October 31, 2012
Hurricane Sandy Wreaks Havoc But Impact On Retail Mixed
This week’s Hurricane Sandy was as bad as (or worse than) expected, and the toll in human/personal terms was serious — in some cases severe. The retail impact is not as straightforward. While many retailers will suffer, supermarkets, chain drug stores, mass merchants and home supply stores could benefit from increased sales of generators, repair equipment, food and supplies. According to The Washington Post, the need to rebuild should create jobs and spur economic activity. With Hurricane Katrina in 2005, two months of poor job growth were followed by a strong rebound in month three, for example.
This time, according to Bloomberg, Walmart closed approximately 80 stores but had no significant damage to facilities or loss of merchandise. Target had 60 stores closed, with 30 on generator power. Home Depot was shipping 750 truckloads of equipment and supplies on Tuesday to its stores in the area. And Lowe’s said it had closed only four stores to date. On the department store side, Saks planned to reopen at least some of its stores on Wednesday; Nordstrom had 15 stores shuttered as of Tuesday; and Macy’s had up to 200 stores offline. Gap, American Eagle and JC Penney had all closed numerous stores, and Walgreen temporarily shuttered approximately 500 stores.
Numerous big box retailers implemented emergency plans to keep supplies moving, according to the Wall Street Journal. Walmart opened an emergency ops center at headquarters last week and will ship supplies in on trucks from special disaster distribution centers. Home Depot pre-loaded trucks and sent them into the area prior to the hurricane. The company made supply chain changes in order to move things in more quickly than in previous disasters. A Home Depot spokesperson told The New York Times that they reached out to get key supplies anywhere they could in order to ship them to their stores beforehand. Lowe’s said it had sent over 600 truckloads of generators, water and supplies to stores and regional distribution centers. Home Depot was managing its efforts from a 350 person command center in its Atlanta, Georgia home office.
Without major store and distribution center damage, as appears the case for most retailers now, many retailers will face a 100 percent loss of business for a few days and a probable slowdown for some period of time. Others, such as supermarkets, mass merchants and home improvement stores will actually see a moderate to large uptick in business, at least in the short-term.
- What hurricane Sandy means for the economy – The Washington Post
- Losses May Exceed Those of 2011 Storm – The Wall Street Journal
- Big Box Retailers Scramble To Blunt Sandy’s Blow – The Wall Street Journal
- New York Shops Remain Closed as Retailers Assess Damage – Bloomberg
- Home Retailers Prepare for After the Deluge – The New York Times
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Discussion Questions
What will be the short and medium-term impact of Hurricane Sandy on the retailing industry? Do retailers have an obligation to engage in altruism in a disaster in addition to making a profit where possible?
Poll
Short term — doh…the stores are closed, the subways not running, 3 feet of snow on the ground. I think there will be an impact. When it’s over, most shopping will return to normal — it’s possible we’ll see a little boomlet in home repairs and furnishings.
Of COURSE retailers have an obligation to engage in altruism in a disaster. It’s good PR and it makes good sense. We’ve been courting the retail community to support RetailROI as well — the Orphan Initiative started by the late Paul Singer and the current Greg Buzek. It’s good business to take care of the community that supports you. Just that simple.
A natural disaster creates demand for a wide range of retailers due to insurance money coming in. In stagnant markets the short-term impact of course is terrible, but in the long view, we’ve seen time and again many retailers can be better off on the whole in a year, as it may force them to rebuild and update systems in addition to demand. As to altruism, we’re all humans, not wallets. Smart retailers know this.
The impact will vary by retail segment. Certainly in the very short term, the impact will be negative. The possible exception will be locations that can get open, have items necessary to secure damaged property, food, and emergency supplies and equipment like generators, pumps, fuel for vehicles, etc. Then in the more short/medium term will come the rebuilding, refurbishing and reequipping homes.
The question mark is for those that sell non-essentials. Someone who has just spent a great deal of money and effort to get their house repaired does not seem a likely candidate to be out buying new clothes, etc. except to replace a few necessary items they may have lost.
