clearn.png
Thursday December 3rd, 2020 5:44AM

Retailers brace as virus bears down on consumers and economy

By The Associated Press

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

With the viral pandemic re-surging through the country and the economy under threat, Story has decided to slash her holiday shopping budget. She'll spend less than $2,000 this season, down from several thousand dollars in 2019. Worried about entering stores, she's buying gifts online and going out only 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.”

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.

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.

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.

Some, like Giftery, a small shop in Nashville, Tennessee, are adopting their own safety restrictions. To reduce respiratory particles that could spread the virus, Giftery is asking shoppers to refrain from talking on cellphones.

“It is vital for us to stay open,” said William Smithson, the owner of Giftery, which generates about 35% of its annual sales from the holiday season.

At the same time, some high-end retailers are giving customers extra coddling. Neiman Marcus is letting shoppers book appointments to take virtual tours of its holiday trees and other decorations if they’re too fearful to enter a store. In doing so, the retailer hopes its customers will also get into the spirit of buying gifts.

“Business restrictions are increasing, and there will be some economic fallout from that,” said Jim O’Sullivan, an economist at TD Securities. But "even without authorities announcing new restrictions, individuals are likely to pull back from activity on their own.”

O’Sullivan predicts that the economy won’t grow at all in the final three months of the year — down from his earlier forecast of a 3% annual growth rate in that quarter — and will shrink 2% in the first three months of 2021. He, like most economists, expects a rebound starting in the second quarter once a vaccine is widely distributed.

O’Sullivan’s forecasts assume that Congress will agree on roughly $1 trillion in new stimulus for the economy by early 2021. Yet so far, there’s no sign of progress toward an agreement. More than 9 million people will lose their unemployment aid at year’s end, when two jobless aid programs are set to expire, unless Congress extends them. Consumer spending will likely fall further.

New viral 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 businesses. Maryland has limited stores and restaurants to 50% capacity. Retailers in most of California are now capped at just 25%; gyms, restaurants and movie theaters 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. 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.

As Story, the Atlanta consumer, and other Americans cut back and as colder weather ends outdoor dining in much of the country, consumer spending will likely weaken and hiring slow. Layoffs could rise. The number of people seeking unemployment benefits rose last week to 742,000 — a historically high number and the first increase since early October.

Small businesses are particularly worried about being forced to shut down again.

“If we close, it will be a devastation,” said Paulette Garafalo, CEO of Paul Stuart, a high-end clothing retailer that operates five stores in Chicago, New York and Washington, D.C.

The stores previously closed for four months while the company pivoted to online sales. But that shift generated only about 25% of pre-COVID business. Sales have since improved. But Garafalo doesn’t envision a boost from the holiday season. She just hopes sales won’t fall.

Out of a sense of urgency, Garafalo's stores have called in their most seasoned sales people to alert customers to new merchandise and aggressively marketing a gift guide.

Likewise, Elonka Perez, who co-owns two restaurants in Washington state, says she’s “scared out of my mind” after Gov. Jay Inslee banned indoor dining again. Perez doesn’t know if her Taco Street restaurant in Seattle will earn enough money from takeout to survive colder weather.

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

Taco Street was open for indoor dining for only a few weeks before having to shut down again. Perez and her husband have been pouring their savings into the business. They don't know how long that can continue.

Macy’s, long an iconic symbol of the holiday shopping season, had to temporarily close its store in El Paso, Texas, because of a viral surge there. The chain is studying how the surge in viral cases is affecting the willingness of shoppers to enter its stores. In the meantime, Macy's has sped up its checkout service for curbside 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 goods — all at one location. That additional spending 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 about shopping.

“Shopping was an outlet to relieve stress — it was an escape from life,” November said. “Now, it’s a source of stress because the process of it is so cumbersome. ... We don’t know how to do it and do it safely.”

___

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

to this report.

