Also like the foodservice industry, many of those closures are likely to become permanent and for some of the same reasons. Retail, like foodservice, is generally a low margin business. Many retailers, both small individual operators and large chains, have significant capital tied up in inventory and advance purchase contracts, not to mention space leases, that cannot be shed completely when their operations are forced to close for extended periods. With debt financing much of the retail industry, after years of steady growth led to expectations of continued consumer spending increases, the necessary short-term disruptions to fight the pandemic are likely to lead to permanent losses. The industry was already under pressure, despite steady consumer spending growth, due to the shift to online versus in-store retailing. As with any paradigm shift, winners and losers emerge even if the overall industry trend is positive. That is why so many retail chains and shopping malls made headlines with bankruptcy filings even before the pandemic at the same time that overall retail industry output grew at an average compound annual rate of 4.5 percent from 2010 through 2019. The pandemic mitigation efforts have accelerated the shakeout. Even as restrictions are being gradually lifted, the disruptions to retail will continue at significant levels throughout the remainder of this year and into next, especially if additional waves of the pandemic appear as expected. Back-to-school shopping and the Christmas shopping season are still facing serious potential for disruption. Capacity limits and PPE requirements will have comparable effects on retail performance to those seen in the tourism industry, if not, perhaps, to the same magnitude. The increased shift to online shopping will almost certainly extend beyond the removal of governmental restrictions, whenever that occurs, due to the combination of increased familiarity, loss of brick and mortar retailers and continued supply chain instability. This does not mean the death of brick and mortar retail or of buildings constructed to house it. It does, however, mean a major shift in the percentages of total demand generated by in-person shopping versus online ordering. More importantly, whether online or in-person, the effects of the current crisis will continue to weigh the total demand down for some time. The stimulus efforts to date have done little to support retail trade due to the restrictions put in place to fight the virus. By the time those restrictions have been substantially removed (as opposed to the limited easing currently occurring) the stimulus payments will be long gone, used primarily to support basic needs and expenses. Additional stimulus will be necessary to boost consumer spending at that time to prevent even greater and longer-term damage. Otherwise, lingering pressure from lost wages, overdue rent or mortgage payments, uncertainty about the future and changes in behavior patterns will continue to hamper the sector.
∴ PROGNOSIS
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