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WASHINGTON (AP) – The LaTonya story is every retailer’s worst scare.
With the viral pandemic resurfacing in the country and the economy threatened, Story has decided to cut its holiday shopping budget. She will spend less than $ 2,000 this season, compared to several thousand dollars in 2019. Anxious to enter stores, she buys gifts online and only goes out 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 put.”
Accelerating coronavirus cases are causing an existential crisis for U.S. retailers and frightening their customers as the crucially important holiday shopping season approaches. It also increases the risk of the economy sliding into a “double dip” recession this winter, as states and cities reimpose 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 the economy in general. Any lasting recovery from the pandemic recession depends on consumers, whose spending drives about 70% of economic growth.
As the virus rages across the country and holiday sales are expected to be low and heavily reliant on online shopping, retailers are considering extraordinary measures to attract shoppers.
Some, like Giftery, a small store in Nashville, Tennessee, adopt their own safety restrictions. To reduce respiratory particles that can spread the virus, Giftery is asking shoppers to refrain from talking on cell phones.
“It’s vital for us to stay open,” said William Smithson, 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 that little extra. Neiman Marcus lets shoppers make appointments to take virtual tours of his holiday trees and other decorations if they are too scared to walk into a store. In doing so, the retailer hopes its customers will also get into the spirit of buying gifts.
“Trade restrictions are increasing and there will be an economic fallout from that,” said Jim O’Sullivan, economist at TD Securities. But “even without authorities announcing new restrictions, individuals are likely to opt out of their activities on their own.”
O’Sullivan predicts the economy will not grow at all in the last three months of the year – down from his previous forecast of a 3% annual growth rate in this quarter – and will shrink by 2% in the first three months of 2021. He, like most economists, expects a rebound from the second quarter once a vaccine is widely distributed.
O’Sullivan’s forecast assumes that Congress will agree to about $ 1 trillion in new stimulus for the economy by early 2021. Yet, so far, there is no sign of progress towards agreement. More than 9 million people will lose their unemployment assistance at the end of the year, when two unemployment assistance programs expire, unless Congress extends them. Consumer spending is likely to decline further.
The new viral cases doubled in just three weeks, O’Sullivan noted, after the previous doubling took six weeks. And as a result, many states are adopting or considering new restrictions on business. Maryland has stores and restaurants limited to 50% of their capacity. Retailers in most of California are now capped at just 25%; gymnasiums, restaurants and cinemas are closed to indoor customers. Illinois and Washington have stores limited to 25% of their capacity.
Restaurant and bar sales declined in October for the first time in six months. Restaurant traffic fell further in November, according to reservations provider OpenTable. The hotel occupancy rate is down compared to a month ago. Consumer spending on credit cards fell in the first week of November compared to a month earlier, according to data compiled by Opportunity Insights.
After the deep recession that erupted in early spring, the economy rebounded faster through the summer and fall than most economists expected. And some industries are still doing well. Home sales hit a 14-year high last month. Manufacturing output, too, continues to grow, although it remains below pre-pandemic levels.
But these positive signs reflect an uneven recovery. While lower paid workers in face-to-face industries have lost their jobs or fear losing them, higher paid Americans have mostly been able to continue working from home. These consumers shifted a large portion of their spending from services, such as eating out, going to the movies, and going to the gym, to purchasing goods – from computers and home and garden supplies to appliances and equipment. of fitness.
Yet many of those purchases have taken place online, with online sales surging 29% in the past year. In contrast, sales in physical retail stores, excluding automobiles, have been essentially flat over the past 12 months.
Like Story, the Atlanta consumer and other Americans have cut spending, and as colder weather puts an end to al fresco dining in much of the country, consumer spending is likely to weaken and hiring. will slow down. Layoffs could increase. The number of people claiming unemployment benefits increased last week to 742,000 – a historically high number and the first increase since early October.
Small businesses are particularly concerned that they will be forced to close again.
“If we close, it will be devastation,” said Paulette Garafalo, CEO of Paul Stuart, an upscale clothing retailer that operates five stores in Chicago, New York and Washington, DC.
Stores previously closed for four months, while the company turned to online sales. But this change only generated about 25% of pre-COVID activity. Sales have since improved. But Garafalo does not envision a boost from the holiday season. She just hopes the sales don’t drop.
Out of urgency, Garafalo stores brought in their most seasoned salespeople to alert customers to new merchandise and aggressively market a gift guide.
Likewise, Elonka Perez, who co-owns two restaurants in Washington state, says she is “scared of my mind” after Gov. Jay Inslee once again banned dining inside. Perez isn’t sure if his Taco Street restaurant in Seattle will make enough money from take out food to survive the colder weather.
“Winter is usually the slowest time for restaurants,” Perez says.
Taco Street was open for indoor dining for only a few weeks before it had to close again. Perez and her husband invest their savings in the business. They don’t know how long it can last.
Macy’s, long an iconic symbol of the holiday shopping season, has had to temporarily close its El Paso, Texas store due to a viral wave there. The chain is studying how the surge in viral cases is affecting shoppers’ willingness to enter its stores. In the meantime, Macy’s has ramped up its checkout service for curbside delivery.
Other chains, notably Target and Walmart, have benefited from the changing habits. Customers spend more and more when they visit the two chains, as they can combine groceries and buy food, clothing and other household items – all in one place. These additional expenses come at the expense of small independent stores.
For many consumers, the pandemic has transformed what shopping means. Alyse November, a licensed social worker in Boca Raton, Florida, says her customers are increasingly stressed by shopping.
“Shopping was a stress reliever – it was an escape from life,” November said. “Now it’s a source of stress because the process is so heavy. … we don’t know how to do it and how to do it safely.
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D’Innocenzio reported from New York. Joyce M. Rosenberg, business writer for AP, has also contributed from New York.
to this report.
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