By Dr. Kevin Forehand, Program Director, Retail Management, School of Business, and Dr. Cynthia Silvia, Faculty Member, School of Business, American Military University
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The coronavirus pandemic is having a far-reaching economic impact on trade and on the supply chain from China to the U.S. Several key retailers such as Apple, Starbucks, Costco and Walmart rely heavily on Chinese manufacturers to keep their supply chains active.
In the wake of the spreading pandemic, China shut down all factories and manufacturing plants indefinitely, disrupting that supply chain.
Most large retailers could weather a month of supply chain disruptions before consumers would be affected. However, should the disruption last longer, there may not be many goods to sell.
A Catalyst in the Midst of Chaos
The novel coronavirus is a catalyst in a series of events that could wreak havoc in the retail sector. Since materializing in Wuhan, China, in late December 2019, the outbreak of the coronavirus which causes the COVID-19 respiratory disease has been confirmed in more than 200 countries. The virus has infected almost 1.3 million people worldwide, with the number of deaths climbing to over 71,000, according to Worldometer.
The President of China, Xi Jinping, halted transportation around the virus’s epicenter where nearly 60 million Chinese citizens live. The United States, Europe, and Asia have imposed mandatory travel bans blocking visitors from China, mandatory screening for those who have traveled to China, and the U.S. has imposed a mandatory 14-day quarantine of non-Americans returning from China.
President Trump also enacted travel bans on Europe, including the U.K. and Ireland. On March 16, the Trump administration advised Americans to avoid gatherings of more than 10 people and to avoid any unnecessary travel. Also, people are urged to stay at least six feet apart when shopping or meeting socially.
Several state governors, led by Andrew Cuomo of New York, J.B. Pritzker of Illinois and Gavin Newsom of California have made those COVID-19 restrictions mandatory.
Changing Retail Environments
The coronavirus has substantially affected industries ranging from automotive, technology, life sciences, healthcare and retail. Large shopping malls, already in decline in recent years, will continue to lose foot traffic because of the new social-distancing precautions.
Major retailers have seen a surge of shoppers for specific goods in recent weeks. Retail stores nationwide are scrambling to address shortages of various cleaning and protective supplies and paper goods, along with food and beverage items.
Walmart and Target are seeing an increase in online and pick-up orders and deliveries. Increased use of these convenient features will help to decrease store foot traffic and could lessen the spread of the virus. In addition, many retailers have adjusted store hours of operation to allow additional time for cleaning and restocking of store shelves.
E-commerce is certainly seeing a boost. According to Retail Dive, digital shopping with home delivery, such as with online grocer Farmstead, has seen a 30 percent (and rising) increase in recent weeks. Downloading grocery delivery mobile apps has surged.
With restaurants ordered shut, dining out is no longer an option in most states. As a result, restaurants are primarily serving to-go orders and many are offering delivery options for their customers. Many of these restaurants are working in conjunction with online food delivery apps such as DoorDash, Grubhub and Uber Eats to assist customers in receiving their food orders.
Stock Markets Have Seen Rare Changes in Valuations
On Friday, April 3, the Dow dropped 360.91 points or 1.69% and came to a close at 21,052.53. The S&P closed 1.51% lower at 2, 488.65 and the NASDAQ fell yet again 1.53% to 7,373.08 after the White House announced additional plans to assist Americans weathering the economic blow of the pandemic.
In response to the widening global pandemic, the stock markets began another roller-coaster week of activity.
American companies that currently operate stores in China are taking steps to prevent the spread of COVID-19 by temporarily closing their locations. Starbucks closed more than 2,000 locations in China. In the U.S., Starbucks recently moved to pickup only operations. Apple, which currently operates stores and factories in China, recently reopened all 42 of its stores there.
The key question is how long will this COVID-19 disruption last before businesses begin to recover? Officials say the situation could last for months, possibly into August.
However, no one knows for sure. What we do know, based on the guidance to practice social distancing and self-quarantine, is consumer behavior will continue to evolve. Businesses and customers will continue to feel the impact of the COVID-19 outbreak for quite some time.
About the Authors
Dr. Kevin Forehand is the Program Director for the Retail Management program at American Military University. Kevin earned a Doctor of Business Administration degree from Northcentral University and an MBA from Thomas University. He has worked in the retail industry for more than 20 years in a variety of roles, including sales associate, support manager, assistant store manager, store manager, district manager and Vice President of store operations.
Dr. Cynthia Silvia is a full-time faculty member for the School of Business at American Military University. Dr. Silvia received a Master of Healthcare Administration and a Doctorate in Healthcare Administration from the University of Phoenix and a Bachelor of Arts and Master of Arts in Elementary Education from the University of Rhode Island. She has been teaching at the university level both online and on campus for the past four years. Additionally, Dr. Silvia has held various retail management positions over the past 38 years for F.W.Woolworth/Woolco, Bradlees, Ames, Sears, Toys “R” Us, Babies “R” Us, and CVS Pharmacy.
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