Business

Omicron exacerbates labor shortages and supply chain problems for retailers

The shelf is empty while shoppers shop in Columbus, Ohio.

Matthew Hatcher | Getty Images News | Getty Images

Reducing store opening hours, temporarily closing premises and sending letters of apology to customers for long queues and delayed appointments.

Here are some of the unusual steps retailers and restaurants are taking as the number of Covid cases in the country skyrockets, fueled by the rapidly spreading omicron variant.

Companies no longer worry about state and local government shutdowns.

Instead, businesses are coping with labor shortages as people cause illness, catch the virus, or try to find childcare. And the threat of new supply chain problems looms as the highly contagious variant spreads around the world.

“There is no doubt that the staffing issue is definitely a big issue this time around,” said Stephanie Martz, chief administrative officer and general counsel for the National Retail Federation. “It may have been less measurable when we were at the point of the pandemic, when so many were closed and everything was so reduced.”

“I don’t know if I can go so far as to say that we have an unprecedented number of people unable to work, but it is large,” she said. “It’s really high.”

The number of Covid cases has skyrocketed. The US reports a seven-day average of about 600,000 new cases daily, a record high and 72% higher than a week earlier, according to an analysis of CNBC data compiled by Johns Hopkins University on Thursday.

Source: Lauren Thomas, CNBC.

The growing number of sick, unprotected or overworked employees has forced retailers and restaurants to take unusual steps as their existing work problems escalate. Macy’s has slashed opening hours for stores nationwide for the rest of this month. In December, Walmart temporarily closed nearly 60 stores in coronavirus hotspots. And other employers, including Starbucks, Chipotle and Nike, have been forced to close some of their doors because they simply don’t have enough people to keep them open.

Walgreens sent out an apology email to customers this week confirming customer complaints about long checkout lines, out of stock, and delays in Covid vaccinations or test appointments. In the note, company executives mentioned the many challenges that pharmacies manipulate, namely providing over 55 million Covid vaccines and over 23 million Covid tests, while issuing over a billion prescriptions annually.

“The system is under high stress,” Walgreens CFO James Kehoe said Thursday in a phone call about the company’s profit and loss. He said the company is going to spend roughly $ 120 million more in labor costs to help its delicate workforce.

Morgan Harris is the owner of the Green Bambino store in Oklahoma City. She said the store that sells baby products, from toys to strollers, is struggling with a shortage of staff and she fears the situation could worsen.

Morgan Harris

Ordinary hours go out the window

Craig Rowley, Korn Ferry’s Senior Account Partner and Head of Retail Practice, said that for retailers with a shortage of working hours, cutting back on hours was a logical first step. Some stores cut sales on weekdays, when they account for only a small percentage of sales compared to busier weekends, he said.

He said the changes associated with the pandemic could prompt retailers to constantly revise store opening hours, especially as more sales move online.

“Lack of labor from [Covid] goes to just about any customer-centric business, Rowley said. “Retailers and restaurants are facing this hugely.”

Morgan Harris owns a Green Bambino store in Oklahoma City that sells baby products including overalls, diapers and toys. She said she had to abandon one of the cardinal rules of retail because she works with a staff of four – less than half of the 10-15 staff she expected. The store had to change its opening hours. It is now open five days a week instead of seven.

She now sees some corporate giants doing the same when they are hit by the Great Resignation and are further compressed by the omicron wave.

“In the past, in retail, you never changed your opening hours,” she said. “It’s outside the window.”

Some companies are making better use of technology to notify customers of staff shortages or store closings. For example, Chipotle’s understaffed establishment might turn off digital orders coming from its app and instead focus on in-store transactions while nearby restaurants do delivery and online orders.

Rowley said the good news is that retailers and restaurant chains have at least gotten through the holiday bustle. “Staffing is not what it was before Christmas, which is why companies have such an advantage,” he said.

Retailers may even ask temporary vacation workers to stay and work extra hours until the new year, he said.

Harris, however, expressed concern that the Green Bambino may have to cope with a leaner workforce, even as its sales are skyrocketing. Its annual revenue rose to nearly $ 900,000 last year – 23% higher than in 2020 and 14% higher than before the 2019 pandemic sales.

The number of job applications dropped to a minimum, despite the fact that they resorted to the help of a recruiter. And she said the omicron wave hasn’t hit the region yet, which could mean more employees will be calling sick.

