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Retailers succeed when viruses carry down on consumers and the economy



WASHINGTON (AP) – LaTonya Story is every retailer’s worst fear.

With the viral pandemic reviving through the country and the economy threatened, Story has decided to cut back on her shopping budget. She spends less than $ 2,000 this season, down from several thousand dollars in 2019. Worried about entering stores, she buys gifts online and only goes out for groceries.

“I want to be conservative,” said Story, a 47-year-old Atlanta resident. “I’m not a scientist, but the best precaution is to stay in place.”

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The acceleration of coronavirus cases is causing an existential crisis for America’s retailers and intimidating their customers, just as the critically important holiday trading season is approaching. It also increases the risk that the economy could slip into a “double-dip” recession this winter as states and cities reintroduce restrictions on businesses and consumers staying home to avoid getting the disease.

An anxious consumer is a frightening sight for both retailers and for the overall economy. Any sustained recovery from the pandemic recession depends on consumers, whose spending creates approx. 70% of economic growth.

So when the virus is ravaging across the nation and with holiday sales expected to be weak and heavily dependent on online shopping, retailers are considering extraordinary steps to attract customers.

Some, like Giftery, a small shop in Nashville, Tennessee, adopt their own safety restrictions. To reduce respiratory particles that can spread the virus, Giftery asks shoppers to refrain from talking on cell phones.

“It’s important for us to be open,” said William Smithson, owner of Giftery, which generates about 35% of its annual sales from the holiday season.

At the same time, some advanced retailers are giving customers extra coding. Neiman Marcus lets shoppers book appointments to take virtual tours of his holiday trees and other decorations if they are too scared to enter a store. That way, the retailer hopes that his customers will also get in the spirit of buying gifts.

“Business restrictions are increasing and there will be some economic decline from it,” said Jim O’Sullivan, an economist at TD Securities. But “even without authorities announcing new restrictions, individuals are likely to withdraw from their activities alone.”

O’Sullivan predicts that the economy will not grow at all in the last three months of the year – down from his previous forecast of an annual growth rate of 3% this quarter – and will shrink by 2% in the first three months of 2021. Most economists expect a rebound start in the second quarter when a vaccine is widely distributed.

O’Sullivan’s forecasts assume that Congress will agree on approx. $ 1 trillion in new stimulus for the economy in early 2021. But so far there is no sign of progress towards an agreement. More than 9 million people will lose their unemployment benefits by the end of the year when two unemployment benefits have expired unless Congress extends them. Consumer spending is likely to fall further.

New virus cases doubled in just three weeks, O’Sullivan noted, after the previous doubling had taken six weeks. And as a consequence, many states are adopting or considering new restrictions on business. Maryland has limited stores and restaurants to 50% capacity. Dealers in most of California are now limited to only 25%; gyms, restaurants and cinemas are closed to indoor customers. Illinois and Washington have limited stores to 25% capacity.

Sales at restaurants and bars fell in October for the first time in six months. According to traffic provider OpenTable, restaurant traffic fell further in November. Hotel occupancy is down from a month ago. Consumer spending on credit cards fell in the first week of November from a month earlier, according to data compiled by Opportunity Insights.

After the deep recession that broke out in the early spring, the economy rose faster during the summer and fall than most economists had expected. And some industries are still doing well. Home sales rose to a 14-year high last month. Also, output production is still growing, although it remains below pre-pandemic levels.

But these positive signs reflect an unequal improvement. While low-paid employees face-to-face have lost jobs or fear losing them, higher-paid Americans have primarily been able to work from home. These consumers have shifted much of their spending away from services such as eating out, going to the movies and hitting the gym, to buying goods – from computers and supplies for the home and garden to appliances and fitness equipment.

Yet many of these purchases have been made online, with e-commerce sales up 29% in the last year. In contrast, sales in physical stores, excluding cars, have been largely flat over the past 12 months.

As Story reduces the Atlanta consumer and other Americans, and when colder weather ends outdoor serving in large parts of the country, consumption is likely to weaken and hire slowly. Redundancies may increase. The number of people applying for unemployment benefits increased last week to 742,000 – a historically high figure and the first increase since early October.

Small businesses are particularly concerned about being forced to close again.

“If we close, it’s going to be a devastation,” said Paulette Garafalo, CEO of Paul Stuart, an advanced clothing retailer that operates five stores in Chicago, New York and Washington, DC.

The stores previously closed for four months, while the company revolved around online sales. But this shift generated only approx. 25% of the pre-COVID business. Sales have since improved. But Garafalo does not see a boost from the holiday season. She just hopes sales don’t fall.

Out of urgency, Garafalo’s stores have called on their most experienced salespeople to warn customers about new items and aggressively market a gift guide.

Elonka Perez, who co-owns two restaurants in Washington state, also says she is “scared of my mind” after government Jay Inslee banned indoor dining again. Perez does not know if her Taco Street restaurant in Seattle will make enough money to survive colder weather.

“Winter is typically the slowest time for restaurants,” Perez says.

Taco Street was only open for indoor dining for a few weeks before it had to close again. Perez and her husband have poured their savings into the business. They do not know how long it can continue.

Macy’s, which has long been an iconic symbol of the holiday shopping season, had to temporarily close its store in El Paso, Texas due to a viral rise there. The chain is investigating how the rise in virus cases is affecting customers’ willingness to enter its stores. Meanwhile, Macy’s has accelerated its checkout service for street delivery.

Other chains, particularly Target and Walmart, have benefited from changing habits. Customers are increasingly spending more when they visit the two chains because they can combine shopping trips and buy food, clothes and other household items – all in one place. This extra consumption has come at the expense of small and independent stores.

For many consumers, the pandemic has transformed what shopping means. Alyse November, a licensed social worker in Boca Raton, Florida, says her clients have become increasingly stressed over shopping.

“Shopping was a market to relieve stress – it was an escape from life,” said November. “Now it is a source of stress because the process with it is so cumbersome. … We do not know how to do it and do it safely. ”

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D’Innocenzio reported from New York. AP Business Writer Joyce M. Rosenberg also contributed from New York.

to this report.


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