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Omicron compounds worker shortage, supply chain woes for retailers

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Source: Lauren Thomas, CNBC

Temporarily closing stores and writing apology letters to customers who have waited too long or missed appointments.

These are just a few of the bizarre steps retailers and restaurants have taken as Covid cases surge across the country. This is due to the rapidly-spreading variant of omicron.

Businesses are not worried anymore about the possibility of state or local government shutting down their businesses.

The businesses have to deal with the fact that there is a lack of employees as more people get sick or are exposed to the virus. The highly contagious virus is spreading around the world, posing a threat to supply chains.

“There is no question that staffing is definitely a big issue this time around,” said Stephanie Martz, the chief administrative officer and general counsel of the National Retail Federation. When we reached a time in the pandemic where so much was already closed, it was less quantifiable. Everything was also scaled down.

She said, “I’m not sure if it would be so far as to state that there is an unimaginable number of people who are unable to work but it’s very high.” It is really high.

Covid cases have increased. The U.S. is reporting a seven-day average of about 600,000 daily new cases, an all-time high and up 72% from the week prior, according to a CNBC analysis of data compiled by Johns Hopkins University through Thursday.

Retailers and restaurants are taking unusual measures as the labor shortages worsen due to an increasing number of overworked, sick or exposed employees. Macy’sFor the remainder of the month, stores across the nation will be closed. WalmartIn coronavirus hotspots, nearly 60 stores were closed temporarily in December. Others employers such as Starbucks, Chipotle NikeThey have had to shut down some doors because they don’t have the people necessary to open them.

WalgreensCustomers received an email from the company this week apologizing for long checkout times, out-ofstock products, and delayed Covid vaccine/test appointments. In the note, the company’s leaders mentioned the many tasks that pharmacy staff are juggling — namely, giving over 55 million Covid vaccines and more than 23 million Covid tests, while still filling over a billion prescriptions annually.

On Thursday’s earnings call, Walgreens chief financial officer James Kehoe stated that there has been “a high degree of stress” in the company. To help their stretched staff, he said that the company will spend approximately $120 million on labor.

Morgan Harris owns the Green Bambino store in Oklahoma City. According to Harris, the Green Bambino sells baby products from strollers and toys, but has had a hard time hiring staff. She worries that it will get worse.

Morgan Harris

Hours go by ‘out of the window’ regularly

Short-staffed retailers can reduce their hours by making logical decisions, according to Craig Rowley, senior client partner of Kornfery and head the retail practice. He said that some stores have reduced sales on the weekdays, when only a fraction of their business is done as compared to weekends.

According to him, pandemic-related changes could prompt retailers permanently to rethink their store hours as more customers move online.

“The labor shortages have started from [Covid]Rowley said that nearly every customer-facing business is affected. Restaurants and retail outlets are both facing these challenges.”

Morgan Harris runs Green Bambino. This Oklahoma City shop sells diapers, toys, and baby items. She said she has had to toss out one of the cardinal rules of retail as she operates with a staff of four people – less than half the 10 to 15 person staff she expected to have. It has been necessary to change the store’s schedule. The store is now open seven days per week, instead of five.

She now sees corporate giants following her lead as they are hit with the “Great Resignation”, and further squeezed by the omicron waves.

She stated, “It used be that in retail you never had to change your hours.” That’s gone.

Many companies are now better equipped to use technology to inform customers of staff shortages and store closings. Chipotle can, for example, close to its location and shut off any digital orders through their app. This allows them to concentrate on the in-store transaction and not worry about online or delivery orders.

Rowley stated that the good news was that both retailers and restaurants have survived the holiday rush. He stated, “Staffing levels don’t match what they were before Christmas so companies have an advantage.”

He added that retail stores may also be able hire temporary holiday employees to work extra hours in the new year.

Harris expressed concern that Green Bambino’s sales may rise and she fears it will have to manage with a less skilled staff. Its annual revenue grew to nearly $900,000 last year — 23% higher than 2020 and 14% higher than pre-pandemic sales in 2019.

Even though a recruiter was available, job applications are slowing to a trickle. And she said the omicron wave hasn’t yet hit the region — which could mean more employees calling out sick.

She said, “I expect our staff shrinks further,” and that it would not grow. I have little faith that we will suddenly find these incredible people to bring on our staff.

