Nicholas Spiro

The View | Will the coronavirus shock push the retail sector in the US and Britain to adopt the China model?

Coronavirus-related lockdowns and supply chain disruptions have dealt a severe blow to the retail industry in the US and UK, already grappling with the threat of online shopping

The retail sector in Asia – particularly China – is better placed to cope, but also faces challenges related to supply and must anticipate post-crisis demand patterns

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The Naked Cowboy, a regular performer at Times Square, New York, puts on a protective mask in the deserted commercial district on March 19. New York state governor Andrew Cuomo ordered businesses to keep 75 per cent of their workforce home as the number of coronavirus cases rose rapidly. Photo: Bloomberg

Nicholas Spiro

Published: 6:00am, 31 Mar 2020Updated: 6:04am, 31 Mar 2020

Long before the Covid-19 pandemic took hold, the retail industry in the US and Britain faced what many experts believed was an existential crisis, as the rapid rise of online shopping upended the business models of traditional retailers, adding to the woes of a sector suffering from overdevelopment, high debt levels and outdated buildings.

Many investors saw the problems facing the industry as the catalyst for a major financial crisis, and began “shorting”, or betting against, the stocks and bonds of retail companies as some of the industry’s biggest names, such as Sears and Debenhams, two prominent department stores, fell into bankruptcy.

In the commercial property markets, the retail sector has been distinctly out of favour with institutional investors for some time. Last year, retail transaction volumes globally fell 3 per cent year on year, compared with a 24 per cent increase in deals in the logistics sector and 3 per cent rise in office transactions, data from JLL shows.

Yet, the challenges faced by the retail industry over the past several years pale in comparison with the generation-defining shock caused by the coronavirus crisis. The economic “sudden stop”, in which activity across the globe has abruptly halted due to lockdowns and social distancing measures, has hit the retail sector particularly hard.

While there is intense debate over the duration of the recession and its long-term consequences for the global economy, the crisis has already forced many retailers to shut their stores temporarily, giving new impetus to the shift to online shopping.