Weather is a 365-day-a-year concern for consumer products companies and retailers. Either it’s too hot, too cold, too wet or too dry for the goods on store shelves to be desirable or the elements wreak havoc on the ability to deliver hats, gloves and bathing suits where they need to go on time. And that’s on a good day. On the worst days, the weather proves devastating to life, limb and commerce.
That was the case just over one year ago when Hurricane Maria ravaged the Puerto Rican coast. While pundits and politicians continue to argue over the facts—and the Gulf Coast braces for Hurricane Michael—the recovery continues.
At a March investment conference in San Juan, the nation’s leaders announced that “Puerto Rico is open for business.” However, reconstructing the territory’s fragile retail ecosystem has proven more challenging than anticipated, leading to shuttered stores, disappointed investors and even lawsuits filed against the parent companies of two of San Juan’s flagship stores.
After Maria, 160,000 Puerto Rican residents emigrated to the United States. The hurricane caused the biggest blackout in United States history, and many areas of the island remained without electrical power for over a year after the Category 4 storm. In the aftermath of the hurricane, many small businesses that were already struggling to keep their doors open due to Puerto Rico’s fragile economy closed up shop completely. In fact, in March of 2017, the New York Times reported that over 10,000 small businesses—almost 20 percent of the island’s total—were still closed five months later.
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“This is like the perfect storm of an economic disaster,” Javier E. Zapata-Rodríguez, deputy director of economic development for PathStone Enterprise Center, told the New York Times. “There is not enough capital flowing, and a lot of small businesses are closing up shop because they were ailing before the hurricane.”
And big box stores haven’t been immune to the devastating impact of the storm either. At the upscale Mall of San Juan, Saks Fifth Avenue and Nordstrom remained shut for months after the hurricane due to storm damage and a lack of electricity. In November, Nordstrom reported the total impact from Hurricane Maria, plus those that hit Florida and Texas, to be $20 million, or 60 basis points, in the third quarter of last year. While Nordstrom has announced its location will reopen on Nov. 9, bringing with it 90 jobs, Saks remains shuttered, a fact that has triggered a lawsuit from property owner Taubman Centers.
CEO Robert Taubman declined to go into detail, but he did address the ongoing litigation during the company’s Q2 earnings call in July. “We believe strongly, they’re required to rebuild and reopen as expeditiously as possible. They did begin remediation efforts. They haven’t begun reconstruction,” he said.
At the time of the call, occupancy in the mall stood at 86 percent, with sales “solidly above last year.” Taubman attributed the performance to the fact that island residents have fewer options of where to shop and eat following the storm. Though tourism had been off by 40 percent for the year through April, the chief executive said all indicators point to full recovery during the holidays.
Since Maria, several storms have threatened to disrupt daily life, the biggest and most recent of which this year has been hurricane Florence, which flooded cotton fields and temporarily closed textile firms. But hurricane season isn’t over yet; according to the National Weather Service, it runs from June 1 to Nov. 30 each year. As retailers in Virginia and the Carolinas struggle to recover, business leaders around the world are waking up to the reality that their company could be next.
“Having a supply chain contingency plan is critical for companies when they are faced with a natural disaster,” Brandon Rael, operations strategy and innovations strategist, told Sourcing Journal. “This enables companies to keep their operations going, while the overall recovery efforts take place.”
Ray Hartjen, marketing director at retail analytics firm RetailNext, agrees that a retailer’s insurance policy against extreme weather events all begins with a well-charted supply chain. “Identify the critical go/no-go components and develop solutions to mitigate risks, such as insurance, supplier diversity, alternate transportation routes, etc.,” he said. “[Retailers need to] map out any external dependencies and determine ready-made solutions for each. This way, when a crisis hits, companies can quickly move to a solution instead of spending valuable time developing potential solutions.”
Beyond mapping out strategies to protect their businesses in cases of extreme weather, Hartjen said working with multiple manufacturers from different areas can give retailers the opportunity to source goods through alternate channels if an extreme weather event takes out one of their suppliers.
“Having multiple suppliers means a great deal,” Hartjen says. “Retailers should work with their suppliers ahead of time to see how they can assist in continuity planning, placing some of the burden for solutions on the vendor partner, as well.”
Retailers aren’t the only ones who are learning to adapt and respond quickly to keep their businesses up-and-running during emergency situations. FedEx told Sourcing Journal there is a framework of systems in place to enable the company to immediately respond to demands placed on their supply chain during Hurricane Florence. “We have contingency plans in place to help lessen the storm’s impact on facilities and service,” the company said.
Puerto Rico’s retail infrastructure continues to recover from the aftermath of Hurricane Maria, it serves as a warning for retailers across the United States that it is time to create a contingency plan to maintain their businesses and supply chains in cases of extreme weather events.
—with additional reporting by Caletha Crawford