Shoppers wearing protective masks leave a Hennes & Mauritz (H&M) store in the Herald Square area of New York, United States, on Thursday, August 6, 2020.
Nina Westervelt | Bloomberg | Getty Images
“Disaster” is a word used to describe the potential retail impact of recurring business stimulus talks in Washington, D.C.
“We are facing a total retail catastrophe that is completely preventable,” Andy Polk, FDRA’s senior vice president for the footwear industry, told CNBC.
“It is no exaggeration to say that putting out a stimulus package until after the election is a disaster and could lead to another collapse of the shoe trade, both in terms of falling sales and in terms of the loss of retail jobs in shoe stores over the Christmas period . ” he said.
In a tweet Tuesday afternoon, President Donald Trump Raise doubts about the timing of stimulus payments to consumers. He said the White House had suspended talks with Democrats and the news had significantly lowered the averages of major stocks. But By Wednesday morning, stocks rose againAfter apparently changing course, Trump tweeted support for aid to airlines and other stimulus measures, raising hopes that lawmakers could pass a smaller aid package.
“A lot of consumers rely on some level of incentive and support this holiday season,” said David Bassuk, global co-leader of the retail practice for AlixPartners. “The vacation begins now. This is the time retailers need consumers to be confident.”
The leading retail group, the National Retail Federation, is pushing for additional momentum for the fuel business.
“The pandemic is not over yet, and neither is the economic crisis it caused,” said NRF President and CEO Matt Shay in a statement.
Indeed, more than 7.5 million Americans According to the Johns Hopkins University, Covid-19 has been diagnosed since the beginning of the pandemic. On average for the past seven days, the number of new U.S. cases is growing by nearly 44,000 each day, based on a CNBC analysis of Johns Hopkins’ data.
The unemployment rate was 7.9% in September.
“There are many families still struggling to make ends meet and companies facing obstacles to getting workers back on payroll,” Shay said. “We need a vaccine to ensure our personal health. And we need more momentum to ensure we can fix a troubled economy, get people back to work, and fuel growth in communities large and small.”
The Business Roundtable, a group of CEOs from some of the country’s largest corporations chaired by Walmart CEO Doug McMillon, has also urged the President and Congress to get back to work on relief legislation.
The group said “failure to reach an agreement on additional relief would worsen and prolong the crisis for our country.”
Major retailers including Apple, Best buy and Home Depothave already seen how government incentives can benefit their bottom line. In the spring, they said they saw sales spike as Americans rushed to their stores and websites to spend extra cash in their pockets. Some opted for discretionary things they had previously skipped, like televisions and clothing, the companies said.
The U.S. government issued millions of checks as part of a historic $ 2 trillion aid package passed in March to try to re-stimulate consumer spending to spark the economic recovery. Eligible adults received checks for up to $ 1,200. depending on income level. (Individuals earning more than $ 99,000 per year or joint applicants earning $ 198,000 did not receive a check at all.)
Walmart said in August that his stimulus loss subsided when buyers spent that money. CFO Brett Biggs said Spending decreased in Julyand declined to provide a financial outlook for the year, citing incentives as a factor.
“Stimulus definitely had an impact on consumers in the second quarter. We’re watching what’s going on in Washington and how we move forward with a new stimulus package,” Biggs said in an interview with CNBC in August. “I think it would certainly be helpful to consumers.”
Goal CEO Brian Cornell said in August He also wants Congress to push another stimulus package to create more security for consumers and businesses. Still, he credited most of the big box retailer’s strong sales in the final quarter to a shift in consumer spendingas families canceled the summer vacation and couldn’t go to dinner or the movies instead of the government-issued checks.
A breakdown in business stimulus talks brings more chaos to an already chaotic Christmas season pressured by a global health crisis and the distraction of a presidential election.
Americans are coping with the uncertainty as the holidays approach and trying to figure out how to celebrate safely, said Ashwani Monga, a marketing professor at Rutgers University in Newark who studies consumer psychology. In particular, the lack of money consumers will not be comfortable if they do not expect relief from the incentives.
“The worst thing about this pandemic is that we don’t know if it’s three months left,” he said. “Is it 12 months left? Will it ever be over? Will we wear masks forever? Nobody knows. For low-income consumers, focus even more on saving for those rainy days than for high-income consumers who did.” enough buffer to go through these times. ”
He said that if Congress approves of additional incentives will “have a huge impact on the economy as a whole,” as families who are short of funds tend to spend that money immediately.
“You give them the money this week and you will see people spend more this week,” he said.
And it’s not just about the bottom line of retailers. The industry is the country’s largest private employer. It contributes $ 3.9 trillion to annual GDP and supports 1 in 4 US jobs, according to the NRF. Weak sales could later lead to major job losses.
Retailers have pushed discounts and vacation marketing earlier than ever this year to gain market share during the pandemic and avoid last-minute bottlenecks in their supply chains. But consumers could wait to shop closer to the holidays anyway because of stimulus uncertainty, said Katie Thomas, who runs the Kearney Consumer Institute, a consumer think tank at consulting firm Kearney.
Whether or not stimulus checks are issued also affects how price sensitive consumers become.
“The price gap is always important,” said Walmarts Biggs at the Barclays conference on September 8th. “Unless we get another stimulus package that we all monitor like you do, the price is probably even more important.”
The lack of a store could also put further pressure on the number of shoppers who go to stores. That number is expected to decrease already up to 25% year after year during the holidays.
“Retailers and malls already have the prospect of reduced pedestrian traffic due to the pandemic as we near the major Christmas shopping season,” said Ryan Severino, chief economist at JLL. “Online sales help, but are not a panacea if consumers are unsupported.”