The coronavirus pandemic has hit hard. More than 100,000 Americans have died. Businesses nationwide shuttered, and more than 44 million people have filed for unemployment insurance since mid-March. The stock market wobbles. However, as the economy reopens, and many Americans benefit from federal assistance, businesses across the country may be in line for a healthy dose of increased consumer spending.
"If jobs are coming back relatively quickly," which the May jobs report indicates, spending should pick up, says Scott R. Baker, an associate professor of finance at Northwestern's Kellogg School of Management. Baker recently co-authored a study for the National Bureau of Economic Research, which found that consumers had curtailed spending since March, while incomes remained largely untouched. Baker suspects that consumers largely pushed off purchases because of financial concerns or because the businesses they'd typically patronize weren't open.
This spending hiatus pushed the U.S. savings rate to a record high of 33 percent in April--boosted in part from federal stimulus checks of up to $1,200 per person, depending on income. Americans are notably bad at deferred gratification, a trait that will favor companies that can meet any uptick in demand as the economy continues to reopen.
In some industries, it's already started. Yardbird, a Minneapolis-based direct-to-consumer outdoor-furniture seller, booked $4.5 million in sales in May, a 400 percent increase over the same month a year ago. Co-founder Jay Dillon notes that in the past 15 days, the company has logged more website visitors than in all of 2019 combined.
"We've been incredibly fortunate," says Dillon, who founded the company with his father in 2016. "We are in a category where we're seeing insane demand--far more than we'd ever expect in a normal year." The problem is, he says, the company doesn't have enough supply, most of which is imported: "In three weeks, we'll be largely out. Normally, we would have expected our inventory to last through August."
For Yardbird, which expects to just outpace its pre-crisis goal of doubling its annual revenue, the lack of inventory is muting an otherwise powerful sales event. The same is true for a number of businesses that have managed to survive the coronavirus but remain hobbled by jumbled supply chains and shipping delays.
Take the bicycle industry, which has seen a huge boost in demand since the start of the pandemic. Many shops could be out of product by next month, says Jeff Cayley, the founder of Worldwide Cyclery, a Newbury Park, California-based seller of high-end mountain bikes. "The industry can't boom revenue-wise if there's nothing to sell," he says.
The Race for Product
Efforts to combat the challenge have been met with uneven results. You can't just throw more money at the problem, says Cayley, who founded Worldwide Cyclery in 2011: "It's a hard, fluid environment right now." As such, it's tough to predict inventory needs. He adds that while no one wants to run out of product, no one wants to overbuy and waste cash, either.
"If demand all comes crashing down by August, and that's right when you got your second big order in, you could really be in a bad situation," Cayley says. "I think that's a real threat across all industries."
And that's if you can get additional inventory. For many businesses that are low on inventory, switching suppliers isn't always possible. "There are not 100 manufacturers of dumbbells," says Deborah McKeever, president of the New York City-based fitness equipment supplier Gym Source. "There are two or three." And they have all had shortages, she adds.
While McKeever says that product is beginning to flow again, she is going to have that good problem of trying to fulfill orders as quickly as possible--albeit not as fast as some consumers would like. The company's delivery estimates now clock in at six to 12 weeks. Prior to the pandemic, customers could expect orders for common fitness equipment accessories like barbells, weights, weight plates, and kettlebells to be filled in a week.
To help appease frustrated shoppers, since the start of the pandemic Gym Source has been reminding customers of its no-questions-asked cancellation policy. It also downsized to 15 stores from 30 in a move to help focus the company's efforts. "We kept our strongest stores, because they're in the right markets," says McKeever, who says Gym Source anticipates meeting last year's revenue goals, but declined to share specifics. "We used this period of time to evaluate where we want to be."
Cayley says he, too, is trying to help temper customer expectations by being up front about the potential for shipping delays. Call and email volume has spiked 500 percent since the pandemic hit, while delivery estimates have lengthened to five-to-nine days from two-to-five days.
"It's been a madhouse trying to deal with the additional consumer demand while simultaneously making a ton of necessary changes," he says. "A lot of customers don't realize how complex the system is and how much it's bursting at the seams right now."