Crisis has come.
With the U.S. now officially on an emergency footing, the gears of commerce are grinding to a halt. New York and the other hardest-hit areas are rapidly following France and Spain toward the complete lockdown seen in Italy, which itself was preceded by one in huge swathes of China.
Retailers, which rely on foot traffic to stay in business, are starting to voluntarily go dark across the U.S. to protect employees and slow the spread of the disease, which causes only mild symptoms in most case but can be deadly for the elderly and people with compromised immune systems.
Nike Inc. has closed its stores in the U.S., Canada and Western Europe through March 27 to protect “the well-being of our teammates and consumers.” Urban Outfitters Inc., Patagonia, Abercrombie Fitch & Co., Everlane and Apple are all closing stores as well, with brands pointing consumers to their web sites as they send sales associates home. Other retailers are, for now, either scaling back hours or weighing their options.
The U.S. Federal Reserve stepped up its efforts to stabilize the economy, slashing its benchmark interest rate to near zero late Sunday afternoon and coordinating more closely with other central banks around the world.
And in France, LVMH Moët Hennessy Louis Vuitton said it will manufacture and distribute hand sanitizer to French health authorities for free to fight the spread of COVID-19. “Given the risk of shortage of hydroalcoholic gel in France, Bernard Arnault has instructed the LVMH Perfumes and Cosmetics business to prepare its production sites to manufacture substantial quantities of hydroalcoholic gel to be provided to public authorities,” the company said.
The only bright spot is that, even as companies closed down in the West, retail is reawakening in China, where the outbreak first started to hit hard in January.
That might bode well for the future — there is a light at the end of the tunnel. But for now, fashion brands, consumers and everyone else are caught in an all-encompassing rush to try to “flatten the curve,” slowing the outbreak so spikes in severe cases don’t overwhelm the health system.
The speed at which the outbreak and response hit the U.S. was head spinning.
In New York, the heart of the U.S. fashion business and a coronavirus hot spot, last week started with something like concerned awareness as jitters from a plummeting stock market took hold. Now life in the city is slowing dramatically as its leaders prioritize the subway and the hospitals with shopping for anything but canned goods a distant afterthought. Many offices have closed as people work from home, schools have shut and larger gatherings have been banned.
While President Trump’s response to COVID-19, which he downplayed for weeks, will be litigated over the election this year, the federal government is now mobilized. (Trump himself, who has met with people who later turned out to have COVID-19, tested negative for the virus over the weekend.)
Retailers are stepping up to take a position on the front lines.
When Trump declared a national emergency on Friday, unlocking $50 billion in funds for the response, he was flanked by chief executive officers, including Walmart Inc.’s Doug McMillon and Target Corp.’s Brian Cornell.
Standing next to Trump at an address from the White House’s Rose Garden on Friday, McMillon said: “When we got the call yesterday from the White House, we were eager to do our part to help serve the country. And given what we’re facing, that’s certainly important to do. We should all be doing that.
“So we’ve been asked to make portions of our parking lot available in select locations in the beginning [of the COVID-19 testing program], and scaling over time as supply increases,” he said.
Target’s Cornell, who was also there, along with top executives from Walgreens and CVS, noted the extraordinary gathering.
“Normally, you’d view us as competitors, but today we’re focused on a common competitor, and that’s defeating the spread of the coronavirus,” Cornell said. “And we look forward to working with the administration to do our fair share to alleviate this growing threat.”
Globally, there are 156,400 confirmed COVID-19 cases, and while 73,968 have recovered, 5,833 have died, according to a tally by Johns Hopkins University. In the U.S., 57 people have died out of 2,952 confirmed cases, although that number is expected to increase rapidly as more people are tested.
It’s an extraordinary time.
But while this a new challenge for modern retailers, the industry does have some relevant experience. Walmart, in particular, with its more than 5,000 stores in the U.S. and a broad product assortment, has long played a role in alleviating the impact of disasters, including hurricanes, floods and so on.
The mass merchant has been working to keep its stores stocked and authorized store managers to control their inventory, including giving them the discretion to limit sales quantities on items in unusually high demand. Online, the company is policing third-party sellers to thwart price gouging.
Walmart U.S. ceo John Furner thanked employees in a video message.
“When I think of the role of Walmart in the communities, it’s a really important role,” Furner said. “We serve millions of people each and every day. We have a lot of categories that have had extraordinary growth. It started with over-the-counter pharmaceuticals, then consumables, and now it’s moving into our food businesses. Our supply chain teams and replenishment teams are working extremely hard to get you [associates] product. Every associate should be proud of what you’re doing and know that what you’re doing right now matters to people.”
Walmart is curtailing hours in its U.S. stores and Neighborhood Markets to restock and clean stores overnight as it tries to cope with the hordes of shoppers panic-buying everything from bread, rice, peanut butter and macaroni and cheese to toilet paper and disinfectant spray — if they can find any.
But while food retailers struggle to keep up with the rare and sustained upsurge in demand nationwide, those focused on discretionary purchases — including fashion — face the opposite problem: How to deal with stores empty of any shoppers, protect their staffs and reassure consumers that buying apparel is still OK in these times.
Many have decided to close for the time being to help slow the spread of the virus.
Urban Outfitters said: “In an effort to protect our communities, we have decided to close all of our stores around the globe. Stores will not reopen until at least March 28. We will continue to pay our store teams during this time. We will continue to operate our e-commerce and subscription businesses.”
