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Retailers are preparing as the virus affects consumers and the economy



WASHINGTON (AP) – LaTonya Story is the worst fear of any retailer.

With the virus pandemic growing again across the country and the economy under threat, Story decided to cut its holiday shopping budget. This season, she will spend less than $ 2,000, compared to several thousand dollars in 2019. Worried about entering 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.”

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The acceleration of coronavirus cases is causing an existential crisis for American retailers and frightening their customers just as the critical holiday shopping season approaches. It also increases the risk of the economy slipping into recession with a “double dip” this winter, as states and cities again impose restrictions on businesses and consumers stay at home to avoid contracting the disease.

Anxious consumers are a daunting prospect for both retailers and the economy as a whole. Any lasting recovery from the pandemic recession depends on consumers, whose costs fuel about 70% of economic growth.

As the virus is rampant across the country and holiday sales are expected to be weak and highly dependent on online shopping, retailers are considering extraordinary steps to attract customers.

Some, such as the small Giftery store in Nashville, Tennessee, adopt their own safety restrictions. To reduce the respiratory particles that could spread the virus, Giftery is asking buyers 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 percent of its annual sales this holiday season.

At the same time, some high-end retailers provide customers with extra courtesy. Neumann Marcus allows shoppers to book appointments to make virtual tours of his holiday trees and other decorations if they are too scared to enter a store. In this way, the trader hopes that his customers will also enter the spirit of buying gifts.

“Business constraints are increasing and there will be some economic consequences,” said Jim O’Sullivan, an economist at TD Securities. But “even without the authorities announcing new restrictions, people are likely to retire on their own.”

O’Sullivan predicts that the economy will not grow at all in the last three months of the year – compared to his earlier forecast of 3% annual growth rate in this quarter – and will decline by 2% in the first three months of 2021 He, like most economists, expects a recovery that began in the second quarter after the vaccine became widespread.

O’Sullivan’s estimates suggest that Congress will agree on about $ 1 trillion new stimulus for the economy by early 2021. And there are still no signs of progress toward an agreement. More than 9 million people will lose their unemployment benefits at the end of the year, when two jobless programs expire, unless Congress extends them. Consumer spending is likely to fall further.

The new virus cases doubled in just three weeks, O’Sullivan said, after the previous doubling took six weeks. As a result, many countries are adopting or considering new business restrictions. Maryland has limited shops and restaurants up to 50% capacity. Retailers in most of California are now limited to just 25%; gyms, restaurants and cinemas are closed to indoor customers. Illinois and Washington have limited stores up to 25% capacity.

Sales in restaurants and bars fell in October for the first time in six months. Restaurant traffic fell further in November, according to booking provider OpenTable. Occupancy in hotels is lower than a month ago. Consumer credit card spending fell in the first week of November from a month earlier, according to data collected by Opportunity Insights.

After the deep recession that erupted in early spring, the economy recovered faster in the summer and fall than most economists had expected. And some industries are still doing well. Home sales rose to a 14-year high last month. Production is also still growing, although it remains below pre-pandemic levels.

But these positive signs reflect uneven recovery. While lower-paid employees in the personal industries have lost their jobs or are afraid of losing them, higher-paid Americans have managed to continue working from home. These consumers have shifted much of their spending away from services such as eating out, going to the movies and going to the gym, to buying goods – from computers and home and garden supplies to appliances and fitness equipment.

Yet many of these purchases have been made online, with e-commerce sales jumping 29% in the last year. In contrast, sales in physical retail stores, excluding cars, have been essentially equal over the last 12 months.

Like Story, consumers in Atlanta and other Americans are declining, and as colder weather ends outdoors in much of the country, consumer spending is likely to weaken and hiring will be slow. Redundancies may increase. The number of people seeking unemployment benefits increased last week to 742,000 – a historically high number and the first increase since early October.

Small businesses are particularly worried that they will be forced to close again.

“If we close, it will be a devastation,” said Flight Garafalo, chief executive of Paul Stewart, a high-end clothing retailer who runs five stores in Chicago, New York and Washington, DC.

Previously, stores were closed for four months while the company focused on online sales. But this change generated only about 25% of business before COVID. Sales have improved since then. But Garafalo does not anticipate a boost from the holiday season. She just hopes sales don’t fall.

Out of a sense of urgency, Garafalo stores have called on their most counterfeit retailers to warn customers about new products and aggressively market a gift guide.

Similarly, Elonka Perez, co-owner of two restaurants in Washington state, said she was “frightened by my mind” after Governor Jay Insley banned the indoor dinner again. Perez doesn’t know if her restaurant on Taco Street in Seattle will earn enough money from food to survive the colder weather.

“Winter is usually the slowest time for restaurants,” says Perez.

Taco Street was only open for indoor dining for a few weeks before it had to close again. Perez and her husband are pouring their savings into the business. They do not know how long this can last.

Macy’s, a long-time symbol of the holiday shopping season, had to temporarily close its store in El Paso, Texas, due to a viral outbreak there. The chain is studying how the influx of viral cases affects the desire of buyers to enter its stores. Meanwhile, Macy’s has accelerated its curb delivery service.

Other chains, especially Target and Walmart, have benefited from the change in habits. Customers spend more and more when they visit the two chains, because they can combine shopping trips and buy food, clothes and other household goods – all in one place. This additional spending is at the expense of small and independent stores.

For many consumers, the pandemic is changing the meaning of shopping. Alice November, a licensed social worker in Boca Raton, Florida, says her customers are increasingly stressed about shopping.

“Shopping was a way to relieve stress – it was an escape from life,” said November. “It’s a source of stress now because it’s so cumbersome. … We don’t know how to do it and do it safely. ”

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D’Innocenzio reports from New York. AP Business Writer Joyce M. Rosenberg also contributed from New York.

to this report.


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