Source: Lauren Thomas, CNBC
Reducing store hours, temporarily closing locations and sending apology letters to customers for long lines and delayed appointments.
These are some unusual moves that retailers and restaurants are taking as fueled by the fast-spreading Omicron version of COVID cases across the country.
Companies no longer have to worry about closing businesses by state and local governments.
Instead, businesses are facing labor shortages as people say sick, are exposed to the virus or scramble to find childcare. And more supply chains are threatened in the form of a highly contagious variant spreading across the globe.
“There’s no doubt that staffing is definitely a big issue this time around,” said Stephanie Martz, chief administrative officer and general counsel for the National Retail Federation. “It was probably less measurable than when we were at a point in the pandemic when so much was closed and everything became so small.”
“I don’t know if I’d go so far as to say that we have an unprecedented number of people who haven’t been able to work, but it’s high,” she said. “It’s really high.”
Covid cases have increased. The US is reporting about 600,000 daily new cases for a seven-day average, up an all-time high and 72% more than a week ago, according to a CNBC analysis of data compiled by Johns Hopkins University as of Thursday.
The growing number of sick, exposed or overworked employees has prompted retailers and restaurants to take unusual steps as their current labor problems worsen. Macy’s cut store hours at locations across the country for the rest of this month. Walmart temporarily closed about 60 stores in the coronavirus hot spot in December. And other employers, including Starbucks, Chipotle and Nike, have been forced to close some of their doors because they don’t have enough people to keep them open.
Walgreens sent an apology email to customers this week, acknowledging customer complaints about long checkout lines, out-of-stock items and delays in COVID vaccine or trial appointments. In the note, company leaders noted a number of tasks that pharmacy workers are juggling – namely, delivering more than 55 million COVID vaccines and 23 million COVID tests, while still filling more than a billion prescriptions annually .
“There’s a high level of stress in the system,” Walgreens Chief Financial Officer James Kehoe said Thursday on the company’s earnings call. He said the company is going to spend about $120 million more on labor to help its thin-skinned employees.
Morgan Harris is the owner of Green Bambino’s store in Oklahoma City. She said the store, which sells baby supplies from toys to strollers, is short of staff and worries it could get worse.
Regular hours go ‘out the window’
For short-handed retailers, reducing hours has become a logical first step, said Craig Rowley, senior client partner at Korn Ferry and head of the firm’s retail practice. Some stores are trimming back on weekdays, when there is only a small percentage of sales compared to busy weekends, he said.
He said changes related to the pandemic could prompt retailers to rethink store hours permanently, especially as more sales go online.
“Lack of Labor” [Covid] Same goes for almost any customer-facing business,” Rowley said. “Retailers and restaurants are facing this in spades.”
Morgan Harris is the owner of Oklahoma City store Green Bambino, which sells baby supplies, including babies, diapers, and toys. She said she had to let go of one of the key rules of retail because she works with a staff of four — less than half of the 10 to 15 person workforce she expected. The store has had to change its schedule. It is now open five days a week instead of seven.
Now, she sees some corporate giants falling prey to the “great resignation” and doing the same, with more squeezed out of the Omicron wave.
“It used to be in retail, you never changed your hours,” she said. “He’s out the window.”
Some companies have become better at using technology to inform customers about staffing shortages or store closures. For example, a goofy Chipotle location might turn off digital orders coming in from its app and instead focus on in-store transactions, while nearby restaurants ramp up delivery and online order fulfillment.
Rowley said the good news is that retailers and restaurant chains have at least escaped the holiday rush. “The level of employees is not what they were before Christmas, so companies have that advantage,” he said.
He said retailers can ask to temporarily stay on vacation and work extra hours in the new year.
However, Harris said he worries Green Bambino may be faced with a lean workforce, even as its sales boom. Its annual revenue soared to nearly $900,000 last year – 23% more than in 2020 and 14% higher than pre-pandemic sales in 2019.
Despite seeking the help of a recruiter, the pace of job applications has slowed. And she said the Omicron wave hasn’t hit the region yet — which could mean more workers are calling to get sick.
“I would expect our workforce to shrink further, not grow,” she said. “I have little hope that suddenly we find all these wonderful people and bring them forward.”
