The coronavirus is disrupting the entire global economy. After the hospitality industry, retail was the next wave to get hit.
With people practicing social distancing, shopping malls are being shut down. Outside that, stand alone retail outlets are closing up shop. The question is will this be temporary or permanent?
In the meantime, companies are trying to survive. This is not a change in business model. Instead, it is a survival mode to try and remain in operation.
Many retailers have stated they will be unable to pay their rents. This is not, of course, sitting well with the mall owners and other landlords.
The largest owner of shopping malls in the United States, Simon Properties, announced they are laying off 30% of their workforce.
They are doing this in expectation of many companies not paying their April rent.
Impact is being felt throughout the entire industry. Those with poor balance sheets are in jeopardy. At the top of the list is Nordstrom which many feel will not make it through.
The Cheesecake Factory, which has 294 locations in North America, has already said publicly that it will not be paying rent in April. Simon has 29 Cheesecake Factory locations, more than any of its peers, according to an analysis by RBC Capital Markets and CoStar Realty.
So far, millions of employees were laid off in the retail sector. Many are laying off tens of thousands at a clip. This is going to drag on the economy. Most of these individuals are the ones who are least prepared for any type of layoff.
Last week, Congress passed and the President signed into law a $2 trillion stimulus package. Part of it is a $1,200 check sent to every adult along with extended unemployment benefits.
Sadly, the $1,200 will not go a long way. It will help to offset some of the loss but it is going to be tough for many.
The other difficulty lies in the fact that retail is one area where automation was being worked on to replace workers. Companies are under pressure to compete with the likes of Amazon who seeks to automate the entire end-to-end online process; from ordering to delivery.
What this could mean is that many of these employees never return to work. Many of the companies could find themselves out of business as a result of this.
No matter how we look at it, life is going to get tougher for those who are in the retail sector.