While the nation’s capital may not be known for its sartorial sensibilities, members of the apparel retail community are paying more attention than ever to what’s happening on The Hill.
As the spread of the coronavirus pandemic derails the sector’s sales and threatens the economy, lawmakers have pushed through emergency measures to stimulate commerce and aid embattled businesses.
Just weeks after passing a $2 trillion Phase III coronavirus stimulus bill, legislators are already working to add more funds to the pot. While measures to add $250 billion to the Paycheck Protection Program—which aims to keep employees across the nation on payroll—reached a stalemate on Thursday, Congress has expressed an urgent desire to push through more funding.
Sourcing Journal spoke with Sen. Marsha Blackburn (R-TN) about the implications of the Coronavirus Aid, Relief, and Economic Security (CARES) Act bill for retail—as well as the benefits of a potential cash infusion.
Bridging the gap to recovery
“The way I think it is going to be most helpful is to provide that continuum,” she said of the push for further funding. “If [businesses] are in this program, they now have a window to bridge them to the other side, to where we get to a recovery.”
Businesses that are eligible for CARES Act benefits can pull 250 percent of their monthly salary base, she said, and she hopes they will view the $2 trillion-plus package as a life raft.
“Individuals were asked to shutter their stores and cease operations by the federal government,” she explained, adding that legislators now feel that it is incumbent upon the government to bolster the industry in a time of need.
“My hope is that people will look at it in that manner,” she said. The senator, who ran a marketing company that worked with small businesses, said former clients chafe at the idea of needing a government handout.
“I have talked to a lot of small business owners… and it’s a little bit aggravating for them,” she said. “People don’t like for it to be seen as stimulus, because they say, ‘We didn’t do anything wrong.’”
However, she said, the federal government must take these measures to “save these businesses and help them survive.”
The senator’s home state houses its own retail stalwarts, like footwear firm Genesco and big-box retailer Dollar General, which operates 1,600 stores across the country.
Both businesses employ well more than 500 associates, making them ineligible for certain Small Business Association (SBA) benefits. But Phase III measures could help prop up their businesses nonetheless, the senator said.
“The SBA program isn’t going to fit with your larger employers, but what it does do is take care of a lot of these small businesses that do contract work,” she said, explaining that those independent businesses running logistics and delivering for larger ones will qualify, effectively keeping a Genesco or Dollar General’s operations humming.
“Many of these are mom-and-pop, self-employed people in the logistics sector,” she said. The same is true for some of the small independent retailers selling Genesco’s shoes in their stores.
There’s a vested interest, Sen. Blackburn said, in keeping chains like Dollar General open to the extent possible—especially in areas less impacted by the virus, where mandatory store closures have not been enforced.
“In so many rural communities, they are the places that sell consumables and groceries and items that are incredibly important,” she said. Small, local retailers selling non-essential goods may benefit from getting creative with customer engagement, she added.
“I have been really encouraged by friends that are in the retail space,” she said. “They are making phone calls to customers, they are doing touch-bases, sending emails—things of that nature that maybe they had not done in the past.”
Sen. Blackburn described a Tennessee retail store that is keeping operations running with a reduced (and socially distanced) staff, now touting deliveries that are “faster than Amazon.”
“They’re a small chain with just a few stores—a little guy in this space,” she said. “But they are helping customers find things they need, and then having them delivered quickly” by store staff.
Retailers have inventory to sell, and they must find a way to move it. “They had just taken orders on their spring and early summer merchandise—and then what happens? The bottom falls out,” she said. “They have 30-60 days to pay those invoices, so they are pushing things out in a different way.”
A different market
American businesses across the retail sector—ranging from small, local operations to large household name brands—are taking sometimes extreme measures to stay afloat.
Earlier this week, Gap announced cancellations on all upcoming orders through the fall season. PVH Corporation and TJX Companies released plans this week to furlough much of their retail and distribution center staff, amounting to thousands of employees cut loose across the country.
