REBusinessOnline

JLL: Coronavirus Is Impacting Retail Supply Chains

The Shops at Canal Place New Orleans

Fashion retailers, such as those at The Shops at Canal Place in New Orleans, are particularly at risk of supply-chain disruption as a result of coronavirus.

With the stock market dropping to lows unprecedented since the Great Recession on Monday and the World Health Organization (WHO) declaring the outbreak of COVID-19 a pandemic, concerns are now rising regarding coronavirus’ long-term impact on domestic investments.

But will the disease have any impact on brick-and-mortar retail? According to a research report from JLL, while retail supply chains have already been affected, the health of retail as whole depends heavily on how long the pandemic lasts.

Certain sectors have already been impacted, and those in the industry can model their current economic outlook on the course SARS (severe acute respiratory syndrome) took in 2003. However, whether that model will hold as the pandemic evolves remains to be seen.

The JLL report explains that the type of short-lived and limited outbreak created by SARS mainly affects the “first and second quarters with many retailers feeling impacts of a disrupted supply chain, but with a subsequent rebound in the following quarters.”

Sectors already affected include inventory and complex supply lines. Chinese-manufactured goods may not be able to reach retailers in the coming weeks to months, as the retailers’ existing supply diminishes.

Countries by share of global manufacturing output in 2018

Fashion stocks, especially for luxury retailers dependent on Chinese consumers have fallen quickly. The drop in tourism already evident will also impact retail.

“North American cities with large convention centers and popular tourist destinations like New York, Las Vegas and Orlando may feel impacts sooner as organizations adjust corporate travel policies, airlines reduce the number of flights and governments caution against mass gatherings,” states the JLL report. As people stay local, fewer flights and cruises will keep tourist dollars out of circulation.

“During the 2003 SARS epidemic, Toronto and Vancouver saw major declines in tourism. Travel from Asia to Canada between April and May 2003 dropped 32 percent from the previous year. However, while British Columbia’s retail sales fell by one percent in June 2003, it quickly caught up in the following months and had a minimal impact on Canada’s overall retail sales that year.”

Consumers to Feel the Influence

What may be affected if the pandemic continues at its current pace?

Current shortages indicate that consumer prices for certain products are likely to rise, impacting spending on retail as consumers shy away from higher priced goods. JLL reports that in continental Europe, electronic goods have already seen a 10 to 15 percent price increase as inventory shortages begin.

The JLL report also forecasts difficulties for brick-and-mortar retail and restaurants as shoppers avoid crowds and anxiously shun other points of exposure. If prolonged, the coronavirus could disrupt supply chains for back-to-school and holiday inventories.

JLL’s report makes clear the uncertainty to which retail is currently being exposed. The length of this pandemic will clarify the long-term impact on the industry.

Whether the coronavirus outbreak continues for weeks or months longer, the supply chain will be the first bellwether of how a global pandemic affects local commerce.

— Sarah Daniels

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