Omicron compounds employee scarcity, provide chain woes for retailers

One shelf stands empty while customers shop in Columbus, Ohio.

Matthew Hatcher | Getty Images News | Getty Images

Shorten store opening hours, temporarily close locations, and send letters of apology to customers for long lines and late appointments.

These are some of the unusual steps retailers and restaurants are taking when Covid cases rise across the country, fueled by the fast-spreading variant of Omicron.

Corporations no longer worry about state and local governments shutting down stores.

Instead, companies struggle with labor shortages as people call in sick, become exposed to the virus, or seek childcare. And there is a risk of further supply chain problems as the highly contagious variant spreads around the world.

“There’s no question that staffing is definitely a big issue this time around,” said Stephanie Martz, chief administrative officer and general counsel for the National Retail Federation. “It was perhaps less measurable when we were at one point in the pandemic when so much was closed and everything so scaled down.”

“I don’t know if I would go as far as to say that we have an unprecedented number that can’t work, but it’s high,” she said. “It’s really high.”

Covid cases have increased. According to a CNBC analysis of data compiled by Johns Hopkins University through Thursday, the US reports a seven-day average of about 600,000 new cases each day, an all-time high, and up 72% from the previous week.

Source: Lauren Thomas, CNBC

An increasing number of sick, exposed or overworked workers has caused retailers and restaurants to take unusual steps as their existing work problems worsen. Macys Shortening hours of operation in locations across the country for the remainder of this month. Walmart almost 60 stores in coronavirus hotspots temporarily closed in December. And other employers, including Starbucks, Chipotle and Nike have been forced to close some of their doors as they simply don’t have enough people to keep them open.

Walgreens Sent an apology email to customers this week noting customer complaints about long lines, out of stock items, and delays in Covid vaccines or test appointments. In the note, the company’s executives mentioned the many tasks that pharmacy staff juggle – namely dispensing over 55 million Covid vaccines and more than 23 million Covid tests while filling out over a billion prescriptions annually.

“The system has been under heavy load,” said James Kehoe, chief financial officer of Walgreens, on a conference call on Thursday on the company’s results. He said the company will spend around $ 120 million more on workers to help its elongated, thin workforce.

Morgan Harris is the shop owner of the Green Bambino in Oklahoma City. She said the store, which sells baby items from toys to strollers, is facing staff shortages and she feared it could get worse.

Morgan Harris

Regular opening times go ‘out of the window’

For understaffed retailers, reducing working hours is one of the first logical steps, said Craig Rowley, senior client partner at Korn Ferry and director of the company’s retail division. Some stores will be scaled back on weekdays when only a small percentage of sales are happening compared to busier weekends, he said.

He said pandemic-related changes could lead retailers to permanently rethink store opening hours, especially as more sales go online.

“The labor shortage of [Covid] goes to almost any customer-facing business, “said Rowley.

Morgan Harris owns Green Bambino, an Oklahoma City store that sells baby items such as onesies, diapers, and toys. She said she had to ditch one of the most important retail rules as it operates with four employees – less than half of the 10-15 people she would have expected. The store had to change its schedule. It is now open five days a week instead of seven.

Now she sees some corporate giants doing the same when they are hit by the “Great Resignation” and further squeezed by the wave of omicrones.

“In the past, you never changed your opening times in retail,” she said. “That’s out the window.”

Some companies have gotten better at using technology to notify customers of staff shortages or store closures. For example, a understaffed Chipotle location can turn off digital orders through their app and instead focus on in-store transactions while nearby restaurants take delivery and online orders.

Rowley said the good news is that retailers and restaurant chains at least survived the vacation rush. “The workforce is no longer what it was before Christmas, so companies have that advantage,” he said.

Retailers could even ask temporary vacationers to stay in the New Year and work extra hours, he added.

However, Harris said she feared Green Bambino may have to deal with leaner staff even if sales skyrocket. Annual sales rose to nearly $ 900,000 last year – 23% more than in 2020 and 14% more than before the pandemic in 2019.

Applications have slowed down to a trickle despite seeking the help of a recruiter. And she said the omicron wave hasn’t reached the region yet – which could mean more employees calling in sick.