Retailers should definitely not use Sandy as an excuse to raise prices and take advantage of the situation. The more they can do to show their concern for the customers the better they will be perceived and the impression (good or bad) they create now will last a long time.
Second question first: Altruism is good business as well as the right thing to do. It becomes an easy decision for retailers and service providers to offer help to people in need…including their own customer base. I heard Danny Meyer discussing being able to open his upper Manhattan Shake Shack locations — in order to distribute free food yesterday — even though his downtown restaurants are closed for the immediate future.
As to the effects on the retail industry, Sandy’s effects and footprint are so huge that there will absolutely be an impact on short-term sales as well as logistical issues. Longer term, the biggest benefit (as usual after an event like this) will hit the sellers of food, “necessities” and home repair products.
Still today, this “Kinder, gentler nation” of consumers appreciates the altruistic retailers. This is an emotional time for at least the next year, along the East and across the country. As the local papers state, this is the Northeast’s Katrina.
I believe this will drive incremental business in segments of retail & CPG, some of which suggested by the article. The net result will be a positive impact to the industries.
P.S., I believe this will add jobs in the near term, also.
Of course, with a disaster of this magnitude, there will be a short-term financial impact. If the NYSE is shut down, there definitely are repercussions.
Those consumers seriously affected by the storm will certainly be rethinking their holiday shopping plans. Retailers should be sensitive to that and offer concessions wherever possible.
With the hyper competitive, omni-channel marketplace — and retailers’ efforts to engage in personal relationships with individual customers — altruism is going to be a must in the areas affected, in order to retain a competitive advantage in business.
Whether or not retailers engage in charitable efforts may be dependent upon the brand’s customers and their locations, although there’s never a downside, PR-wise, to charity.
I agree with what’s been said. Short, short-term you can’t make money when the doors are boarded up. Longer short term, some sectors (like DIY) will get a shot in the arm. Medium-term things will get back to whatever passes for normal in retail.
As to “altruism” — a cynic might note it’s generally good for business, one way or the other.
For the stores destroyed or damaged, the impact is devastating in the short and long term. For the industry, there is a huge hit for the stores closed in the short term. However, there is a huge demand for basic products now, clean-up products in the near term, and all kinds of goods for rebuilding and replacing what was lost. It could be that the overall impact is a wash, but that will not be true for all retailers or for all stores.
Short term will be hard. Over the longer term, there will be a big need to replace everything that was tragically washed away. In addition, there will be a new flood — insurance money — that will fuel a huge pop in retail sales in the affected areas. Hurricane Andrew devastated south Florida in the early ’90s and, after the insurance money kicked in, the business there exploded for over a year.
Short term it’s all logistics. Medium term, it will be accessing the right products to meet consumers’ needs that have totally changed.
Retailers essentially have no obligation to do anything, let alone engage in altruism. Those that have this as part of their regular culture, however, will be better champions of it than those that may attempt to fake it for profit.
Making a profit is the reason to be a retailer — period. If you don’t, you can’t be altruistic about anything.
For a large portion of the East Coast, holiday shopping may be altogether different than previously thought. The season may change to needs rather than wants. This far into the process of the seasonal planning, retailers that have don’t have much ability to be nimble will have real challenges.
Many businesses will do what they can to help, and others will be able to do more. Anything is appreciated for the victims, and many locals will do the right thing, as they always do.
For all the looters out there, Shame On You!
First, my prayers go out for all of those who have found themselves in harm’s way of the storm.
Regarding short term impact, certain retail sectors such as hardware and home improvement (obvious) will see a boost in sales as recovery and clean-up takes place. There will be a lag as the things get rebuilt, but certain other retailers such as home furnishing, electronics, etc., will benefit as insurance money is paid out to the insured victims of the storm.
Regarding the obligation, it is events like Sandy that rally great people together for a cause bigger than just themselves. This is where the unselfish get the spotlight, even if they don’t want it.
Companies can show they care more about the customer than they do about the sale. Unfortunately, there will be retailers that may mark up their plywood and other necessities out of demand. Others will feel a moral obligation to help.
