With few exceptions, the news in the retail sector here these days ranges from bad to awful.

Major national retailers are closing their doors, others are filing for protection from creditors, and most are slashing prices to try to attract increasingly restrained consumers.

"It's survival of the fittest time," says Marshall Clark, a longtime commercial real estate broker and retail developer. "The weakest ones will go out of business this year. It's a necessary adjustment to the lower amount of spending everyone's doing."

Circuit City Inc., which had operated two big-box consumer electronics stores here, closed all its stores nationally last week, leaving vacant buildings on North Division and at Spokane Valley Mall. Meanwhile, Gottschalks Inc., which operates a store on the South Hill, has filed for Chapter 11 reorganization, as has Joe's Sports & Outdoor, which opened a 52,000-square-foot store in Spokane Valley in September 2007, and had made plans to open a second here.

National clothing discounter Steve & Barry's closed its anchor store at NorthTown Mall early this year, and building permits for retail development have slowed to a near standstill across the Spokane area.

Demand for commercial construction loans, especially in the retail sector, also has dropped off.

"Most of the retail deals today are being done with medical or dental entities and restaurants, because people have to eat, or local franchises," says prominent Spokane developer Dave Black. "Consumer confidence and spending are down nationally in almost all categories. It's a scary time."

Retail employment has fallen sharply. Preliminary state figures show that 25,400 workers were employed in the retail trade sector in Spokane County in January, 1,600 fewer than a year earlier.

That, says Ivars Graudins, a labor market and economic analysis manager for the Washington state Employment Security Department in Olympia, "is a very noticeable drop over the year."

Macy's Inc. was one of the big national retail chains to cut jobs here, though it amounted to just five or six positions at each of its four stores in the Spokane and Coeur d'Alene area. Nationally, it has cut jobs due to the weak economy.

Furniture stores here have closed, too, including Burgans Fine Furniture, at the corner of Boone Avenue and Division Street, after more than 90 years in business here. Horizon Furniture Inc., in Spokane Valley, says it plans to close this month after cutting costs as part of a year-long battle in the furniture industry. Other furniture stores here also have closed in the past year.

Not all retailers are suffering, however.

Pat Conley, who manages the White Elephant Surplus Store, in Spokane Valley, and co-owns both White Elephant stores here with his brother, Rich, says the Valley store's sales have been up 30 percent to 40 percent so far this year.

"For us, business has been good," Conley says.

White Elephant's focus on having lower prices than its competitors has kept customers coming back.

"That's what we've always done," he says.

A recent $100,000 remodeling project at the Valley store, at 12614 E. Sprague, "has paid for itself. That was the best part," he says.

Conley says the store removed some of its older merchandise and now is bringing in more games and hobby items, as well as more toys.

"The big box stores are getting out of models, while we're bringing in everything we can," he says.

Along with low prices, another key to White Elephant's success has been getting the products currently in high demand into the store quickly, an advantage White Elephant has over big chains that move more slowly, Conley says.

Like the Valley store, White Elephant's North Side store, at 1730 N. Division, has enjoyed higher sales, although it's up more than 20 percent, he says.

"We (the Valley store) had a lot more room to go up," he says.

Conley says the North Side store also is scheduled to undergo some remodeling.

Leasing market

Clark, who owns Clark Pacific Real Estate Co. here, says more retail businesses ought to be leasing right now. "They could get screaming deals. But people always go in herds," he says.

He says very few national retailers are doing anything right now. Retail spaces currently are more likely to be occupied as office space, for medical use, or by government agencies, he says.

For example, the prime retail spot once occupied by CompUSA, at 808 N. Ruby, now is likely to be occupied by a tenant that will use the 25,000-square-foot building for medical activities, he says. He declines for now to disclose details about that potential tenant.

Black, of Spokane-based NAI Black, says retailers have scaled back store openings, are closing stores, and are renegotiating leases and renewals.

Last year, Black fought hard to secure approval for major retail development on two parcels in the Southgate area of the South Hill, and said at the time that Target Corp. was interested in the site as a possible tenant. Now, Black says the earliest Target might open a store there would be 2012. Home Depot Inc. secured zoning changes in the Southgate area for a new store, but later dropped those plans.

"No retailer is in any hurry to make a deal right now," Black says. "It's more about the economy."

In Coeur d'Alene, Barnes & Noble Inc., one of the Village at Riverstone's most anticipated retail anchors, apparently has canceled its plans to open at the mixed-use development. Barnes & Noble representatives couldn't be reached for comment for this story.

One bright spot, says Clark, might be for deep discounters such as Wal-Mart Stores Inc., which apparently are doing better than other retailers. "Cheap is in," when it comes to spending, he says.

Cutting prices is in vogue.

Average selling prices on TVs at Costco Wholesale Corp.'s stores have dropped 40 percent in the last year, says Richard Galanti, the Issaquah, Wash.-based chain's chief financial officer. With the lower prices, sales of TVs have jumped sharply at Costco, Galanti says.

Yet, he says, the frequency that Costco members visit stores is up, they're buying less overall. While sales of TVs is up, sales of such items as other electronics, sporting goods, and patio furniture are flat or down, as much as 20 percent. Also down are sales of clothing and bedding, he says.

Sales of non-discretionary items such as food and sundries are up 5 percent to 10 percent, he says.

Galanti says Costco also has observed a diminishing loyalty for name brands, and a migration to private label goods, including Costco's Kirkland Signature brand.

"People were willing to spend a couple extra dollars before, but not anymore," he says. "The quality is the same on private labels, while the cost savings add up dramatically. Every time you can save a few dollars here and there, that's big in this economy."

The impact on government

Retailers aren't the only ones being tugged down by the nasty undertow of the recession. Government agencies are predicting significant drops in retail sales-tax collections.

"If our citizens continue to decrease their spending, then our receipts might be down more than the 6 percent" drop now being predicted for 2009, says Ken Thompson, finance director for the city of Spokane Valley. Back in December, city officials had predicted a roughly 5 percent decrease.

"Our 2009 budget projects $19,380,000 in sales tax, but a 6 percent reduction would generate around $18,500,000," he says. "This difference of $780,000 would be made up by additional carryover from the prior year, 2008, as total revenue has come in greater than expected and expenses have been less than expected."

Spokane County now is anticipating a $680,000 drop in sales-tax revenues this year compared with last year, says spokeswoman Martha Lou Wheatley-Billeter. That's without factoring in a possible annexation of unincorporated land on the West Plains by the cities of Spokane and Airway Heights, which Wheatley-Billeter says would cost the county about $1 million annually.

"Things are looking worse for 2010," she says. "Where are we going to go from here?"

The county has cut fat from recent budgets, she says, "but in 2010 we're looking at the bone."

At the end of March, with January sales-tax collections figures available, the county is going to begin looking at its 2010 budget, months ahead of its normal schedule. "Normally, discussions begin in late spring and summer," she says.

The city of Spokane also has planned for lower sales-tax collections this year.

City spokeswoman Marlene Feist says the city has budgeted for a 2 percent decrease in sales-tax revenue for 2009.

"Our sales-tax numbers are down, as one would expect, but we are faring relatively well compared to other locations in the state," Feist says. "It is difficult to predict how the rest of the year will proceed. We are very interested in what January looks like."

January receipts and those from this month come from November and December collections, and as a consequence, the city has yet to see January collection numbers.

Fortunately, Feist says, sales tax is the most variable portion of the city's major general fund revenues, representing about 20 percent of them. One percent of annual sales-tax revenue equals about $350,000, while the general fund budget for 2009 is about $155 million, Feist says.