Outbreak-induced panic now poses a distinct threat to the global economy.
The novel coronavirus, officially dubbed COVID-19 by the World Health Organization, has spread from its Wuhan, China nucleus to infect more than 80,000 in countries across Asia, Europe, South America and the U.S.
The crisis is prompting public health officials to take action by instructing their constituents about how to limit exposure and remain aware of symptoms, and retail experts say that these warnings are already impacting consumer confidence when it comes to getting out and shopping the stores.
According to Coresight Research, which delivers data-driven insights about the retail technology sector, more than 27 percent of consumers are already avoiding public areas or limiting their visits to venues like shopping centers. More than half (58 percent) said they would be likely to hold off on such visits if the outbreak spreads in the U.S.
According to analysts, a worsening outbreak would hit malls disproportionately. Of those consumers who said they would change their habits in the event that the disease spreads further, three quarters said they would specifically avoid large retail centers and shops in general.
Some experts believe the virus’ spread could be a boon to the online sector, which allows consumers to feed the need for retail therapy without interfacing with store associates and other shoppers. They may even forego patronizing their favorite retailers in the service of safety.
“Shoppers are going to put their personal health above their default store preferences,” Mark Floisand, senior vice president of product and industry marketing at Coveo, an artificial intelligence company personalizing digital experiences, said.
“A personalized and relevant online shopping experience is critical,” he added. “During the coronavirus pandemic, with more and more shoppers electing to avoid the risk of public spaces, they’ll head to the retailer that provides the most efficient and personalized online shopping experience.”
While the outbreak has provided an unexpected opportunity for online business, Floisand also predicts increased competition. Retailers will be held to a high standard of service as more shoppers are driven to the web.
“The corollary is that those that don’t deliver on these online expectations, will lose out to those that do,” he said.
But even the heartiest—and most service-focused—online businesses could be stymied by the meager trickle of goods out of China. Supply chains that depend on Chinese manufacturing have slowed to a halt, leaving vendors without backup plans in a lurch.
For Amazon’s third-party sellers, who drive a massive chunk of overall sales on the platform, it’s become very difficult to obtain inventory. That’s according to Taylor Hiott, co-founder of Nine University, a training program for prospective merchants.
The virus has “created an even bigger backlog of orders” than was already expected due to the Chinese New Year holiday, which prompts the country’s workforce go on leave for a number of weeks beginning at the end of January.
“Some products are still sitting in the factory, some haven’t been finished, and some are sitting in ports,” Hiott said. “Certain countries have closed down borders to ships from China, and they’re waiting for the quarantine period to pass, while some are even sitting in ports in the U.S.”
The coronavirus has extended that delay on product shipments by a large margin, and could impact many third-party sellers’ ability to stay competitive on site.
“Their ability to survive depends on how established they are on Amazon,” Hiott explained. Some sellers restock in the weeks between Christmas and Chinese New Year, knowing that they won’t receive inventory while workers are out during their holiday break.
“It can be a rough time of the year, because many sellers sell a lot in Q4 and there’s a delay of about 14 days before Amazon pays them,” he said, explaining that those sellers don’t get cash flow back into their businesses until the beginning of January. “By then, it’s too late to place orders because of Chinese New Year. And now, because of coronavirus, that’s been made even worse.”
Some third-party seller clients are experiencing price gauging from the Chinese suppliers who have been able to return to work. Some factories reopened on Feb 17, he said, and they’ve raised their prices—some by two to three times higher.
He also confirmed earlier reports that Amazon had reached out to third party sellers with instructions on how to manage consumer expectations.
“As a seller with inventory problems, you could potentially lose money unless you pause your seller account or put it on vacation mode,” Hiott said, adding that the company encouraged affected sellers to take swift action so as not to frustrate shoppers.
“Amazon has some strict parameters and quality control and performance parameters that they put on sellers,” he added.
Some of Nine University’s clients are being hit harder than others by the inability to get a hold of product. Sellers specializing in sport, outdoor, kitchen, health and household goods—especially products in the $20 range—are feeling the pain most acutely, he said.
Many of those goods are produced in China, and sellers are quickly running out of inventory.
Conversely, for merchants selling items like dietary supplements, business is booming. That’s because many of those products—which face strict FDA approval guidelines—are manufactured stateside.
“In the categories that are produced outside of China, no one’s having issues,” Hiott said.
And, of course, some sellers have managed to maintain the status quo with their manufacturing partners—against all odds.
“There are some suppliers who are up and running and selling product, and those sellers have a huge leg up right now,” he said. “A few of our clients are exploding on certain products because they’re able to get inventory, and others aren’t.”