Forecast

Economic Impact of Coronavirus May Be Far Ranging

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Potential financial impacts from the burgeoning coronavirus (COVID-19) crisis began to emerge as the calendar turned to March and the number of confirmed cases approached 100,000 worldwide. Nearly 10 percent of cases were outside of China.

As global health officials scrambled to establish contingency plans to deal with a more widespread outbreak, including virus testing protocols and quarantine provisions, the footwear, shipping and retail industries are beginning to reckon with the fallout from the endemic.

Shipments of merchandise out of China will continue to slow for at least the next month, which has some smaller shoe retailers concerned about whether they will receive important fill-in orders from key suppliers in May and June. Columbia Sportswear says disruptions to its distribution and logistics providers will likely hamper its ability to “timely fulfill orders and meet consumer demand” beyond Spring 2020.

Meanwhile, a U.S. consumer survey by Coresight Research late last month found that 58 percent of Americans will avoid or limit visits to public areas, including shopping centers and entertainment venues, if the coronavirus outbreak worsens. Shopping centers and malls would be the hardest hit, with some 75 percent of respondents suggesting they will avoid retail if the coronavirus crisis widens. (Some consolation for retailers: Younger consumers are not as likely to avoid the mall as their parents and grandparents.)

“To successfully navigate this outbreak, retailers need to think about how they can best restore consumer confidence and meet changing consumer buying patterns as the virus potentially spreads,” said Kelly Lynch, retail solutions manager for analytic platform ActiveViam. “This includes making sure that their online infrastructure is strong enough to cope with an influx of online orders in affected areas, making delivery strategy changes, and just simply providing customers with clear, concise information about any changes that may impact the buying experience.”

Vendors and trade organizations are already coping with the health crisis and its mounting effects. During its year-end conference call last week, Crocs’ senior executives confirmed that “many” of the brand’s 350 partner stores in China were closed temporarily and that those remaining open on reduced schedules were experiencing “lower-than-usual traffic.” Nonetheless, the company, which sold 67.1 million pairs worldwide n 2019, said it remains “very optimistic” about its long-term growth prospects in China, although it confirmed a $40 to $60 million negative impact on 2020 results from the coronavirus.

Columbia Sportswear, which, like Nike, underwent a “deep clean” of its corporate headquarters last week, confirmed that COVID-19 is impacting its supply chain, since temporary factory closures were making it difficult to obtain raw materials. Nike, meanwhile, was forced to shutter its European headquarters for two days this week after an employee there was stricken with the virus.

And on the trade organization front, the Footwear Distributors and Retailers of America (FDRA), citing the “new heavy strains” that coronavirus has put on brands’ and retailers’ workflows, has postponed all of its March events, including its Footwear Executive Summit in Washington, D.C. and a Diversity & Inclusion Workshop scheduled for March 31 outside Boston. Yesterday, Outdoor Retailer confirmed it is closely monitoring the coronavirus situation, but is still “actively planning” to host the annual Summer Market in Denver from June 23-25.