Long-term effect of COVID-19 on retail/restaurants

The Quarantine Zone
1

Just the other day we were blithely discussing here the retail apocalypse. As that name implies, retail and restaurants were already in fragile shape.

Now with the apocalyptic rise of COVID-19, retail and restaurants are shutting down across the country (and probably in whatever country you’re in as well). There have already been millions of layoff and a commensurate number of unemployment claims. So in the short-term, this is really bad.

But as for the long terms? My first thought is: this is going to be really, really bad. Like “nuclear bomb went off and nobody bothered to rebuild” level bad. Some thoughts:

• First, independent restaurants and small chains. The nature of the restaurant business is all about keeping the plane flying. Once it stalls, you’re usually done, as you have to cycle cash flow and fresh ingredients. Managing staff is also a huge challenge. A certain number of the independent restaurants that shut down this week (for example, here in Mobile, AL) would not be able to open up tomorrow. I.e., they’re already done. Anything that was on the verge of closing anyway is now closed forever.

You extend this a couple weeks, you will see a significant percentage never open again. Months could mean, I dunno, I’m not a restaurant expert (just an MBA who knows marketing a bit), but I would suspect a palpable percentage of indies shutting down forever: 10%? 15%? 30%? More?! Anything like a year and you’re going to kill off most restaurants. The ones that reopen will be those whose owners had a lot of money and can take advantage of the resurgence of demand once the plague lifts.

I doubt many indies will survive based on “curbside” except for those based on such a business model in the first place: food trucks, 100% takeout Chinese, bakeries, etc. That doesn’t mean that these are guaranteed to survive, just that they have a chance.

• Big restaurant chains with drive-thrus. I guess for me the key question is whether certain chains will fare (pun intended) better under the new conditions of disease and malaise. If I had to pick one to do so, it would be Chick-fil-A. They already have probably the best drive-thru system on the planet with their enthusiastic teen labor bringing you your food to your car (though do they still do that?). I’ve already seen long lines around the restaurant.

On the plus side for such chains, they pick up the slack for everything that’s shut down. On the minus side, people are not out and about as much, and the economy is melting down. A few chains may do better, but it’s mostly going to be negative, I suspect. Any marginal chain will probably be killed off–and there are a lot of them. The big, healthy guys like McDonald’s may suffer but will definitely survive.

• Grocery. An article:
Coronavirus sales boom could be short-lived and costly for grocery, analyst warns

The analyst said,

Makes sense to me. The pandemic is going to engender cultural changes that we can’t even imagine yet. New life and shopping “hacks,” as it were. If people find something cheaper or more convenient, they’re going to stick with it, especially if it’s just as good as what they used to experience.

• Other retail. Nuclear winter. Again, this thing is going to teach people and teach 'em good about all the things they don’t really need. We already had a world in which most products were commodities anyway. Sticking people at home teaches them that they don’t need to dress up any more–so clothing sales go even lower. And what was there to buy beside food and clothing anyway? Yeah, I can’t remember either.

Those are some ponderings. Thanks in advance for yours!

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Its not just when the virus subsidies, and that could take many months. There is going to be a massive drop on consumption due to all the layoffs and cut hours. It will take many years for employment to pick back up.

On the plus side, maybe (heavy heavy emphasis on maybe) this will lead to legislation that increases consumer demand via things like rebuilding labor unions, living wage laws, etc so people have the money to spend on consumption items. But sadly knowing America, I’m guessing the answer will (yet again) be tax cuts for the well off.

But even when things pick up, lots of people are in an economic hole due to layoffs and one of the things you cut back on are frivolous purchases and restaurant meals while you try to rebuild.

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You are indeed correct. Rebuilding the economy itself is going to be a major, long-term task.

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Duplicate

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Depends what kind of assistance the restaurants get. And even if they stay above water…what kind of pool will they have to draw from when they reopen.

I, like millions, was furloughed. Now trying to wind through the byzantine maze of an unemplyment system that has shut down their physical offices. Was in hold from 8am-915 when i finally gave up

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I fully expect that my company will go under. We primarily build museum exhibits, and nobody is going to museums right now, nor are museums going to be seeking new exhibits anytime soon.