Additionally, this latest pandemic may delay the normal return of steady shipments popular baby items like strollers and car seat. Due to delayed shipping times and increased freight costs, the store has decided not to be in furniture sales anymore. It stopped accepting deposits for many items, since it could not predict if — or when — those big-ticket items would come back into stock.

It doesn’t feel as though I am reinventing the business every other week like in 2020. However, we don’t know which businesses we’ll need to operate post-pandemic. “The uncertainty will continue for several more months, or even longer,” she said.

One customer waits in line for their contactless curbside pick-up at Recreational Equipment Inc.’s flagship store, Seattle, Washington on Thursday May 14, 2020.

Bloomberg | Bloomberg | Getty Images

Muscle memory

Shoppers, on the other hand, have kept spending — even if some browse online instead of in aisles or switch to curbside pickup or home deliveries, which have become part of their muscle memory.

Coresight Research found that public place avoidance has increased slightly in recent weeks, based on a poll of over 500 U.S. citizens conducted Dec. 27, compared to previous weeks. A growing number of Americans are cutting back on travel internationally and using public transport. Nearly 66% of respondents said they are avoiding any public place — up from 62% when the survey was conducted Dec. 13.

Nearly 38% reported that they are avoiding malls and shopping centers, while only 33% claimed they were staying away from bars, restaurants and coffee shops. This compares to the 32%, 30% and 32% respectively two weeks earlier.

But, there was no significant shift in the consumer’s purchasing behavior or spending habits as a result of the survey.

It is possible that the restaurant business may experience another slump. Black Box Intelligence, a restaurant analytics company found that restaurant sales fell for the first week since March in the week ending Dec. 26. However, they attributed the decline to Christmas falling on a Saturday this year and the omicron surge.

OpenTable data has shown that reservations made by online, telephone, and walk in diners are lower in the United States than they were in pre-pandemic years. But, this could mean consumers switching to taking out or sticking to resolutions for the New Year.

It could result in Americans buying more stuff than they do services. The National Retail Federation reported that holiday sales could reach an all-time high of 11.5%. The final numbers will not be available until the end of next week.

Jack Kleinhenz is the chief economist of retail trade groups. consumers’ heightened appetite for goods and reluctance to spend on trips, dining out and other types of spending could fuel inflation.

John Mercer of Coresight Research, Coresight Research head of research said that the shopper appeared to “roll their eye, take a deep breathe and sigh, and then just carry on with as usual.”

He stated, “It is quite different this year.” He said, “Consumers were double and triple jabbed. These people have experienced this previously. You can see that the omicron is generally weaker in countries other than ours.

According to Centers for Disease Control and Prevention, nearly three quarters of all Americans were fully vaccinated as of Thursday. So far, 73 million people have received a booster shot — representing roughly 22% of the U.S. population. On Wednesday, the CDC approved the booster shot. Pfizer and BioNTech‘s Covid booster shots for children ages 12 to 15.

And there is some evidence that omicron is milder than previous variants, according to World Health Organization officials.

That may be starting to change the outlook for Americans who are getting sick. The country is reporting an average of about 1,250 deaths per day, Hopkins data shows, well below the record numbers seen following last year’s holiday season when the daily average held above 3,000 for about a month starting in January 2021. The death toll tends to lag rises in case counts hospitalizations, however.

Martz of the NRF said that consumers as well as retailers now have a greater understanding about coronavirus. It’s led the NRF to place more emphasis on products like at-home Covid test, booster shots and improved masks than wiping down counters or installing screens.

The industry’s annual conference is one way it is moving forward. NRF’s Big Show will be held next week in New York City at the Javits Center — previously a mega-center for Covid vaccines and potentially the source of the first known instance of omicron spreading within the United States.

Martz admitted that this conference might look different to pre-pandemic. Every attendee must have proof that they are vaccinated and wear a mask. The staffing may be less for booths located on the showroom floor. Trade groups will distribute Covid testing at-home and host mobile testing units.

As many as 20,000 attendees are expected — roughly half of the attendance in 2019.

She said that it was right to keep pushing forward, as retail workers on the frontline continue to come to work every day.

She stated that she felt it was now the time for them to “get back together in some manner”, even though they won’t be able to recreate their shows in the past.

CNBC’s Nate Rattner, Lauren ThomasPlease see the following: Amelia LucasThis report was contributed by you.

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