  • Associated Categories: Associated Press (AP), AP Business, AP Online - Georgia News, AP Business - Economy, AP Business - Personal Finance
© Copyright 2020 AccessWDUN.com
All rights reserved. This material may not be published, broadcast, rewritten, or redistributed without permission.
Iran closes businesses, curtails travel amid virus surge
Iran has shuttered businesses and curtailed travel between its major cities, including the capital of Tehran, as it grapples with the worst outbreak of the coronavirus in the Mideast region
10:54AM ( 10 minutes ago )
Mortar shells hit Kabul residential areas; at least 8 dead
An Afghan official says at least 23 mortar shells targeted different residential areas in Kabul, killing at least eight people and wounding 31 others
10:47AM ( 17 minutes ago )
No. 4 Clemson at Florida State postponed hours before start
The game between No. 4 Clemson and Florida State has been postponed hours before kickoff
10:30AM ( 34 minutes ago )
Associated Press (AP)
Asia Today: South Korea mulls steps as new virus cases rise
South Korea has reported 386 new cases of the coronavirus in a resurgence that could force authorities to reimpose stronger social distancing restrictions after easing them in October to spur a faltering economy
9:16AM ( 1 hour ago )
G-20 summit opens with Saudi urging united response to virus
Saudi Arabia’s King Salman opened the Group of 20 summit as the coronavirus pandemic overshadows this year’s gathering of heads of state, transforming it from an in-person two-day meeting of the world’s most powerful leaders to a virtual gathering of speeches and declarations
9:10AM ( 1 hour ago )
The Latest: Russia reports yet another virus case record
Russia has reported a new daily high in the number of coronavirus infections and deaths
6:59AM ( 4 hours ago )
AP Business
EXPLAINER: Trump's election challenges falling flat in court
While President Donald Trump vows to press ahead with efforts to overturn the election, judges across the country have consistently swatted down his legal challenges
1:18AM ( 9 hours ago )
Brees to miss at least 3 games after Saints place him on IR
The Saints have placed quarterback Drew Brees on injured reserve, meaning he’ll miss at least three games with rib injuries
8:32PM ( 14 hours ago )
Georgia governor certifies presidential electors for Biden
Georgia’s Republican governor and top elections official have certified results showing Joe Biden won the presidential race over Republican President Donald Trump
7:06PM ( 16 hours ago )
AP Online - Georgia News
Biden wants Congress to pass virus aid in lame-duck session
President-elect Joe Biden is pushing Congress to approve billions of dollars in emergency COVID-19 assistance before he takes office
6:45PM ( 16 hours ago )
Mnuchin denies trying to limit Biden's economic options
Treasury Secretary Steven Mnuchin has denied that he is attempting to limit President-elect Joe Biden's options for reviving the pandemic-damaged economy by ending several emergency loan programs being run by the Federal Reserve
6:18PM ( 16 hours ago )
Wall Street slips amid worries about worsening pandemic
Stocks ended an up-and-down week on a down note on Wall Street Friday, taking 0.7% off the S&P 500
4:56PM ( 18 hours ago )
AP Business - Economy
Trump makes late-term bid to lower prescription drug costs
President Donald Trump's administration is trying to close out major unfinished business on lowering prescription drug costs
5:37PM ( 17 hours ago )
The Latest: WH disputes concerns about getting vaccine out
White House press secretary Kayleigh McEnany is disputing Joe Biden’s concerns about the government’s ability to distribute a coronavirus vaccine after one is approved, given that the Trump administration is refusing to share information with the president-elect’s team
2:17PM ( 20 hours ago )
Macy's loses money in 3Q; virus surges into holiday season
Macy’s swung to a loss and sales tumbled 22% as the department store chain struggled to bring shoppers back to stores during a pandemic
1:45PM ( 1 day ago )
AP Business - Personal Finance
Iran closes businesses, curtails travel amid virus surge
Iran has shuttered businesses and curtailed travel between its major cities, including the capital of Tehran, as it grapples with the worst outbreak of the coronavirus in the Mideast region
10:54AM ( 12 minutes ago )
Mortar shells hit Kabul residential areas; at least 8 dead
An Afghan official says at least 23 mortar shells targeted different residential areas in Kabul, killing at least eight people and wounding 31 others
10:47AM ( 20 minutes ago )
No. 4 Clemson at Florida State postponed hours before start
The game between No. 4 Clemson and Florida State has been postponed hours before kickoff
10:30AM ( 37 minutes ago )
G-20 summit opens as leaders urge united response to virus
The Group of 20 summit has begun with appeals by the world’s most powerful leaders to collectively chart a way forward as the coronavirus pandemic overshadows this year’s gathering, transforming it from in-person meetings to a virtual gathering of speeches and declarations
10:17AM ( 50 minutes ago )
The Latest: Calif Gov. Newsom’s child in 14-day quarantine
One of Gov. Gavin Newsom’s children may have been exposed to the coronavirus at school and is in quarantine
10:15AM ( 52 minutes ago )