Irene Vs. Retailers
It’s been quite a week for the East Coast. First came an earthquake (we still can’t believe it) and then Hurricane (later tropical storm) Irene. That latter event has turned into the gift that keeps giving as communities continue to deal with record flood levels days after rain and wind have passed.
Retailers had to ramp up to meet the demand for bottled water, batteries, flashlights and a host of products that consumers needed in preparation for the storm.
Locally, here in this area of New Jersey, stores were overwhelmed by demand. Take bottled water, for example. Authorities recommended that each household have one gallon of water per person for three to seven days. With millions of people in the path of the storm, it took minutes for large sections to be completely cleaned out.
This past Saturday morning, one shipment of bottled water barely made it off the delivery truck. While shopping for supplies at a local supermarket, an announcement was made that a truck was pulling up outside the store with bottles of water. Shoppers quickly queued up outside the store and began grabbing cases as soon as pallets hit the ground.
Retailers, as a piece on the National Retail Federation’s Big Blog pointed out, tracked news reports and made use of weather data to determine where to direct resources. Showing that government and business can work together, the U.S. Department of Homeland Security’s Critical Infrastructure Division briefed the NRF on the Irene’s "projected path, damage estimates, emergency response data such as access and credentialing information once the roads were safe to travel, and links to information about preparation steps." The NRF then briefed members.
Retail chains, the NRF blog mentioned, both Home Depot and Walmart, showed they were largely up to the task of getting products to stores and staying open to supply consumers. Most stores in the path of the storm have reopened and life, albeit more slowly in some places than others, is returning to normal. Walmart, for example, has reopened 263 of its 298 stores on the East Coast closed during the storm.
The industry has learned from each preceding natural disaster to improve performance for the next. What we wonder, have they learned from this one?
Discussion Questions
Discussion Questions: What effect do you think Hurricane Irene will have on retail numbers for August and September? What is your assessment of the retail industry’s response to Hurricane Irene?
Of course if stores are closed, they will lose. Winners are those that have the wherewithal to keep open. After Hurricane Katrina, FEMA was passing out vouchers like old Halloween candy to just about anybody who queued up. Grocers got wiped out as shoppers stocked up on this windfall. Then sales were off for a bit while consumers were living off their free stockpile of food. Irene is a more manageable storm so I think things will be back to normal very soon.
Irene giveth, and Irene taketh. While the building supply, grocery, and drug stores all will benefit, the specialty stores lost a back-to-school weekend. The upside is those stores that were already struggling will get to blame the weather!
In regard to retailer’s responses, I tip my hat to my local Whole Foods. Not only did they bring pallets of water in during the storm, but they also posted pictures of them on their Facebook with updates on their open status. Great job Bedford, MA Whole Foods team!
The numbers that stores report for August will vary widely by segment, and will depend on the chains’ geographic spread. Any store dependent on impulse traffic to sell discretionary goods is likely to show soft numbers, especially with the effect on a key back-to-school shopping weekend. On the other hand, the business was probably robust for DIY and discount chains last week, selling everything from batteries to bottled water. But overall, I expect to see some pent-up demand on the apparel side of the business spilling over from August into September.
The hype machine was there. People stocked up. I think we will see a jump up, but since there wasn’t any extended period of supply disruption, the question becomes, will consumers work through those supplies first or keep them and purchase again? Based on current consumer confidence trends, retailers will see a small slowdown in September while people work through what they have.
There was a cartoon in today’s paper that showed work people scurrying about cleaning up debris after Irene, re-establishing power lines (and restocking stores), labeled “The Second Stimulus.” In that context, Irene was a stimulus and the retail responded very well.
When there is a great unforeseen demand for products and service, the retail industry is always a great responder. But what is needed for this September and thereafter is the emergence of the still untapped genius that can create consistent ramped up consumer demand via “Steve Jobs-type” innovations rather than hurricanes and tornadoes.
I agree — different sectors will fare differently. Grocery will be up, hotels will be up (they were all booked when I checked for my family), and formal dining establishments will be down.
Given all the notice, I was disappointed to hear how many DIY stores ran out of staples like batteries, flashlights and lamps. I have friends and relatives on Long Island and by Friday there was nothing to be found. I call that “opportunity missed”.
Net, obviously a boon for home repair stores and providers, and a dampening effect on apparel. Unfortunately, the Northeast is one area that still has a “traditional” back to school calendar.
