The Boom within the Bust: Creativity Thrives in the Crisis

RIGA - Latvia is experiencing its worst economic crisis since independence in 1991. According to EU figures unemployment is 22 percent, and last year the economy shrank by 18 percent. But surprisingly creative businesses are opening up in Riga. They are not only weathering the storm, but have found ways to take advantage of the crisis.

Edijs Vucens, 25, was a shop manager, and Zanete Skarule, 24, a VJ for MTV. Both were made redundant when the crisis hit. Left without jobs, they opened a new kind of business in August 2009, called Perle. This second hand shop on Terbatas street in the center of Riga is hard to miss, with its massive glittery sign. Inside, everything from bikes, to retro sunglasses and kitschy decorations are sold. And on a Friday night, the entire place morphs into one of Riga’s coolest venues where young trendies dance the night away between racks of funky 1970s vintage clothes. The owners of Perle say that without the recession, they would not have had the chance to open this business.

Perle is just one of many new creative venues springing up around Riga. Imaginative young professionals, having lost their jobs, are now freed up to follow their creative dreams. Artists, designers and writers are taking advantage of cheap commercial spaces suddenly available as businesses and shops close during the recession.

This is the case for Tasty, a swanky minimalist art space, in central Riga, with wooden floors and white walls. Local artists, who can’t afford to show in a gallery, can rent wall space to showcase and sell their work. Tasty was opened in October 2008 and survived because owners Ilze Zaseste and Zile Davidsone, both originally designers, were able to renegotiate the rent to less than half of the original price.

The business plan was revised substantially to cope with falling consumer spending during the recession, and Tasty now also offers creative workshops on making objects such as candles, soaps and broaches. “This works because before the crisis, people had money and just bought everything,” says Zaseste. “But now they make things themselves, and sometimes even start selling them.”

She adds that it is not easy in this economic climate and that in order to be successful, it’s crucial to be innovative. The only way to succeed, she believes, is to offer a product or a service which is not yet on the market.
Ieve Zibarte, 38, would certainly agree with this. She trained as an architect and could never find a shop in Latvia that sells good architecture books. So she decided to open one herself. The result is Lukabuka, a bookshop that sells glossy upper-end architecture and designer books. This business too was born out of the recession, last November, when she found an empty space near Riga’s Old Town. Rather than let the store stand empty, the building’s owners have allowed Zibarte to use the space rent-free and pay only utilities. 

She says her business works because, as an architect, she can advise potential buyers about books on a subject she knows well. As a result, one of Lukabuka’s biggest clients is Riga’s Central Library.

But the books sold at Lukabuka are glossy expensive hardbacks. So can consumers really afford to spend 30 lats (42.80 euros) on a book in today’s economic climate? Especially since high unemployment means that consumer spending is at an all-time low. According to EU figures, during 2009 the volume of retail trade in Latvia dropped by 30 percent.

Zibarte explains that her business is sustainable because, with the city’s only high-end architecture bookshop, she has found a unique niche market. She also says that people buy her books because their priorities and habits have changed due to the downturn. “It’s true that people don’t have much money, and they can’t go on expensive kite surfing or snowboarding holidays anymore. Instead, they spend money on a nice book which they can keep forever,” she said.

Like many other new creative businesses, Lukabuka has a flexible business model. Pieces of art from various local artists are scattered around the shop, and they are for sale. Even some of the furniture, such as the bookshelves and the table that serves as a counter, can be bought. “Creative types never had much money, so they know how to work in tough times,” says Zibarte. “Now is actually a good time for us because prices are going down.” This means that the costs of running a business are now lower than during the boom years.

Despite this optimism, sales are sometimes slow. Zibarte declined to give any figures regarding turnover or profit. But she did say that she has already exceeded the threshold of turnover above which a business has to pay VAT. This means that since January, Lukabuka has a turnover above 10,000 lats. This is enough to cover the low running costs, and to pay modest salaries to Lukabuka’s three owners. A second branch of the store will open in the Latvian Opera House in Riga next month.

Perle, Tasty and Lukabuka are just a few examples of how Latvia’s creative types are making the crisis work for them. These are not businesses that will make their owners wealthy in the near future. But although financial profits may be low, all of these creative entrepreneurs say the personal rewards are high. And most importantly all of these businesses are surviving. “It’s not exactly a secure life, but we are doing what we like. We earn less [than when we had jobs] but we are much happier,” says Vucens.

The economic crisis has provided fertile ground for creativity, and innovative businesses are springing up in the niches left behind by failed companies. The owners of these businesses have expanded their initial ideas by diversifying their activities to remain afloat. Original concepts have emerged out of this - a shop which doubles up as a disco, a gallery where art is also taught, or a bookshop that sells furniture. The recession is certainly tough. But for many young creative people in Riga, it has also made Latvia’s capital a more interesting place.