Retailers go into business triage mode as coronavirus enters the U.S.
The fallout from the coronavirus outbreak has so far been minimal for American retailers, but some near-term and potentially much worse long-term disruption is expected as the disease spreads to the U.S.
The potential impact on U.S. retail includes:
- Shortages: Incidents of out-of-stocks of many medical supplies, particularly hand sanitizers, face masks and antibacterial wipes, have been reported in recent days. Consumers have also been seen stocking up on bottled water, toilet paper, dry goods and medications.
- Supply chain disruptions: Strict quarantine measures forced the closure of thousands of Chinese factories, with many slowly re-opening. Many industries also rely heavily on factories in China for parts and materials, and that could affect sourcing from other regions. Retailers and manufacturers face potential delays and increased air freight as China is expected to take months to return to full capacity. The spread outside of China presents a further risk to American supply chains. Wells Fargo in a Feb. 11 note warned that further delays in the restart of production could begin to result in out-of-stocks at U.S. shelves as early as mid-April.
- Fear of public places: In a survey of U.S. consumers taken on Feb. 25 and 26 from Coresight Research three-quarters say they will avoid shopping centers or malls if the outbreak worsens. About 47 percent are already avoiding or limiting mall visits.
- Tourism revenues: A number of luxury companies downwardly adjusted their 2020 outlooks because Chinese tourism has ground to a standstill. The spread of the outbreak to other regions, as well as flight restrictions, blocked borders and general unease around travel, promises to depress all tourist-related traffic.
- Work-travel restrictions: Travel-related work will face challenges as the uncertainty continues. Amazon.com restricted employee travel to China in February and late last week asked all global employees to stop all nonessential travel, both domestic and internationally.
- Scams: Amazon barred more than one million products from sale in recent weeks that inaccurately claimed to cure or defend against the coronavirus. The site also removed tens of thousands of excessively-priced sanitizing gels and hygiene masks.
- Macro slowdown: The stock market last week had its worst week since 2008, signaling that one of the longest expansions in history could be ending.
- Coronavirus Briefing: Coresight Research Survey Data Suggests US Malls Will Be Hit Hard if Outbreak Worsens – Coresight Research
- Grocers Prepare for Surge in Demand as Coronavirus Spreads – The Wall Street Journal
- Chinese manufacturing hits record low amid coronavirus outbreak – BBC
- Walmart, McDonald’s, Home Depot, and 7 other retailers share how the coronavirus outbreak could affect business – Business insider
- Coronavirus fears empty store shelves of toilet paper, bottled water, masks as shoppers stock up – USA Today
- Supply Chains are starting to come back online in China, says retail trade group CEO – CNBC
- Coronavirus Hits Keep On Coming – RSR Research
- US malls ‘will be hit hard’ if coronavirus worsens, study finds – CNBC
- CVS and Walgreens warn there could be a shortage of hand sanitizer – CNN
- US stores start running low on masks, gloves, hand sanitizer, and more amid growing fears of coronavirus – Los Angeles Times
DISCUSSION QUESTIONS: What do you see as the biggest challenges facing retailers in relation to the coronavirus outbreak? What actions do you recommend retailers and suppliers take now to minimize the impact for their customers and their businesses?