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Businesses bloom in Nome and Kotzebue.

Businesses Bloom In Nome and Kotzebue

IF YOU ARE FROM ANCHORAGE, Kotzebue is not the most pleasant place to be in the winter. The temperature doesn't get that low, not as low as it does in Fairbanks or Northway, but it does get nippy. What makes Kotzebue unusual is the wind. There is wind almost every day, and when the temperature drops to 10 above and there's a 40 knot wind, it gets chilly.

But the only thing chilly about Kotzebue these days is the weather. Business is hot here above the Arctic Circle. A local boom brought about by development of the Red Dog Mine has stimulated the community's economy.

Businesses here are doing so well that expansion is the order of the day. Some not only are growing but are diversifying into new markets. New businesses are appearing, and even the local branch of National Bank of Alaska is adding on a back room.

Arctic Fabrics, for instance, is hardly the type of store you would expect to see in Kotzebue. Specializing in material for clothing, the store has been in the black since it opened 14 months ago. Hadley Hess, the owner, is seriously considering expanding - to double the size of her current space.

"Business has been pretty good," she says. "I've been doing between $3,000 and $4,000 a month since I opened, and business is getting better, even with the bad fishing season (this past year)." The shop itself is modest, about 225 square feet in size. Hess rents the space for $400 a month, and heating is the largest utility cost at $160 a month in the winter.

A one-person shop, Arctic Fabrics was opened in a converted garage on Fifth Street, away from the tourist area. "Almost all of my customers are locals," Hess notes. She says her only problem has been stocking printed velveteen. "A lot of the people here like the fancy parkys with it, but it's hard to find," Hess adds.

Next door to Arctic Fabrics is Ron Brown's Arctic Sun Video. Brown has been in business for two and half years and operates the only video store in town. He built the building himself, living in the loft and leaving the main floor available for his business.

"I'm a civil engineer by trade, now I'm making popcorn," he says. "I started out with 300 videos, and now I've got over 2,500. Kids' videos rent for $1.50 a piece, and I've got scads at $1.50. There's not that much for kids to do here in Kotzebue."

Business has been so good that Brown is expanding. He bought an $8,000 computer program to keep track of his inventory and has all of his merchandise bar coded, even the soft drinks.

"Right now my store has 800 square feet. When I finish construction on the front, I'll have another 650 square feet. I'll be putting in convenience items, like toilet paper and candy, as well as Nintendo machines," says Brown.

While the state of Alaska may pump the greatest amount of money into Kotzebue, that does not mean the community is without major employers. Alaska Airlines is an important contributor to the economies of Kotzebue and Nome. According to a company spokesman, the airline handles 21 million pounds of freight and mail annually and pumps dollars "in seven figures" into the two communities in salaries, utilities, rentals and other business-related expenses.

Ed McCarthy, the airline's customer service manager in Kotzebue, overseas everything from loading planes to checking luggage. He notes that while Alaska Airlines only employed 14 people during the summer-half of them part-time workers-the airline brought in between 7,000 and 10,000 tourists, beyond local passenger traffic. The carrier flies year-round to Kotzebue, three times a day.

The largest private-sector business contributing to the Kotzebue economy is NANA Corp., the regional Native corporation. John Shively, senior vice president, says NANA had 52 summer and 35 winter employees on staff last year, with a combined payroll in Kotzebue of $250,000 per month.

"The Red Dog Mine has added to the economic base of the community, as well as to that of the corporation," notes Shively. He adds that the miniboom created by Red Dog has helped NANA to diversify its investments, expanding into tourism, marketing jade products and other activities.

Another firm expanding in Kotzebue is Hanson's Trading Co., a general store owned by the Kikikitagruk village corporation. In December, Jerry Finke, general manager of the business, oversaw Hanson's entry into a second market - Nome.

Finke says the community of Nome is excited about the new store. He adds that pricing items the same as in the company's Kotzebue store has nudged the Alaska Commercial Co., Hanson's primary competitor, into lowering its prices by about 5 percent.

The Hanson's in Nome, operating in the former Stop, Shop and Save site, is expected to employ nine people. Says Finke, "We are now providing both communities with better buying power. Prices are lower and there's more variety. In the long run, it's the consumer that benefits from the competition."

