This week a new phrase – social distancing measures – entered our lexicon.

Introduced by Dr. Nancy Messonnier, director of the Center for the National Center for Immunization and Respiratory Diseases at the CDC, she described “social distancing measures” as part of standard protocol to limit “community spread” of disease in the case of a pandemic, which the coronavirus (officially COVID-19) has not yet reached but threatens to do so.

The President and government officials are working valiantly to reassure Americans that the “threat to the American public remains low,” as VP Pence said in Wednesday’s nationally televised news conference.

However, in a separate news briefing the same day, Dr. Messonier was less than reassuring. “Ultimately, we expect we will see community spread in this country,” she said. “It’s not so much a question of if this will happen anymore, but rather more a question of exactly when this will happen and how many people in this country will have severe illness.”

During that briefing, she outlined three categories of non-pharmaceutical interventions or NPIs to contain community spread of the virus. There are common-sense personal NPIs like washing hands, covering coughs, and not touching one’s face. Environmental NPIs include frequent washing of surfaces people touch.

And then there are community NPIs. “Social distancing measures designed to keep people who are sick away from others,” she said. “These are practical measures that can help limit exposure by reducing exposure in community settings.” In other words, keeping out of public places and in one’s home to avoid potential exposure.

It may mean closing schools and businesses, as has been done in Northern Italy, an emerging hot spot for the disease. The Guardian described the region as effectively in “lockdown” with schools, businesses, public offices, and restaurants closed, and sporting events and religious services canceled.

Recognizing there is a tremendous amount of uncertainty about what’s to come because this is a new virus and totally unpredictable, Dr. Messonnier stressed that community interventions will vary depending on local conditions. But she also warned, “We would implement these NPI measures in a very aggressive, proactive way.” The CDC has set up a separate website to provide updates on the progress of the disease in the country.

Community interventions will mean closed businesses

Should community NPIs become necessary, it could be devastating to brick-and-mortar retailers especially, but even to e-commerce retailers which may be forced to close fulfillment facilities or be unable to make home deliveries. Forgive me for going biblical on you, but since we’ve long talked about the “retail apocalypse,” we may as well go all the way to the potential for a retail Armageddon if our public health officials enact such aggressive, proactive measures to halt the spread of the disease.

We all hope and pray this disease abates like the flu as the warm weather arrives, but it may take a turn for the worse. Nobody knows. Nobody can predict. And it may come back stronger in the fall, as flu typically does.

Consumer confidence shaken

Already investors are seeing the writing on the wall. The Wall Street Journal reported that the Dow Jones Industrial Average fell 12.4% this week with a drop of more than 3,500 points, making February the worst month since 2009.

Doug Cohen, managing director at Athena Capital Advisors, is quoted saying, “This unfortunately is the perfect storm. This is not something out of a standard economic textbook.” Combine consumers’ fear of contracting a potentially fatal disease with fears about the economy and you have that “perfect storm” Cohen speaks about coming to retailers dependent on consumer confidence to open their wallets and spend. Also on Wednesday, the National Retail Federation’s president and CEO Matthew Shay was characteristically bullish about prospects for retail in 2020.  

“The nation’s record-long economic expansion is continuing, and consumers remain the drivers of that expansion,” he said, predicting that retail sales will increase between 3.5% and 4.1% in 2020, “despite uncertainty from the lingering trade war, coronavirus and the presidential election.”

“With gains in household income and wealth, lower interest rates and strong consumer confidence, we expect another healthy year ahead,” he continued. “There are always wild cards we cannot control like coronavirus and a politically charged election year. But when it comes to the fundamentals, our economy is sound and consumers continue to lead the way.”

Consumers signal caution

However, a new survey indicates consumers are leading the way to a slowdown in retail sales, not an uptick especially if the coronavirus takes hold.

“U.S. consumers are already becoming cautious—and if the situation worsens (or even the perception of the situation), U.S. consumers could dramatically change habits to reduce the risk of infection, and this could hit retailers hard,” Coresight Research reports from its survey among 2,000 adult Americans conducted February 25-26.

Currently, some 28% of those surveyed said they are already steering clear of public places, like shopping centers, entertainment venues, and changing travel plans.

Further, 58% said they will avoid public areas or travel if the outbreak worsens in the U.S., with about one-fifth as of now uncertain what they will do if it becomes more of a threat. Frankly, those undecideds may have no choice depending upon the measures enacted by public health officials.

Digging deeper into consumers’ expectations of how their behavior will change, the survey found shopping centers and malls are the first place consumers will avoid, followed by public transportation and international travel.

Some 75% of those who say their behavior will change if the outbreak worsens will avoid malls, as compared with 73% avoiding public transportation, and 68% postponing international travel.

As compared with shopping centers and malls, they are less likely to stay out of stores in general, with some 53% of those who expect to change behavior if the outbreak worsens saying they will avoid stores.

But it is far more likely they will shop primarily for necessities in grocery, drug, and hardware stores, rather than stores that cater to discretionary purchases. Restaurants, bars, and coffee shops are also likely to take a hit, with 61% saying they will avoid these if the outbreak worsens.

Beyond necessity purchases, retailers’ success is far more dependent on how people feel. If consumers feel confident, they will spend. If they don’t, then they will delay unnecessary purchases and sit tight. That is what could happen if this disease advances, as it likely will.

Picking up the pieces in the aftermath

Assuming a best-case scenario, retailers might take a short-term hit, but consumers could come back strong later to make up their delayed purchases. But retailers should plan for rising consumer uncertainty that could have devastating long-term consequences.

In a recent article by Jing Daily columnist Jiaqi Loa, exploring the psychological impacts of the coronavirus on Chinese citizens, wrote, “It’s become a disorienting, time-stopping social disaster. How can a company convey a marketing message that doesn’t sound out of place to a public who just experienced this type of fear, trauma, and paranoia?”

American consumers are already on edge, as the Coresight Research study indicates, and with the stock market imploding this week amid fears it will continue to tank, consumer confidence could be rattled to the core, like it was in 2008-2009. In a prescient article by fellow Forbes.com contributor Nikki Baird, she predicts the coming decade may bring the “death of consumerism.”

She writes, “Consumers are becoming more mindful and sensitive to their environmental footprint, and consumerism is highly vulnerable to that sensitivity. I would even go so far as to say that in the next decade, retail sees a substantial shrinking of consumerism.” Even before the coronavirus, there have been deep changes taking place in the minds of consumers, resulting from their growing recognition that our consumer culture is a major contributor to environmental damage.

Combine this with the psychologically-disorienting effect from fear of catching a contagious disease and any self-imposed or even forced halt to unnecessary shopping caused by a potential pandemic, and we can expect dramatic changes to how consumers shop and what they spend their money on. 

A perfect retail storm is brewing. It may mean deep and long-lasting changes in consumer psychology. We can hope for the best, but we need to plan for the worse.

Source: Forbes