06/29/2020
After 9/11, I remember hearing people say, “This changes everything,” and “Nothing will ever be the way it used to be.” It may have felt that way, but it wasn’t true.
It certainly changed the way we boarded airplanes, and it did change everything for those who went off to fight wars in Afghanistan and Iraq, and for their families, but that was a small percentage of Americans. Most of us continued to work at the same jobs in the same manner. We got to those jobs by the same means of transportation, and returned to the same homes.
We continued to get paid, and to spend our money on the sorts of things we always had. Our leisure activities were pretty much unchanged.
You could argue that 9/11 changed our national psyche, or that it didn’t. I’m agnostic on that debate, but I know that it did not change everything.
The coronavirus changed everything. I don’t know anyone whose life was not altered dramatically by the pandemic. I can’t think of a single business, let alone an entire industry, that was not affected in ways great and small.
That’s not to say that everyone has been affected to the same degree. If your business depends upon a large number of people being confined at the same time in the same space, then the effect on you is far more drastic than it is for a business that provides professional services one on one, for example.
I wouldn’t want to be running an airline right now, let alone a cruise-ship line or a nursing home. They talk a lot about leaving the middle seats empty, but actually that wouldn’t bring them anywhere close to social distancing. On an aircraft designed to carry 200 passengers, you could fit about 20 if you were to keep more than 6 feet apart.
Then there is the problem that no one wants to be locked up with any sized group of strangers for three hours. There is no restriction on flying right now, but I heard recently that Delta has more pilots on an average day than it has customers.
I guess that beats industries which have no customers at all, like professional sports, plays, concerts, movie theaters, theme parks, museums, etc. Each of those businesses is trying to start up right now in some fashion, but it is hard to see how their model makes a profit. I have a friend who is a very successful public speaker, but it just doesn’t work without the public part.
There are two industries that are even more familiar to nearly everyone, employ far more people, and are in almost equally bad shape. One of them is the restaurant business, which normally accounts for around 15 million jobs at 660,000 locations. That would be 10 percent of the total American workforce.
Virtually all of those restaurants shut down their table service for several months beginning in mid-March, resulting in a 70-percent drop in business at sit-down establishments, in spite of an increase in takeout. The food and beverage industry suffered 60 percent of U.S. job losses in March.
Reopening is especially tricky because restaurants have traditionally needed to be crowded at peak hours in order to operate in the black. If state governments restrict restaurants to operate at, say, half their previous capacity, it’s like saying, “You can run your business, but you can’t make any money.”
The only viable options I can think of are either to raise prices, or find a way to spread business into other times of day. Both seem problematic, but necessity is the mother of invention, and without some original thinking we could lose a shocking number of our favorite eateries.
As large and important as that industry is, the other familiar segment is much bigger. The retail sector employs about twice as many people, and represents 6 percent of the economy.
Unlike the restaurant business, retail was already under a lot of stress before the coronavirus struck, having lost market share to online merchants steadily over the past 15 years.
The shutdown pushed several teetering giants over the edge, including J .C. Penney, Neiman-Marcus and J.Crew, all of which will remain with us in some form or other for the time being. Their size might give the impression that large retailers were especially hard hit by the current crisis, but that would be misleading.
There is general consensus among market analysts that the reverse is true. The shutdown was devastating to small retailers, which will ultimately devolve to the benefit of large ones, accelerating a consolidation that has been going on for years.
Walmart, Target, Costco, Lowes and Home Depot all prospered throughout the spring in terms of sales and profits, as well as their stock valuation. Grocery and liquor stores also did well, but most other retailers suffered.
In my home state of New York, and pretty much everywhere else, the merchants listed above were all deemed essential and allowed to remain open. Of course they were permitted to sell all their merchandise, not just the essential items, giving them a distinct advantage over the shuttered stores that carried those “non-essential” products.
I don’t have any statistics on art materials retailers during shutdown, only anecdotes, but I think I can make a couple of generalizations. Virtually every store in the industry was closed to foot traffic from mid-March through at least mid-May, but most retailers encouraged customers to shop online or by phone.
That effort probably worked well for you to the extent that you were already good at it before the pandemic. A company does not become proficient at ecommerce overnight, especially in the face of those who are very good at it indeed (Amazon).
The most striking retail development of the shutdown though, was not that the big got bigger or that the internet merchants gained more market share. It was that millions of people adjusted to grocery shopping without setting foot in a supermarket.
Like Zoom conferencing, curb service was not a new idea, and had in fact been growing rapidly in popularity pre-virus, but the lockdown made it a rocket. It became so commonplace that it was a part of the instructions for reopening stores issued by New York State. “Provide remote shopping alternatives for customers, including click and collect, delivery and shop by phone …”
Sometimes opportunities arrive quietly in the night, and other times they roar up with lights flashing. I think this is one of the latter.
You can provide a service that the internet cannot, and you can do it better than anyone else. Tick-tock.
You can e-mail Kevin at kfahy@fwpi.com