Retailers should be careful about being perceived as opportunistic in their pricing and promotions.
Citigroup’s Broadlines and Food and Drug research, headed by Deborah Weinswig, estimated last night that Hurricane Sandy will affect the bottom line “BROADLINES AND FOOD & DRUG: EXPECT (-150) TO (-250) BPS IMPACT ON DEPARTMENT STORES; DISCOUNTERS MAY EXPERIENCE SLIGHT NET BENEFIT.”
I agree with Paula Rosenblum, it is good business to treat people well and help those in your community and beyond.
Short term, stores were closed and in some areas will remain closed for several more days. Long term, things will return to a semblance of normal. We need the return in order to stabilize our psyche as a community.
Sure, home furnishings and stores related to repair parts, etc. will be busy. My hope is they will remember it is to rebuild homes, not increase their bottom lines by raising prices.
I noticed from the article that many like Home Depot and Walmart took early steps to get materials in the affected areas before the storm hit. That was a smart decision; one hopefully based on assistance not profits.
First, retailers have no OBLIGATION to engage in altruism. They can do it if they think it will generate connection in the community and ultimately lead to more sales and profit in the end. The only obligation retailers, or any company has is to deliver continuing profits and growth to their shareholders.
With regard to reaction to Sandy, my wife noted that she got a flurry of emails from retailers announcing that they would have free shipping during this period. Her comment, “Brilliant. Everybody is home and what are they going to do but go shopping online?”
That is the way retailers should be thinking about online. Their stores are not a place with walls and ceilings, their stores are wherever they are connecting with their shoppers.
Prayers go out to all those families, communities and businesses that have suffered losses during this devastating storm. I am reminded that property can be repaired or replaced. The same cannot be said of family and friends.
Long term, I have seen projections that the short term economic impact of such losses could be outweighed by longer-term development that could reach 5 to 6 times the projected damages caused by Sandy. For example, in New Jersey, the early projection is $20 billion in damages, which may result in over $100 billion in post-Sandy spending. Having said all of this, no one wanted this storm to happen. However, my mother always reminded me that there is always good that comes from bad.
Regarding good, retailers have an obligation to several publics: customers, employees, investors, community, etc. The key is to balance such obligations and insure that they act as shepherds for all, with a particular emphasis at this time to their employees and the communities in which they operate.
No one will profit from this. We all lose! Maybe Home Depot and Lowe’s will get a short-term bump, but it will eventually be overcome by increased insurance cost and higher taxes due to the cost necessary to rebuild infrastructure. A tragedy is just that, and thinking that anyone will be spared loss is folly.
In the short term, I think the impact on retail is pretty obvious — recovery and repair related segments will do well, other discretionary segments will suffer. The real question is over the longer term — do rebuilding efforts serve as an economic stimulus in the affected areas?
My sense is that it doesn’t, for two reasons. First, rebuilding money is spent pretty narrowly in the economy, primarily in the construction sector. Secondly, that spending doesn’t tend to ripple through the economy creating any great multiplier effect. People that have been through an experience like Sandy, and who have lost so much, tend to become pretty cautious in their spending habits for a while. It’s a traumatic experience, and we only need to look to the long-term impact of Katrina on the Gulf Coast to see an example of that.
For retailing as a whole, short-term, small; long-term, practically zero. Not to be uncaring here, but damage estimates of $30-$50B — and even these numbers are inflated by estimates of “lost business”(that has simply shifted to another time or place) — represent a few hours of national output. Except in a few coastal areas that suffered extensive damage, life will be back to normal by the weekend.
Well, storm-caused losses are still losses, even if one after-effect is a boost in economic activity related to re-construction. Significant value has been permanently destroyed by Sandy and some new value will likely be created too as part of the recovery. Luckily we have a large economy that can absorb the hit, but not without serious consequences.
Retailers in the affected areas have lost days of sales that will not be recovered. Some sellers of household staples and construction materials will enjoy a surge in demand over the coming few weeks. These effects will probably not be symmetrical, as discretionary dollars shift to categories which are no longer quite so discretionary.