The spike in sales for the pre-Irene rush was surely appreciated by most retailers (although store associated looked pretty dazed and a little overwhelmed), but now that many homes are fully stocked, supermarkets may suffer a lack of traffic for awhile. (Certainly grocery stores were empty on the Monday after the storm.) What will now be lost are the invaluable impulse sales that result from high traffic moving through a store’s aisles, and that economic blow could be considerable. Some supermarket, drug and mass chains have begun to take a more informed view of disaster preparation. Indeed, at an industry roundtable I participated in earlier this year, one merchant’s suggestion was to begin promoting disaster preparation six months prior to the season, with the thought that consumers might appreciate that as an option to a mad crush the day before the arrival of the storm — or in some parts of the country, the tornado season.
Disaster preparation should probably be part of every mass market chain’s seasonal programming, and retailers should take a long view of prompting families to prepare well in advance of the hurricane or tornado season. It would certainly be a public service that could very well also be good business.
My take is retail numbers will be steady, neither up nor down, with the exception of those selling clothing and necessary school supplies. Those will be up and well they should be.
The downside are the resort areas along the east coast from North Carolina through New England. Hurricane Irene battered those areas during the last full week of summer before Labor day. They got hit at the time when their numbers for the year are met, exceeded or down. There is no way those leaving the resorts are returning for the few days they have remaining. So hotels, restaurants and bars are going to lose a small but significant part of their season.
Disaster preparation should be an integral page in every retailer’s manual.
Perhaps most interesting to Irene was some retailers’ creative use of Facebook and other social media before, during and after the storm.
Disasters are unique opportunities for retailers/businesses to build relationships. For example, one of the Westin hotels in NYC provided a free brunch for their guests on Sunday morning after the storm had passed because they knew all the other restaurants were closed. They took what could have been a profitable morning and turned it into an investment for long term loyalty.
The lesson for retailers is to think big and look for opportunities to delight your customers.
Mostly what we’ve learned – well, re-learned – is how New York-centric the media is: building up with exaggerated (I’ve even heard the word “irresponsible”) claims about storm surges, and then yawning “it was nothing” Monday morning…as upstate and Vermont were washed away. (There’s been some speculation this disconnect may create apathy next time around, but hurricanes are infrequent enough in the NE that I’m not sure anyone will remember.)
My brother, a D.C. attorney who lives in Georgetown, had this tongue-in-cheek reply when I inquired about his family’s safety following their recent earthquake and visit by Irene: “I found a locust on the front porch today” (plague #8, Exodus 10:1-20). Jim and I, as Red Cross lifeguards, worked shoulder-to-shoulder to rescue folks in the aftermath of the ’66 Topeka tornado. He knows a violent natural disaster when he sees one.
Not to diminish the impact of the flooding and loss of power to seven million East Coasters caused by Irene. And sadly, there was loss of life as a result. But they could have left. You can dodge a hurricane and floodwaters, but you can’t dodge a tornado. And as Ann Coulter (an earthquake-jaded Californian like me) recently said regarding the East Coast earthquake, “Our hearts and prayers go out to those who almost lost their balance.”
Retail numbers in the northeast will dip, of course, until banking connections are restored and insurance payments are received. It always happens that way. The floodwaters are already receding and workers are finding ways to get back to work.
Here in my little corner of New England, my power is still out, so I might be a bit jaded. (Thank you National Grid. Perhaps if I actually saw a few more trees down I might understand better why the ENTIRE TOWN is still dark!)
My client base is primarily independent retailers, several without power as well. For them, this wasn’t an opportunity to stock up on bottled water or batteries; that’s not their business. For them, this really is a disaster, for they are unable to open, and the lost sales are really beginning to hurt.
In this economic environment, independent retailers have to be at their very best because the margin for error is slim. If you’re in an affected area, anywhere along the eastern seaboard, and you drive by a dark boutique, dry cleaner, convenience store, gas station or pizza parlor, this is where the impact is at it’s most catastrophic.
Large retailers, by and large, have crisis plans in place, and home offices can quickly support the regional and local teams. Well run independents, who are consummate entrepreneurs, think through for the inevitable “bumps in the road.”
There will be displaced retail dollars, to be sure, with some categories performing well (in crisis we need water, food, shelter, repairs to structures, etc.) and others losing a step (you’re probably not out buying new car or lawn mower or sweater for the fall at this point in time — that could come later, if a car needs to be replaced).
Total retail sales become a wash — in no way intended to be a pun. The “Broken Theory of Economics” simply does not work in this instance for the larger economy. There will be winners and, sadly, losers.