Covid-19 is creating absolute hysteria in many of our communities. But what level of impact will it have on the retail real estate industry?
It’s been difficult cutting through the noise and media, so we turned to dozens of execs and CEOs in the retail industry to get firsthand data on how they’re responding. Here are 3 key takeaways. (Disclaimer: LocateAI does not claim these results are indicative of the future nor representative of the entire industry.)
1. Retail execs are gearing up for a steep decline in top line sales of up to 50% across the country for the remainder of 2020.
Nearly every CEO made the claim that they expect top line sales to decrease by between 25% and 50% across the country. The hardest hit sectors within retail will be entertainment and food services, which aligns with the growing public motto of “social distancing.” Major cities like NYC announced in-store bars and restaurants will close effective 8pm Mar 16, per NYT.
There is less consensus on how long Covid-19’s financial impact will last. The most common response fell in between 3 and 6 months before some level of normalcy, while many anticipate the virus impacting sales for 12 months or longer.
2. Execs are wasting no time to respond to limit financial impact. Here are top 5 measures that execs are taking in response to Covid-19:
- Cash conservation was by far the #1 theme voiced amongst top executives. This includes cutting investments, delaying payments, and punting hiring decisions, and potential layoffs. “Cash is king” has not been more resonant.
- Many execs are turning to ancillary revenue streams like e-commerce, catering, delivery, and drive-thru to limit slowdown of sales.
- Speed needs to be a core part of decision making here. Now’s not the time to wait around, but the time to take decisive preemptive measures.
- Communication was another core theme: monitoring the news intently, communicating strategy with employees, and staying connected with customers via social media.
- Many execs have instituted work-from-home policies to ensure safety of their employees, and cutting travel.
3. Real estate expansion will materially slow down.
Execs most commonly reported that they will halt all expansion immediately until further notice, and over half of respondents reported that they will slow down their real estate expansion plans by at least 25%. About one third said they will still cautiously proceed with their original expansion plans, and will rely on market dynamics to look for relief from landlords.
Just as how retail execs are gearing up for the crisis, many players in the retail ecosystem — including landlords, investors, and service providers — will need to respond quickly, stay level-headed, and many will need to find ways to conserve cash as a first class priority until equilibrium is in sight. The key here is to buckle up and stay prepared.
I leave everyone with a quote from Winston Churchill: “A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty.”
Stay warm and safe,
LocateAI is a tech-enabled services company in San Francisco that helps retailers make data-driven real estate decisions. We will be analyzing US consumer behavioral patterns in the midst of COVID-19 to understand its impact on the retail industry using millions of data points. If you want to stay up to date on our data analysis, you can join our email list here.