There are significant differences between Nome and Kotzebue, both economically and culturally. Although roughly the same size, the communities are as far apart as fiddleheads and ice worms. Kotzebue is a large Native community that serves as a supply hub for a number of villages in the surrounding area. Nome, on the other hand, is a small city. In Kotzebue, everyone waves at one another as they drive by. In Nome, people look both ways before crossing the street and don't wave unless they are on the sidewalks.

Kotzebue is a damp community-liquor can be consumed or brought into the community by the individuals who will consume it; while Nome is wet-liquor is sold in the community. Kotzebue's Front Street is bordered predominately by small houses, with only a few businesses; while Nome's Front Street is faced only by businesses.

The focus of the two communities is different as well. Nome has an active chamber of commerce and an aggressive convention and visitors bureau; Kotzebue has neither.

Nome's business community suffered during Alaska's recession. Jim Stimpfle, Nome's only real estate broker, and an insurance agent on the side, says, "In 1984 I had 75 transactions here, the average being about $95,000. In 1985 I had four. I had to let my staff go and move my office into my dining room. That's how bad it was."

Though the market has picked up since the end of 1988, Stimpfle notes it remains much smaller than it had been. He adds, "People are buying homes now, but not at the 1984 prices, about 30 percent less. A lot of people took a bath."

The business community in Nome is well aware of the predicament created by its dependence on government spending. Its largest source of income is state and federal dollars.

"We can't depend on those dollars forever," says Lois Wirtz, director of the Nome Convention and Visitors Bureau. "We have to expand our economy. That means tourism. In addition to the summer tourist trade we also have winter events that bring people to town, like the Iditarod and Bering Sea Ice Classic.

"But there's a lot more we can do, like encourage American tourists to consider the Soviet Union as a travel destination and, of course, convince Soviet travelers to visit Nome."

The possibility of travel to the Soviet Union has become an obsession in Nome, and for good reason. The Nome Chamber of Commerce and the convention and visitors bureau are working on the political, red-tape details of ongoing flights between the two countries and how to deal with the rubles that Russians spend in the United States. Although rubles are not convertible yet, the international door is opening quickly and it won't be long before that will be the least of the problems, notes Stimpfle.

"Nome could turn into a tourism hub 12 months out of the year," he says. "Imagine, for instance, two New Years Eve parties. You could fly to Magadon, where it's tomorrow today, celebrate the New Year and then back to Nome and celebrate it again. Where else in the world can you do that?"

There is no question that Nome is on the cutting edge of the future. With Eastern Europe opening up like an exploding fireweed pod, there is every reason to believe that travel restriction on Soviet citizens will ease significantly and quickly.

Says Stimpfle, "Originally the Soviet government figured that if it allowed unrestricted travel a lot of their people would get visas, kiss Mother Russia goodbye and head for Pay-N-Pak. Now the Soviets cannot afford not to let their people travel. But that means (the United States) has to start cutting the red tape to take advantage of the change.

"Right now, round trip to Magadan from Nome is about $500 per person. But $250 of that pays for a custom's agent to come up from Anchorage to check luggage and stamp passports. With one customs agent in Nome - just one - we could double the number of people going both ways. That's economics and tourism in action!"

Although doing business in the Arctic certainly differs from conducting commerce in larger cities, there are many benefits. Business people note that even though much of their payment is in the form of checks, very few of those checks bounced. Within the local communities, this is understandable. After all, everyone knows everyone. If you write a bad check in Kotzebue, it doesn't take long for the word to get around.

But for the larger companies, it could have been a problem. Ed McCarthy of Alaska Airlines notes his corporate office in Seattle is constantly telling him to get "better forms of identification" on the checks he sends south. He says, "That's fine to say in Seattle or Anchorage or Fairbanks. But in Kotzebue, quite a few Natives don't have a driver's license. Why should they have one? They don't drive."

PHOTO : Kotzebue's Hadley Hess is considering doubling the space occupied by her successful year-old business.

PHOTO : Nome's new Hanson's Trading Co. general store is run by Erv Everhardt (left), manager, and Jerry Finke, general manager of both the Nome and Kotzebue stores.
COPYRIGHT 1990 Alaska Business Publishing Company, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
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Title Annotation:Business in the Arctic
Author:Levi, Steve
Publication:Alaska Business Monthly
Article Type:company profile
Date:Feb 1, 1990
Words:1712
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