Apple has also closed all stores outside of China until March 27.
“What we’ve learned together has helped us all develop the best practices that are assisting enormously in our global response,” Tim Cook, Apple’s ceo said. “One of those lessons is that the most effective way to minimize risk of the virus’s transmission is to reduce density and maximize social distance. As rates of new infections continue to grow in other places, we’re taking additional steps to protect our team members and customers.”
Others, like Walmart, are scaling back hours.
Calvin McDonald, ceo of Lululemon Athletica Inc., said the company’s North American doors would only be open from noon to 6 p.m. and that in-store events such as yoga classes and run clubs would be suspended. Instead, the company will be offering digital meditation sessions and workout classes. The online business and mobile app will also remain open.
Celeste Burgoyne, executive vice president of Americas and global guest innovation, added, “The events of the past days and weeks have been unprecedented and our teams continue to monitor and navigate this rapidly changing situation with the rest of the world.”
And the learning curve for the world has been a steep one.
France’s Prime Minister Édouard Philippe ordered the closure of all nonessential businesses, including retail shops, restaurants, cafés and cinemas, starting Sunday. That includes all the luxury goods stores owned by the likes of LVMH Moët Hennessy Louis Vuitton, Kering, Hermès and more.
Schools and museums were already closed in France and gatherings of more than 100 people were banned.
“Considering simulations of the progression of the epidemic, I have decided, together with the President [Emmanuel Macron], to close all public spaces that are not essential to daily life,” said the prime minister, speaking at the French ministry of health in Paris.
Essential businesses — including grocery stores, food markets, pharmacies, gas stations, banks and news agents — are allowed to remain open.
In Spain, government leaders moved the country to a full lockdown.
Prime Minister Pedro Sánchez ordered that people should only leave their homes for “essential activities.” Those include work, seeking medical care, shopping for food and groceries, visits to the pharmacy and caring for the elderly in need.
“I want to tell the workers, the self-employed and businesses that the government of Spain is going to do everything in its power to cushion the effects of this crisis,” Sánchez said.
In Italy, where the disruption of Milan Fashion Week last month was only the beginning of the COVID-19 fallout, only banks, pharmacies and grocery stores are allowed to operate.
“We are definitely close to the exhaustion of our resources,” said Attilio Fontana, regional president of Lombardy, which includes Milan. “We are trying to do miracles to respond to the requests of health treatments, but if we don’t do something to invert the increasing number of patients, we will never be able to be as fast as the virus.”
In the U.S., civic leaders are scrambling to work miracles now so they’re positioned to handle a spike in cases.
New York Gov. Andrew Cuomo called on Trump to use the Army Corps of Engineers to convert military bases or college dormitories into temporary medical centers.
How investors respond to all of this is unclear.
On Friday, Wall Street was bouncing back from its biggest plunge since 1987 and heartened to see a COVID-19 response forming, pushing the Dow Jones Industrial Average up 1,985 points, or 9.4 percent, 23,185.62. But the market is still down 21.6 percent from its all-time high on Feb. 12. It felt like a long weekend and there is nothing like lasting sentiment these days among investors, who are ready to run for cover. (An oil price war as producers face an economic slowdown doesn’t help matters any.).
While the medical response is clearly the most important focus right now, investors and retailers also have to plan ahead.
One of the biggest — and more difficult — questions is just how long the COVID-19 disruption will last and what to do in the meantime.
“It seems today that tomorrow will never come,” said Suketu Gandhi, a consultant and partner Kearney. “Tomorrow will come, it’s just a matter of when the sun will rise again.”
Unlike previous crisis, the consumer has money to spend today, but doesn’t have physical access to stores. That could help retailers boost business on their web sites.
Despite all the concerns and with the very real danger for some, he noted the solution for slowing COVID-19 is relatively clear and based in containment, isolating people and removing social interaction.
“We’re not trying to figure out the endgame, we’re trying to figure out that the game [of trying to figure out how to be the most effective retailer possible] never ends,” Gandhi said. “It’s about saying, ‘OK, when this ends, everything will start.’ It’s about saying we continue to engage, we continue to play, we continue to move forward so that when [the outbreak] does end, then you have the momentum going forward. If you stop, restarting is very hard.”
And he said the experience with COVID-19 in China’s larger cities suggests that consumer activity restarts 45 to 60 days after the worst of the outbreak passes.
In the very rosiest of scenarios, that’s still a major hit for retailers and it comes at a bad time.
“Many retailers came into 2020 not only hoping for, but needing a continuation of consumer confidence and upside. They needed it,” said David Bassuk, global co-head of retail at AlixPartners. “This is definitely going to push retailers way backwards.”
Historically, retailers have been hit harder in the stock market than other sectors in times of crisis and spend six months to a year getting back to normal, Bassuk said.
“Retailers need to brace for a 2020 that is dramatically impacted and an early 2021 that is still feeling the effects,” he said.
The first response is for companies to monitor cash levels and be cautious with spending, but Bassuk said, “It goes way beyond that in retail.”
Retailers need to have a really clear playbook.
“They can’t do this in an unstructured way,” he said. “It needs to be organized, you need to be organized, you need to be monitoring it daily.”
The playbook will be different for every company, but will include specific steps to take in stores and online, in regards to marketing and pricing and supply chain and expense management.
Companies need to have the “urgency to make quick, early decisions,” he said. “You need to get ahead of it. You can’t sit on the sidelines.”