NYTimes: ‘Pretty Catastrophic’ Month for Retailers, and Now a Race to Survive

Retail sales across industries plunged by 8.7 percent in March compared to February, the New York Times is reporting.

The drop is the largest decline recorded in the three decades that the government has been tracking the data. Worse, the coronavirus pandemic’s most extreme impacts on the economy didn’t occur until mid-to-late March, suggesting the numbers for April could be even more grim.

Grocery stores, pharmacies and other sellers of essential items saw a surge of demand as consumers stocked up. But that didn’t come close to offsetting the steep drop in sales in virtually every other category. Spending on cars and car parts fell by more than 25 percent in March, seasonally adjusted. Sales at gas stations, pushed down by low oil prices as well as reduced commuting, fell 17 percent. And sales at clothing stores fell by more than half.

As businesses look forward to recouping some of their losses once social-distancing measures begin to loosen, economists warn that demand for certain items and services won’t quickly spring back.

Economists often distinguish demand that is deferred because of a crisis from demand that is destroyed. Retail probably has some of each. Someone who needs a new dishwasher might put off the purchase but will probably buy one eventually. But an office worker who puts off her springtime wardrobe refresh might just skip a year, meaning those sales are simply lost.

 

“Pent-up demand is what drives recoveries, and the good news there is we will come out of this with some degree of pent-up demand,” said Ellen Zentner, chief U.S. economist for Morgan Stanley. She added, however, that there are “a lot of caveats.”

 

People who lose jobs won’t quickly resume spending once businesses reopen. And people willing to spend might be reluctant to congregate in malls, restaurants and other businesses that rely on face-to-face contact.

The situation is particularly dire for independent business owners, many of whom have not been able to secure the “essential business” designation that has allowed their larger, corporate-backed counterparts to stay open.

John Horrocks closed BlackBird Frame & Art, a custom framing business in Asheville, N.C., based on county orders on March 26 and anticipates it will remain closed through May. Mr. Horrocks, who owns the shop with his wife, is working with a local bank to secure a loan through the Paycheck Protection Program, which will help pay the staff until the business reopens.

 

Mr. Horrocks, 65, said that he understood the need for the shutdown but that he had been frustrated to see national retailers continue to sell nonessential goods and services even as local businesses temporarily shutter. A Michaels location in Asheville, for instance, has remained open as an essential business and continues to offer custom framing to shoppers, he said.

Read the full article at nytimes.com.