This means that many seasonal merchandising forecasts may as well be tossed out the window. Overall consumer spending levels may remain at parity in affected regions, but we may anticipate sales of more power tools and fewer power dresses.
Like all citizens, merchants must engage in enlightened self-interest when it comes to helping the disaster recovery. Donations of life-saving commodities, such as bottled water, first aid supplies and food should be automatically offered where the need is great. Profiteering should be absolutely avoided, for reasons of morality, karma, and damage to reputation.
In the end, retailers count on the economic health of their communities to enable their stores to prosper. When making decisions in a period of crisis, this consideration should be second only to immediate physical safety.
These things aren’t called DISASTERS for nothing, are they? Not to be a downer, but there is a reality here and there is nothing positive about the losses themselves — only the response to loss.
There is real human suffering and it is just beginning. Loss of retail revenue means loss of job income for employees leading to reduced spending. Uninsured losses mean doing without and that means less spending. Many people will have to buy essentials on credit and that means less spending in the end as more money goes to interest payments.
All of us will pay for this storm because whether insured or self-insured, or do without, storms don’t pay for themselves.
On the bright side, there is a silver lining to all clouds. This will be an opportunity for many people to push the reset button on their business and personal lives and that can be a very good thing.
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Short term — doh…the stores are closed, the subways not running, 3 feet of snow on the ground. I think there will be an impact. When it’s over, most shopping will return to normal — it’s possible we’ll see a little boomlet in home repairs and furnishings.
Of COURSE retailers have an obligation to engage in altruism in a disaster. It’s good PR and it makes good sense. We’ve been courting the retail community to support RetailROI as well — the Orphan Initiative started by the late Paul Singer and the current Greg Buzek. It’s good business to take care of the community that supports you. Just that simple.
A natural disaster creates demand for a wide range of retailers due to insurance money coming in. In stagnant markets the short-term impact of course is terrible, but in the long view, we’ve seen time and again many retailers can be better off on the whole in a year, as it may force them to rebuild and update systems in addition to demand. As to altruism, we’re all humans, not wallets. Smart retailers know this.
The impact will vary by retail segment. Certainly in the very short term, the impact will be negative. The possible exception will be locations that can get open, have items necessary to secure damaged property, food, and emergency supplies and equipment like generators, pumps, fuel for vehicles, etc. Then in the more short/medium term will come the rebuilding, refurbishing and reequipping homes.
The question mark is for those that sell non-essentials. Someone who has just spent a great deal of money and effort to get their house repaired does not seem a likely candidate to be out buying new clothes, etc. except to replace a few necessary items they may have lost.
Retailers should definitely not use Sandy as an excuse to raise prices and take advantage of the situation. The more they can do to show their concern for the customers the better they will be perceived and the impression (good or bad) they create now will last a long time.
Second question first: Altruism is good business as well as the right thing to do. It becomes an easy decision for retailers and service providers to offer help to people in need…including their own customer base. I heard Danny Meyer discussing being able to open his upper Manhattan Shake Shack locations — in order to distribute free food yesterday — even though his downtown restaurants are closed for the immediate future.
As to the effects on the retail industry, Sandy’s effects and footprint are so huge that there will absolutely be an impact on short-term sales as well as logistical issues. Longer term, the biggest benefit (as usual after an event like this) will hit the sellers of food, “necessities” and home repair products.
Still today, this “Kinder, gentler nation” of consumers appreciates the altruistic retailers. This is an emotional time for at least the next year, along the East and across the country. As the local papers state, this is the Northeast’s Katrina.
I believe this will drive incremental business in segments of retail & CPG, some of which suggested by the article. The net result will be a positive impact to the industries.
P.S., I believe this will add jobs in the near term, also.
Of course, with a disaster of this magnitude, there will be a short-term financial impact. If the NYSE is shut down, there definitely are repercussions.
Those consumers seriously affected by the storm will certainly be rethinking their holiday shopping plans. Retailers should be sensitive to that and offer concessions wherever possible.