When asked about how these current measures will position retailers and brands for a future recovery, the senator quoted a conservative icon. “Ronald Reagan used to say something that we should remember right now,” she said. “‘You can bet on hope, or you can bet on fear.’”
As the curve begins to flatten, Sen. Blackburn believes people will be ready to get back to work, and consumers will be ready to shop.
“I think there will be an appetite for purchasing as we move on through the fall and the summer, and there’s going to be a little bit of pent-up demand,” she said.
While the senator admitted the post-coronavirus economy could be “a little bit of a different market,” with shoppers “focusing more on necessities instead of luxuries,” she insisted that a general desire for new duds, like back-to-school clothes for growing kids, is inherent in our culture.
“There are some things like that, that are just not going to change,” she said.
While she declined to provide guidance to retailers and brands thinking of canceling shipments as a means to stay solvent, she pointed to a need to “immediately generate” economic activity as soon as the market opens up.
“I had an economist talking to me about the draw down of the economy and the fact that we were going into a recession,” she said. “He gave me a good way of picturing this: he said, what we want is for this recession to be a V shape—a sharp down, and then back up.”
“We don’t want a U-shaped recession like we did in 2008, where it took us a decade to start back up,” she continued. “And we don’t want an L, which is what the Great Depression was.”
Retailers should be ready to sell as soon as a spike in consumer demand materializes, she said, adding that she believes the president’s close advisors, like U.S. Economic Council Director Larry Kudlow, will move forward with further recommendations to stimulate commerce in the coming weeks.
“You will see economic return—and return with some momentum,” she said.
Make America Manufacture Again?
The reality in which the trade war with China was the industry’s most pressing issue seems a world away in 2020.
But amid coronavirus-induced panic, executives and lawmakers alike are calling for rollbacks or deferments on the payment of China tariffs as a means of alleviating a portion of the retail sector’s financial burden.
“I think that’s certainly a possibility,” Sen. Blackburn said, adding that President Trump’s Phase I trade deal with Chinese President Xi Jinping, signed into law in January, has proven vitally important to the relationship with the country.
Still, the senator suggests that a tough stance on China’s bad-acting is a must as the U.S.—and the industry—moves forward.
“China has stolen a lot of our intellectual property, and they have infringed on people’s copyrights and trademarks,” she said. “I think that your readers are people who understand how China has tried to take advantage of them over and over; this is not new to them.”
The senator described the reverse-engineering of American products as a major issue across industries, and pointed to new bipartisan legislation that she has introduced with colleague Sen. Bob Menendez (D-NJ) that would return some manufacturing, specifically in the pharmaceutical sector, to the U.S.
“I was talking to some of my colleagues, and they would like to broaden my legislation,” she said of the Securing America’s Medicine Cabinet (SAM-C) Act, which encourages drug manufacturers to partner with universities and thought leaders in the space on new innovations. “Some have said, ‘We need to do this with technology, and in other areas where they have put our supply chains at risk.’ I would like to do that, and call it the MAMA Act—Make America Manufacture Again.”
She argued that there’s a case for Made-in-the-USA footwear and apparel with the potential legislation. “There is so much that we could be doing here domestically, and you look at how people are focusing more on quality today,” she said.
Retail companies could establish partnerships with young designers and universities to innovate in areas like pattern-making and prototyping, she suggested. Modern methods have allowed companies to 3D-print samples, “taking months out of the development process,” and effectively reducing reliance on Chinese manufacturers.
Companies could also issue challenge grants to burgeoning designers and students to figure out how to build better products at more affordable prices, she said.
“People want quality items; they don’t want planned obsolescence filling their homes,” she added.
But as the senator works toward liftoff on these promising new plans, the retail industry—and the country—is reaching an unpleasant apex.
In the coming weeks and months, she said, Americans should think of the country’s retailers and brands as fellow citizens in need.
“People have got to see that the places where they’re spending their time, effort and money are partners in doing good things for all of us,” she said. “I think what we have to do is show that we believe in ourselves, in this economy, in the American dream.”