Coronavirus and Consumers
The virus is hurting most retailers — but helping some
Last month in the central-Chinese city of Wuhan, the first cases of the deadly disease coronavirus were reported after several people visited a wild animal market in the city. At time of writing, the disease has spread to 20 countries and affected over 6,000 people with 133 confirmed deaths. The United States, has had five cases confirmed by the CDC.
In China, the world’s second-largest economy, the retail industry is feeling the devastating effects of coronavirus. However, not every business has been negatively impacted and some shops in the U.S. have even seen a spike in sales.Courtesy Qilai Shen/Bloomberg
Effects in China
Some of the world’s largest chains have recently announced temporary store closings in the country.
China is Starbucks’ second-largest market, accounting for around 10% of global revenue, according to Reuters. The company has closed over half of its almost 4,300 Chinese outlets and said it expected the recent outbreaks to negatively affect its Q2 financial performance. Xiamen, China-based coffee competitor Luckin Coffee announced that its Wuhan stores will remain closed until after the Lunar New Year.
In their January 28, 2020 earnings call, Starbucks CEO Kevin Johnson said “As events unfold, we will be transparent with all stakeholders in communicating how we are responding to these extraordinary circumstances and the implications for our near-term business results. We remain optimistic and committed to the long-term opportunity in China, building on our brand heritage and 20-year legacy of profitable growth.”
Starbucks isn’t alone; burger giant McDonald’s and fried-chicken restaurant KFC also announced store closings. McDonald’s has suspended all operations in five cities (Wuhan, Ezhou, Huanggang, Qianjiang, and Xiantao) and face masks are being distributed to crews all across the country, as reported by Business Insider.
On January 29th, IKEA announced that it was temporarily closing about half of its 30 Chinese locations, saying “In response to the Chinese government’s call for strict and effective disease control IKEA China will from Jan. 29 temporarily close around half of the stores in China. Affected employees will stay at home until further notice with pay.”
Effects in U.S.
Domestically, drug stores and pharmacies are selling out of medical masks, especially in population-dense cities like New York and Chicago. Some wholesale distributors have almost tripled the price.
3M CEO Mike Roman said that the industrial supplies company is increasing production of protection products to meet demand. “We are ramping to full production. We’re going 24/7,” Roman told CNBC’s “Squawk on the Street.”
Manufacturers aren’t the only ones to profit from the shortages, creators and resellers are listing knockoff masks on eBay and Etsy with logos from famous brands like Supreme and Gucci.
Lending a hand
Several retail companies have pledged to help. Luxury holdings company LVMH, French luxury group Kering, and Chinese sportswear maker Anta have all committed to donating to relief efforts. WWD reported that 12 companies have given a collective $2.88 billion to date.
Along with consumer goods corporations, the airlines industry has had to change course (no pun intended) over the past few weeks. United has cancelled flights to and from China, in addition to Delta and American reducing service.