Plus, she said, the latest wave of the pandemic could further delay the return of steady shipments of popular baby items, such as car seats and strollers. Store furniture is going out of business due to backlogged shipping times and high freight costs. It stopped accepting deposits for many items, because it couldn’t predict whether — or when — those big-ticket items would be back in stock.
“I don’t think I’m going to reinvent the business every two weeks like I was in 2020, but we don’t know what businesses we’ll have to run after the pandemic,” she said. “Uncertainty is here to stay for many more months, if not longer.”
A customer waits for contactless curbside pickup at the Recreational Equipment Inc. (REI) flagship store on Thursday, May 14, 2020 in Seattle, Washington, US.
Chona Kasinger | Bloomberg | Getty Images
Shoppers, on the other hand, have continued to spend—even if browsing online or switching to curbside pickup or home delivery instead of a few aisles—has become part of their muscle memory.
Avoiding certain public places has increased slightly again, according to a survey conducted by CoreSight Research of more than 500 US consumers on December 27 compared to previous weeks. An increasing number of consumers said they were withdrawing from activities such as international travel and use of public transport. Around 66% of the respondents said they are avoiding any public place – up from 62% when the survey was conducted on December 13.
About 38% of respondents said they were avoiding shopping centers and malls and about 33% said they were avoiding restaurants, bars and coffee shops, versus 32% and 30%, respectively, two weeks ago.
However, the company’s survey did not show any significant change in what consumers were buying or spending.
The restaurant industry could be entering another recession. Restaurant analytics firm Black Box Intelligence found that restaurant sales declined for the first time since mid-March in the week ending December 26, but the reversal in large part of the Omicron boom coincided with Christmas this year. ,
OpenTable data shows that online, phone and walk-in reservations led to fewer diners sitting by online, phone, and walk-in reservations in the United States in the first week of 2022 compared to pre-pandemic levels, but consumers may switch to takeout or take the new year. Try to stick to resolutions.
If it does, it could mean that Americans spend on goods rather than services. According to the National Retail Federation, holiday sales were on track to hit a record high of 11.5%. (Final numbers won’t be released until the end of next week.)
Jack Kleinheng, chief economist at the retail trade group, said consumers’ growing appetite for goods and reluctance to spend on travel, food and other types of expenses could fuel inflation.
John Mercer, head of research at CoreSight Research, said that for the most part, shoppers “roll their eyes, take a deep breath and sigh, and then move on as normal.”
“It’s quite different this time,” he said. “Consumers have been double-jabbed, triple-jabbed. They’ve been through this before. It’s really clear that in other countries, Omicron in general is very vulnerable.”
As of Thursday, three out of four Americans have been fully vaccinated, according to the Centers for Disease Control and Prevention. So far, 73 million people have received a booster shot—about 22% of the US population. And on Wednesday, the CDC flagged off Pfizer and BioNTech’s COVID booster shots for children ages 12 to 15.
And there is some evidence that Omicron is lighter than previous forms, according to World Health Organization officials.
This could begin to change the outlook for Americans who are getting sick. Hopkins data shows the country is seeing an average of about 1,250 deaths per day, far below the record numbers seen since last year’s holiday season, when for nearly a month starting January 2021. The daily average was above 3,000. The death toll goes down. However, the number of cases and hospitalizations tend to increase.
NRF’s Martz said both retailers and consumers have a better understanding on the coronavirus. This has led to more emphasis on tools like booster shots, at-home COVID testing and better masks, rather than wiping down counters or installing plexiglass screens.
The way the industry is proceeding is by throwing its annual convention in person. NRF’s Big Show will be held next week at the Javits Center in New York City – formerly a mega-center for COVID vaccines and possibly the source of the first known example of an omicron spreading in the United States.
Martz acknowledged that the conference would look different from pre-pandemic. All attendees must wear a mask and show proof of vaccination. The booths on the showroom floor may have less staff. And the business group will conduct COVID testing at home and host a mobile testing unit.
20,000 are expected to attend – almost half of the attendance in 2019.
Still, she said, it feels right to move forward as frontline retail workers continue to go to work in person day after day.
“We think it’s an opportune time to get back together in some fashion now,” she said, even though “it won’t look like our shows are in the past.”
CNBC Nate Ratner, Lauren Thomas, And Amelia Lucas contributed to this report.