U.S. package volume would decline by 4 percent in the fourth quarter.

At Atlanta-based Home Depot, the country’s second largest retail chain, sales are on the decline, hit not just by dampened consumer confidence but the hammered housing industry, as well. Customers have been delaying big kitchen and bath remodels, the company said last week. The company believes its sales decline for 2008 could hit 8 percent.

“It’s not just about housing anymore,” said Carol Tomé, Home Depot’s chief financial officer. “It’s about jobs, the craziness in the financial markets, and the global economy. So it’s very hard for us to predict when this might turn. We’re just focused on what we can control.”

What it can control is a strategy focused on fundamentals. The company wants to improve in-stock levels, beef up service on the sales floor, and has lowered prices on more than 1,000 items.

Shopping but not buying

The recession in retail could extend well beyond Christmas. Estimates vary, but most Wall Street analysts don’t see a recovery until mid-2009 or 2010.

Some experts blame a new “window-shopping” economy for part of the malaise — consumers socializing and walking around malls, but buying less than they used to.

“Here’s the really kind of crazy and interesting thing,” said Dennis Kemp, general manager of Perimeter Mall. “I worked last weekend and we were slammed busy. It was our first weekend for Santa to be here and Santa photo sales were up 18 percent. I don’t get it. It’s somewhat illogical.”

But visiting malls for Santa photos or lunch is different from leaving with arms laden with shopping bags. So retailers have responded to reduced sales with fewer sales clerks.

“We have managers saying their availability of staff has been dramatically cut,” Kemp said. “There’s going to be a lot of tired people, and customers may experience some delays” getting help or ringing up sales.

Mall and shopping center developers also see a fair amount of retailers testing the waters while staying on shore.

“There are still a good number of people out looking” for new retail space, said Brad Glenn, executive vice president of a small, family-owned retail development company in Atlanta called Southprop. “But few are making the leap.”

Southprop owns several retail strip centers, including one on Roswell Road with the bar Johnny’s Hideaway.

In order to make his aging strip center work — and move retailers from window-shoppers to tenants — he decided to reinvest. Southprop secured a bank loan and spent a few hundred thousand dollars pouring a new parking lot and improving the circa 1965 center.

Now, it’s 100 percent leased, Glenn said. He’s added a luxury nail salon, wine shop and personal fitness center.

“National tenants have pulled back the reins, but locals are popping up, especially in an area like Buckhead,” Glenn said.

The Streets of Buckhead, a $1.5 billion project planned at Peachtree and East Paces Ferry roads in the heart of Buckhead, is 50 percent leased, said Ben Carter, the developer, who’s already signed clothier Hermès and jeweler Van Cleef & Arpels.

He said the project benefits when high-end retailers compare what Atlanta has to offer with the more expensive sites in New York, Beverly Hills, Calif., and Chicago.

“We are a bit of a bargain for these retailers,” Carter said.

Still, the weak economy has persuaded him to delay opening for five months, or until March 2010.

Besides Buckhead, there’s an opportunity for retailers to snag prime spots throughout the metro area.

Rich Ingalls, 51, recently laid off from Home Depot’s corporate headquarters, found a good location for his first franchise of Batteries Plus — next to a Wal-Mart and Lowe’s in Buford’s Mill Creek Crossing center. While those discounters are competition in one sense, they do not carry the battery selection that Ingalls does, so he can benefit from their traffic.

“I’ve had other people who thought it was a real gutsy move,” he said of opening a store in a recession. “But I’ve told people I think it’s a good time to start a business. There are not quite as many businesses chasing real good locations and landlords are anxious to rent.”

Still, retail will not be for the fainthearted during the next few years.

Klenberg, the owner of Richard’s Variety Store, said he increased the equity line of credit on his house to open his second location last month.

“I risked everything,” Klenberg said. “I put my neck on the line. I really did.”

It’s too early to know how his second store will fare over the long haul, but, so far, he’s not looking back.

“It’s doing great,” he said.