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Pandemic hits retail on multiple fronts

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NEW YORK — The coronavirus pandemic is disrupting the retail industry on multiple fronts. As the disease began to spread in the United States and globally earlier this month, retailers had to deal with interrupted supply chains, sick employees, empty shelves and the possibility that consumer spending in retail stores will plummet as containment efforts go into effect and consumers are urged to stay at home.

Meanwhile, sales of products like hand sanitizers, cleaning supplies and pantry staples outpaced retailers’ ability to keep those them in stock, leading to frustrated customers and some reports of price gouging.

A report by Nielsen noted that hand sanitizer sales in the one-week period ended March 7 were up 470% compared to the same period last year. Aerosol disinfectants were up 385.3%, and multipurpose cleaners were up 148.2%.

Walmart sent an email to customers saying that it had ramped up cleaning efforts, with “sanitation solutions used in high-touch, high-traffic areas,” with extra attention paid to registers and shopping carts. The email also assured customers that Walmart was dedicated to “keeping stores stocked and prices fair.”

After an employee at a Walmart store in Cynthiana, Ky., tested positive for COVID-19, the retailer revamped its policies to make it easier for employees who feel sick to stay home. Associates can receive up to two weeks of pay if they need to self quarantine, and two weeks or more of pay if they contract COVID-19.

Retailers are also promoting their online shopping services as alternatives for consumers who want to limit their contact with other people. CVS and Walgreens both said they would waive delivery fees on prescription medications, for example.

The report by Nielsen looked beyond the immediate product sales associated with the COVID-19 outbreak to identify six consumer behavior thresholds that will provide clues about how consumer spending patterns will evolve as the pandemic unfolds.

They are:

• Proactive Health Minded Buying. In this threshold, interest rises in products that support overall maintenance of health and wellness. This is common in areas with minimal local cases of COVID-19, which are generally linked to an arrival of an infected individual from another country.

• Reactive Health Management. Often triggered by reports of local transmission of the virus and the first COVID-19-related deaths, this threshold is associated with consumers prioritizing products designed for virus containment, like face masks and hand sanitizer.

• Pantry Preparation. This threshold is characterized by a spike in store visits, as consumers strive to stock their pantries with shelf-stable products and a broader assortment of health safety products. This tends to occur when there are multiple cases of local transmission and multiple deaths linked to COVID-19.

• Quarantined Living Preparation. This threshold, marked by localized emergency actions, sees consumers shift their shopping from store visits to online options. It is also associated with rising out-of-stocks and strains on the supply chain.

• Restricted Living. Severely restricted shopping trips and limited online fulfillment are associated with this threshold, which occurs when communities go into lockdown. Product shortages can lead to price spikes.

• Living a New Normal. In this threshold quarantines lift and people return to their daily routines, but with a renewed sense of caution about their health. There may be permanent changes in supply chains, the use of e-commerce and in hygiene practices, according to the report.

Nielsen notes its study of the U.S. market shows how quickly new information about the outbreak is processed by consumers and turned into buying behavior. For retailers and suppliers, consumer behavior in places like China and Italy will offer insights into how shopping patterns in the United States will evolve in the coming weeks.

A poll by the market research firm Digital Commerce 360 suggests that most retailers expect the coronavirus pandemic to affect their sales negatively.

Asked about their financial expectations relative to the coronavirus and their retail business, only 14% of the surveyed retailers said they “expect no downside revenue implications.” That compares to 47% of respondents who said they “expect some downside revenue implications” and 9% who said they “expect significant downside revenue implications.”

The survey also found 58% of retailers expecting some impact on consumer confidence, and 22% believing it will be significant.


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