STATEN ISLAND, N.Y. -- With many large retail operations filing for bankruptcy or reporting revenue in the red over the last few years, economists predict the impact of the coronavirus (COVID-19) on this already ailing industry could be devastating.
Since the start of the outbreak, which led to to the shuttering of all retail operations last month, the economy has plummeted. People have lost jobs. And national retailers are laying off workers.
Macy has furloughed 125,000 employees across the country and The Gap did the same to 80,000 of its workers. The move by Macy’s has already led to the retailer being removed from the S&P 500 index.
“This week saw both Macy’s and the Gap’s bond ratings cut to ‘junk’ status, with the GAP suspending dividends. This outlook is not good for other brick-and-mortar retailers, especially heavily leveraged ones,” said Richard LaRocca, who holds a dual doctorate in finance and international economics, and is a professor of finance at Wagner College.
“Even though online shopping accounts for approximately 10% of retail sales, the coronavirus outbreak has definitely had an influence on how we shop,” he added.
LaRocca referenced data from the brand protection firm Red Points, which shows that Americans have bought more items online compared to in-store purchases than they normally would have during the coronavirus pandemic.
“This shift could be a permanent one, especially with the older consumer demographic, who have been reluctant to do shopping online. Also, retail could shadow what happened as a result of the last economic downturn; we could very likely see sales growth from rental and consignment retailers, a.k.a. ‘value’ retailers, just as we saw post-2008,” he added.
Finance experts say seeing big American retailers, like Macy’s and The Gap, in jeopardy at this time is very concerning.
“Remember retail was already in decline before the coronavirus hit. In January of this year, employment in retail was down 8% from the same time last year,” said Abraham Unger, associate professor and director of Urban Programs in the Department of Government and Politics at Wagner College.
“The current public health crisis just accelerated this trend. We are talking about significant brick-and-mortar brands that represent the power of American retail. That power has been stunningly deflated. But this is about more than the loss of major American symbols of commerce,” he added, referring to the Macy’s and Gap Inc. furloughs.
According to the National Retail Federation, the retail sector contributes approximately $2.6 trillion, or about 25%, to the annual Gross Domestic Product of the United States, pointed out LaRocca.
“[This] is the nation’s largest private-sector employer, supporting 52 million jobs overall. The retailers who will get hit the hardest will be the ones who tend to sell more luxury good or ‘wants,’ as opposed to the ones who sell staples or ‘needs,’” he added, noting how drug store and supermarket sales have significantly increased during the outbreak.
HURTING THE MIDDLE CLASS
The furloughs and store closure mandates are leaving a large portion of the middle class unemployed.
The U.S. Department of Labor said initial U.S. unemployment insurance claims rose last week to more than 6.6 million. This brought the number of people who filed initial claims in the last two weeks to almost 10 million.
“This was by far the largest one-week increase in recorded U.S. history. Since the U.S. and the world economies are largely dependent upon U.S. consumption, any substantial increase in U.S. unemployment will have a severe effect on GDP, both at home and abroad,” said LaRocca.
Retailers also aren’t saying whether everyone will retain their job when stores reopen. In fact, Macy’s said it would look at resumes when the stores reopen. It’s likely companies may reduce their number of workers.
“We’re talking about a certain kind of job that has offered the middle class some opportunity to keep up since the massive decline of U.S. manufacturing a generation ago,” said Unger.
“[Retail] allows for flexibility of hours for two-parent homes ... or single parent homes that need flexible hours. It offers upward mobility into managerial roles for Americans without college degrees, which is over 60% of the population. It is also a sector that is younger, and has more women and minorities, so more vulnerable populations are now losing their jobs too," he added.
LONG-TERM IMPACT ON RETAIL
While the long-term effect of the coronavirus on the retail industry is still unknown, many people’s buying habits have changed during the pandemic.
“Many Americans -- as some predict -- will stay home once the public health crisis is over,” said Unger.
“Many might rush outside to do their shopping for a literal breath of fresh air and old fashioned human interaction at a real store once it’s possible again. But, by then, the big retailers like Macy’s, which need a lot of customers to keep their stores open, might have lost too much money to reopen in the way they once did,” he added.
WHAT WILL BUSINESSES NEED TO STAY AFLOAT ONCE PANDEMIC IS OVER?
If national retailers want to stay afloat, they’ll have to offer major discounts, especially since many people will have suffered significant income loss, warned Unger.
“Big retail operations have high overheads and brands to maintain. Can a megastore like Macy’s, or even more so, Bloomingdale’s, ever fully return if it essentially becomes a TJ Maxx? Online operations only require a skeletal crew by comparison with an actual high-end retail location and all of its attendant costs, plus a lot more staff, so I’m not seeing these stores staying afloat to the same degree they are now,” explained Unger.
*** CLICK HERE FOR COMPLETE COVERAGE OF CORONAVIRUS IN NEW YORK ***
RELATED COVERAGE
Amazon workers protest working conditions amid coronavirus outbreak
Staten Island Amazon worker who planned protest amid coronavirus is fired
Amazon workers plan walkout at Staten Island facility Monday due to coronavirus
S.I. Amazon worker with coronavirus quarantined: What protocols are in place?
Coronavirus: Macy’s to furlough almost 125,000 employees
Lawmakers urged to pass bill canceling rent for 90 days
These companies are hiring in wake of coronavirus
Coronavirus and the workplace: How Staten Island’s largest employers are coping
Cuomo: New York pause extended until at least April 15
Coronavirus: NY officially on ‘pause;’ all non-essential businesses shuttered
Coronavirus: Temporary hospital sites chosen; none on Staten Island
Turning 50 in wake of coronavirus: A surprise drive-by bash
Coronavirus: DMV shuts down all offices, auto bureaus
"impact" - Google News
April 03, 2020 at 06:20PM
https://ift.tt/3dTueA0
How will coronavirus impact future of brick-and-mortar retail? - SILive.com
"impact" - Google News
https://ift.tt/2RIFll8
Shoes Man Tutorial
Pos News Update
Meme Update
Korean Entertainment News
Japan News Update
Bagikan Berita Ini
0 Response to "How will coronavirus impact future of brick-and-mortar retail? - SILive.com"
Post a Comment