“I assume that our staff will continue to shrink and not get bigger,” she said. “I have very little hope that all of a sudden we will find all these great people and attract them.”

In addition, the recent wave of the pandemic could further delay the return to continuous deliveries of popular baby items such as car seats and strollers. The business is pulling out of the furniture business due to delivery delays and higher freight costs. It stopped accepting deposits for many items because it couldn’t predict if – or when – those large items would be back in stock.

“I don’t feel like I’m reinventing business every two weeks like I was in 2020, but we have no idea what business to do after the pandemic,” she said. “The uncertainty will linger for a few more months, if not longer.”

A customer waits for a contactless roadside pickup at the Recreational Equipment Inc. (REI) flagship store in Seattle, Washington, USA on Thursday, May 14, 2020.

Chona Kasinger | Bloomberg | Getty Images

Muscle memory

Shoppers, on the other hand, have continued to spend money – even with some browsing online rather than down aisles or switching to roadside pickup or home delivery, which have become part of their muscle memory.

According to a survey by Coresight Research of more than 500 US consumers on December 27, compared to the previous weeks, avoiding some public places has crept in again slightly. An increasing number of consumers said they were withdrawing from activities such as international travel and using public transport. Almost 66% of respondents said they avoid any public place – up from 62% when the survey was conducted on December 13th.

About 38% of respondents said they avoided shopping malls and shopping malls and about 33% said they avoided restaurants, bars and cafes, up from 32% and 30% two weeks ago.

However, the company’s survey showed no significant changes in what consumers were buying or how much they were spending.

The hospitality industry may find itself in another downturn. Restaurant analyst Black Box Intelligence found that restaurant sales declined for the first time since mid-March in the week ending December 26, but the reversal was largely due to Christmas, which fell on a weekend that year, and the rise in omicrones .

OpenTable data shows that in the United States, fewer seats were reserved with online, phone, and walk-in reservations in the first week of 2022 compared to pre-pandemic levels, but consumers could have take-away switch or try to stick to New Year’s resolutions.

If that happens, it could mean Americans are spending on things rather than services. Christmas sales were well on their way to hitting a record high of up to 11.5%, according to the National Retail Federation. (The final numbers won’t be released until the end of next week.)

The retail company’s chief economist, Jack Kleinhenz, said: Increased consumer appetites for goods and reluctance to spend on travel, restaurants and other expenses could fuel inflation.

John Mercer, research director at Coresight Research, said that for the most part, shoppers “roll their eyes, take a deep breath, and sigh, and then move on as much as possible.”

“It’s very different this time,” he said. “Consumers were jabbed twice, three times. You have seen this before. It’s really obvious that Omicron is generally much weaker in other countries. “

Almost three in four Americans are fully vaccinated as of Thursday, according to the Centers for Disease Control and Prevention. To date, 73 million people have received a booster vaccination – that’s roughly 22% of the US population. And on Wednesday the CDC gave the go-ahead Pfizer and BioNTech‘s Covid Booster Shots for children from 12 to 15 years.

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

That could begin to change the outlook for Americans who get sick. The country reports an average of around 1,250 deaths per day, Hopkins data shows, well below the record highs after last year’s Christmas season, when the daily average was above 3,000 for about a month from January 2021. The death toll tends to fall, but the number of cases and hospital admissions increases.

Martz of NRF said both retailers and consumers understand the coronavirus better. That has led to a greater emphasis on tools like booster shots, home Covid tests, and better masks, rather than wiping down counters or installing Plexiglas panels.

One way the industry is moving forward is to host their annual conference in person. NRF’s Big Show is next week in New York City at the Javits Center – previously a mega-center for Covid vaccines and possibly the source of the first known case of omicron spread in the United States.

Martz admitted the conference will look different than it did before the pandemic. All participants must wear a mask and present a vaccination card. The booths in the showroom may have fewer staff. And the trading group will distribute Covid tests at home and host a mobile testing unit.

Up to 20,000 visitors are expected – around half of the visitors in 2019.

Still, she said, it feels right to move forward as the frontline retail workers go to work in person, day in and day out.

“We believe this is a reasonable time to somehow get back together,” she said, although “it won’t look like our shows have done in the past.”

CNBCs Nate Rattner, Lauren Thomas, and Amelia Lucas contributed to this report.