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Sorry to hear that. :frowning:

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That sucks, sorry. :frowning:

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Distressed retailers struggled with falling sales for years — and then came coronavirus

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Why the restaurant industry will never be the same

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It will depend on who wins the election. If the Dems win (and take the senate–a big if) they will help rebuild the economy with the Reps complaining all the way about deficits (which never matter if the money is for tax cuts for the wealthy). I expect that a lot of restaurants will go under, but new ones will take their place. But it could take a long time to fully recover.

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Well, my prediction about restaurants getting nuked is definitely coming true:

A lot of restaurants are already permanently closed

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I’ll also add that I think the shelter in place policies are going to have the following effects, which will be negative for the restaurant business:

  1. Teach a lot of people who don’t cook for themselves to start doing so. People will also see that they are saving a lot of money doing this.

  2. Teach a lot of people who eat a higher proportion of restaurant food to do without, even if they just switch to Lean Cuisine and Chef Boi-R-Dee. They’ll save money doing this too.

  3. Encourage people to enjoy their restaurant food at home instead of going out or find more or less equivalent substitutes such as pre-made meals and meal kits.

The Plague is going to have a lot of cultural effects, some good, some bad. Teaching people to prepare their own food is probably a good shift in terms of public health and wellness, but it will be a devastating blow to the restaurant industry.

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Don’t underestimate the social aspects of restaurants. There will be pent up demand. The critical point is whether there will be the money to go with that demand. If a restaurant has closed “forever” what has the owner done? In a worst case they have been declared bankrupt, their creditors will have got some cents on the dollar of money owed, and the landlord is looking at a permanently empty building.
Hard case. Business closed down. Everyone laid off, fittings removed. Sign taken down. Lease terminated.
Medium case. Business shuttered. Everyone laid off. But the restaurant is still there.
That is the case for most of my favourites restaurants right now.
Hopeful case. Business struggling with take away. A couple of staff on. Last nigh I walked through a couple of streets of restaurants Many were open for take away. Almost none had any customers. They won’t be trying for much longer.

One of my favourite cafés is keeping alive with takeaway coffee and food. A loyal local patronage. Some staff laid off, but I asked the owner how he was doing. The answer was “not making money, but not losing money.”

It is going to be really hard, no doubt. And struggling businesses, especially the more generic ones, those without loyal customers, will not manage well.
But things will revive. Perhaps the culture will change. For people for whom going out for a meal was just a way to avoid cooking at home things may change more permanently. However they are a target for a higher end delivered meal. People adapt.

Those of us with an assured income need to take some steps to help. If a favourite eatery or café is trying to keep going by offering services that meet the lockdown - delivered, takeaway - we should give them our business. There isn’t much to spend money on right now. Spending local where you can to keep others going is a good start.

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I would be more than willing to support one particular nearby Chinese takeout that happens to be very, very good. They make the best Singaporian noodles I’ve ever had, among many other things. I don’t even know if they’re still open, but if they are, every outing is a risk, and the sanitary status of all the packaging is unknown. I may yet give them a try during the ongoing crisis, but every trip out these days is a risk.

And it’s not just the independents. There are several big restaurant chains around here that I really love (like the Keg) [PDF] that are totally unequipped for any kind of takeout and are just totally closed. They may be chains, but I believe most or all are independent franchises.

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Well, the restaurant down the street from me won’t be reopening - the 2 owners just died from CV.

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:frowning:
RIP.

I was looking into becoming a silent partner in a new high end restaurant before COVID19 hit. Those plans have been delayed (realistically shelved) for now.

I agree with Francis Vaughan. There will be a bit of a rebound effect once this crises ends. People who have been cooped up for weeks will want to go out.

Regardless change is in the offing.

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I drove down to the small rural county seat yesterday for a grocery order pickup. Lines were long at the few fast fooderies and taco trucks and at one upcountry burger stand with outside tables. Traffic was not heavy at the sit-down eateries with takeout offered. I have no idea if this is a permanent shift - I doubt it. We’ll want to resume social dining when we feel safe.

I read of but haven’t seen restaurants turning their seating areas into mini-marts as a temporary survival move. I’m reminded of camp stores with attached dining areas. Will multi-purpose eateries survive?

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Will this be the beginning of the Restaurant Wars in which Taco Bell emerges victorious?

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remember TV was going to kill movie theaters? People want to go out so restaurants will always be around just not as many