“I expect our staff to shrink even more, not increase,” she said. “I have very little hope that all of a sudden we will find all these amazing people and put them in order.”

In addition, the latest wave of the pandemic could further delay a return to a stable supply of popular baby products such as car seats and strollers, she said. The store is leaving the furniture business due to delays in delivery and higher shipping costs. He stopped accepting deposits for many goods because he could not predict whether – and when – these high-value goods would return to the warehouse.

“I don’t feel like I’m reinventing the business every two weeks like in 2020, but we have no idea what companies we will have to run after the pandemic,” she said. “Uncertainty will persist for several more months, if not longer.”

Customer awaits contactless pickup at Recreational Equipment Inc.’s flagship store. (REI) in Seattle, Washington, USA on Thursday, May 14, 2020.

Chona Kasinger | Bloomberg | Getty Images

Muscle memory

Shoppers, on the other hand, continued to spend – even as some browse online rather than in the aisles, or switch to pickup or home delivery, which has become part of their muscle memory.

Avoidance of certain public places has slightly increased again, compared to previous weeks, according to a December 27 poll by Coresight Research of more than 500 US consumers. A growing number of consumers said they are moving away from activities such as international travel and the use of public transport. Nearly 66% of respondents said they avoid any public places, up from 62% when the poll was conducted on December 13.

About 38% of respondents said they avoid shopping malls and malls, and about 33% said they avoid restaurants, bars and cafes, up from 32% and 30%, respectively, two weeks earlier.

However, the company’s research did not reveal any significant changes in what consumers buy or how much they spend.

The restaurant industry may begin another recession. Restaurant analyst firm Black Box Intelligence found that restaurant sales declined for the first time since mid-March in the week ending December 26, but attributed the reversal in large part to the fact that Christmas fell on the weekend this year, as well as the surge in omicrons. …

OpenTable data shows that in the United States, sit-down meals ordered online, over the phone, and without appointment have dropped from pre-pandemic levels in the first week of 2022, but consumers may be switching to takeout or trying to stick to New Year’s promises.

If it works, it could mean that Americans will spend their money on things rather than services. Holiday sales were approaching an all-time high of 11.5%, according to the National Retail Federation. (Final figures will not be released until the end of next week.)

This was stated by Jack Kleinhenz, chief economist of the retail group. increased consumer appetite for goods and reluctance to spend money on travel, restaurants and other types of expenses can contribute to inflation.

John Mercer, head of research at Coresight Research, said that for the most part, the shopper “rolls his eyes, takes a deep breath and sighs, and then kind of behaves as usual.”

“It’s different this time,” he said. “Consumers have been hit double, triple hit. They’ve been through this before. It is indeed clear that in other countries the omicron as a whole is much weaker. “

Almost three out of four Americans are fully vaccinated as of Thursday, according to the Centers for Disease Control and Prevention. To date, 73 million people have received revaccinations, which is approximately 22% of the US population. And on Wednesday, the CDC gave the green light to Pfizer and BioNTech’s Covid injections for children ages 12-15.

And there is some evidence that the omicron is softer than previous options, according to the World Health Organization.

This could begin to change the mindset of sick Americans. The country averages about 1,250 deaths per day, according to Hopkins, well below the record numbers seen since last year’s holiday season, when the average daily deaths hovered above 3,000 for the month beginning in January 2021. The death toll tends to lag behind. however, the number of cases and hospitalizations is increasing.

NRF’s Martz said both retailers and consumers are better aware of the coronavirus. This has led to more focus on tools like booster shots, home Covid tests and better quality masks, rather than wiping down counters or installing plexiglass screens.

One of the ways the industry is moving forward is by hosting the annual conference in person. The big NRF show will take place next week in New York at the Javits Center – formerly a mega-center for Covid vaccines and possibly the source of the virus. the first known proliferation of omicrons in the United States.

Martz acknowledged that the conference will look different than before the pandemic. All participants must wear masks and provide proof of vaccination. Booths in the showroom may have fewer staff. And the sales team will distribute Covid tests at home and host mobile testing.

Around 20,000 attendees are expected – roughly half of 2019 attendance.

Still, it would be right to move forward, she said, as retail workers at the forefront continue to go to work in person day after day.

“We think now is the right time to somehow get back to life together,” she said, even if “it doesn’t look like our past concerts.”

CNBC Nate Rattner, Lauren Thomas, and Amelia Lucas contributed to this report.


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