With the hyper competitive, omni-channel marketplace — and retailers’ efforts to engage in personal relationships with individual customers — altruism is going to be a must in the areas affected, in order to retain a competitive advantage in business.
Whether or not retailers engage in charitable efforts may be dependent upon the brand’s customers and their locations, although there’s never a downside, PR-wise, to charity.
I agree with what’s been said. Short, short-term you can’t make money when the doors are boarded up. Longer short term, some sectors (like DIY) will get a shot in the arm. Medium-term things will get back to whatever passes for normal in retail.
As to “altruism” — a cynic might note it’s generally good for business, one way or the other.
For the stores destroyed or damaged, the impact is devastating in the short and long term. For the industry, there is a huge hit for the stores closed in the short term. However, there is a huge demand for basic products now, clean-up products in the near term, and all kinds of goods for rebuilding and replacing what was lost. It could be that the overall impact is a wash, but that will not be true for all retailers or for all stores.
Short term will be hard. Over the longer term, there will be a big need to replace everything that was tragically washed away. In addition, there will be a new flood — insurance money — that will fuel a huge pop in retail sales in the affected areas. Hurricane Andrew devastated south Florida in the early ’90s and, after the insurance money kicked in, the business there exploded for over a year.
Short term it’s all logistics. Medium term, it will be accessing the right products to meet consumers’ needs that have totally changed.
Retailers essentially have no obligation to do anything, let alone engage in altruism. Those that have this as part of their regular culture, however, will be better champions of it than those that may attempt to fake it for profit.
Making a profit is the reason to be a retailer — period. If you don’t, you can’t be altruistic about anything.
For a large portion of the East Coast, holiday shopping may be altogether different than previously thought. The season may change to needs rather than wants. This far into the process of the seasonal planning, retailers that have don’t have much ability to be nimble will have real challenges.
Many businesses will do what they can to help, and others will be able to do more. Anything is appreciated for the victims, and many locals will do the right thing, as they always do.
For all the looters out there, Shame On You!
First, my prayers go out for all of those who have found themselves in harm’s way of the storm.
Regarding short term impact, certain retail sectors such as hardware and home improvement (obvious) will see a boost in sales as recovery and clean-up takes place. There will be a lag as the things get rebuilt, but certain other retailers such as home furnishing, electronics, etc., will benefit as insurance money is paid out to the insured victims of the storm.
Regarding the obligation, it is events like Sandy that rally great people together for a cause bigger than just themselves. This is where the unselfish get the spotlight, even if they don’t want it.
Companies can show they care more about the customer than they do about the sale. Unfortunately, there will be retailers that may mark up their plywood and other necessities out of demand. Others will feel a moral obligation to help.
Retailers should be careful about being perceived as opportunistic in their pricing and promotions.
Citigroup’s Broadlines and Food and Drug research, headed by Deborah Weinswig, estimated last night that Hurricane Sandy will affect the bottom line “BROADLINES AND FOOD & DRUG: EXPECT (-150) TO (-250) BPS IMPACT ON DEPARTMENT STORES; DISCOUNTERS MAY EXPERIENCE SLIGHT NET BENEFIT.”
I agree with Paula Rosenblum, it is good business to treat people well and help those in your community and beyond.
Short term, stores were closed and in some areas will remain closed for several more days. Long term, things will return to a semblance of normal. We need the return in order to stabilize our psyche as a community.
Sure, home furnishings and stores related to repair parts, etc. will be busy. My hope is they will remember it is to rebuild homes, not increase their bottom lines by raising prices.
I noticed from the article that many like Home Depot and Walmart took early steps to get materials in the affected areas before the storm hit. That was a smart decision; one hopefully based on assistance not profits.
First, retailers have no OBLIGATION to engage in altruism. They can do it if they think it will generate connection in the community and ultimately lead to more sales and profit in the end. The only obligation retailers, or any company has is to deliver continuing profits and growth to their shareholders.
