Retailers brace for COVID-19 to hit economy, consumers

Nov 24, 2020

The acceleration of coronavirus cases is causing an existential crisis for America’s retailers and spooking their customers just as the critically important holiday shopping season nears. It’s also raising the risk that the economy could slide into a “double-dip” recession this winter as states and cities re-impose restrictions on businesses and consumers stay at home to avoid contracting the disease.

Nancy Dennis is the Alabama Retail Association’s Director of Public Relations. She says Black Friday is typically the kick-off of the holiday shopping season. But this year, the pandemic is causing a lot of traditional shopping trends to be thrown out the window. “They’ve already got a big part of their shopping done," Dennis explains. "They realized with COVID, that they needed to get their holiday shopping done early. Shoppers don’t want to be in crowds. That’s a high-risk activity for Coronavirus.”

An anxious consumer is a frightening prospect for retailers as well as for the overall economy. Any sustained recovery from the pandemic recession hinges on consumers, whose spending fuels about 70% of economic growth.

Brad Plothow is the VP of brand and communications at Womply. The commerce platform provides apps, marketing, and financial tools to help generate avenues for businesses and customers. He says his company commissioned a study specifically on mom and pop stores. “When we talked to small businesses across the country, we see that they have their eyes all year long on this holiday season," he says. "Black Friday to Chirstmas Eve is really important to small businesses in particular. For Alabama, 3 out of the top 4 weeks of the year occur during that period."

So as the virus rampages across the nation and with holiday sales expected to be weak and heavily dependent on online shopping, retailers are considering extraordinary steps to draw customers.

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

After the deep recession that erupted in early spring, the economy did rebound faster over the summer and fall than most economists had expected. And some industries are still faring well. Home sales rose to a 14-year high last month. Manufacturing output, too, is still growing, though it remains below pre-pandemic levels.

But those positive signs reflect an unequal recovery. While lower-paid employees in face-to-face industries have lost jobs or fear losing them, higher-paid Americans have mainly been able to keep working from home. These consumers have shifted much of their spending away from services, like eating out, going to movies and hitting the gym, to buying goods — from computers and home and garden supplies to appliances and fitness equipment.

Yet many of those purchases have occurred online, with e-commerce sales having jumped 29% in the past year. By contrast, sales at physical retail stores, excluding autos, are essentially flat over the past 12 months.