With regard to reaction to Sandy, my wife noted that she got a flurry of emails from retailers announcing that they would have free shipping during this period. Her comment, “Brilliant. Everybody is home and what are they going to do but go shopping online?”
That is the way retailers should be thinking about online. Their stores are not a place with walls and ceilings, their stores are wherever they are connecting with their shoppers.
Prayers go out to all those families, communities and businesses that have suffered losses during this devastating storm. I am reminded that property can be repaired or replaced. The same cannot be said of family and friends.
Long term, I have seen projections that the short term economic impact of such losses could be outweighed by longer-term development that could reach 5 to 6 times the projected damages caused by Sandy. For example, in New Jersey, the early projection is $20 billion in damages, which may result in over $100 billion in post-Sandy spending. Having said all of this, no one wanted this storm to happen. However, my mother always reminded me that there is always good that comes from bad.
Regarding good, retailers have an obligation to several publics: customers, employees, investors, community, etc. The key is to balance such obligations and insure that they act as shepherds for all, with a particular emphasis at this time to their employees and the communities in which they operate.
No one will profit from this. We all lose! Maybe Home Depot and Lowe’s will get a short-term bump, but it will eventually be overcome by increased insurance cost and higher taxes due to the cost necessary to rebuild infrastructure. A tragedy is just that, and thinking that anyone will be spared loss is folly.
In the short term, I think the impact on retail is pretty obvious — recovery and repair related segments will do well, other discretionary segments will suffer. The real question is over the longer term — do rebuilding efforts serve as an economic stimulus in the affected areas?
My sense is that it doesn’t, for two reasons. First, rebuilding money is spent pretty narrowly in the economy, primarily in the construction sector. Secondly, that spending doesn’t tend to ripple through the economy creating any great multiplier effect. People that have been through an experience like Sandy, and who have lost so much, tend to become pretty cautious in their spending habits for a while. It’s a traumatic experience, and we only need to look to the long-term impact of Katrina on the Gulf Coast to see an example of that.
For retailing as a whole, short-term, small; long-term, practically zero. Not to be uncaring here, but damage estimates of $30-$50B — and even these numbers are inflated by estimates of “lost business”(that has simply shifted to another time or place) — represent a few hours of national output. Except in a few coastal areas that suffered extensive damage, life will be back to normal by the weekend.
Well, storm-caused losses are still losses, even if one after-effect is a boost in economic activity related to re-construction. Significant value has been permanently destroyed by Sandy and some new value will likely be created too as part of the recovery. Luckily we have a large economy that can absorb the hit, but not without serious consequences.
Retailers in the affected areas have lost days of sales that will not be recovered. Some sellers of household staples and construction materials will enjoy a surge in demand over the coming few weeks. These effects will probably not be symmetrical, as discretionary dollars shift to categories which are no longer quite so discretionary.
This means that many seasonal merchandising forecasts may as well be tossed out the window. Overall consumer spending levels may remain at parity in affected regions, but we may anticipate sales of more power tools and fewer power dresses.
Like all citizens, merchants must engage in enlightened self-interest when it comes to helping the disaster recovery. Donations of life-saving commodities, such as bottled water, first aid supplies and food should be automatically offered where the need is great. Profiteering should be absolutely avoided, for reasons of morality, karma, and damage to reputation.
In the end, retailers count on the economic health of their communities to enable their stores to prosper. When making decisions in a period of crisis, this consideration should be second only to immediate physical safety.
These things aren’t called DISASTERS for nothing, are they? Not to be a downer, but there is a reality here and there is nothing positive about the losses themselves — only the response to loss.
There is real human suffering and it is just beginning. Loss of retail revenue means loss of job income for employees leading to reduced spending. Uninsured losses mean doing without and that means less spending. Many people will have to buy essentials on credit and that means less spending in the end as more money goes to interest payments.
All of us will pay for this storm because whether insured or self-insured, or do without, storms don’t pay for themselves.
On the bright side, there is a silver lining to all clouds. This will be an opportunity for many people to push the reset button on their business and personal lives and that can be a very good thing.