Some of the disruption to supply chains based in China because of the coronavirus is now slowly ebbing away, said the United States based National Retail Federation CEO Matt Shay.
“A number of the larger companies have started to indicate that the signs that they’re getting from the Chinese market is some of the production is coming back online,” Shay said.
CEOs of retailing companies that have supply chain operations in China have told Shay that much of the needed inventory “is already pulled,” he said.
“It’s either on the water or in the ports or in distribution centers,” Shay said. “So we’ve got the supply, and the disruption in the Chinese supply chain is coming back online.”
Shay said that the next concern for US based retailers is the extent to which the coronavirus outbreak will spread in the United States and how that would impact consumer demand. Demand has been strong so far and there has been steady foot traffic to stores in the US, Shay said.
“I think we have to rely on the guidance of health-care professionals to direct us as to make all the preparations we should,” Shay said. “But let’s expect that we’re going to be ready if we have to deal with this in the next couple months.”
A day ago the NRF released its sales fore cast for 2020. According to the NRF, the growth for the retail segment sale for 2020 will be between 3.5 per cent and 4.1 per cent which will be more than $3.9 trillion.
Shay said that the figures forecast also assumes that the coronavirus does not turn into a global pandemic because much of the forecasting for 2020 was done before “we started to experience the severe reaction we’re seeing in the market over the last few days.”
“It’s really based on the really strong fundamentals of the consumer economy,” Shay said. However, the coronavirus does add uncertainty into a consumer landscape that otherwise contains low unemployment and rising wages, Shay said.
Shay said that the level of minimization of disruption of supply chains in China differs according to company and segment.
But, he said, “a number of the larger companies have started to indicate that the signs that they’re getting from the Chinese market is some of the production is coming back online. I think there’s a question of how long is that tail that works through the system to get those companies back to full strength and really producing goods at the rate they need them.”
On Wednesday, Macy’s CEO Terry Lundgren had said that supply chains of retailing companies have become too dependent on China. He cited how both the trade war the coronavirus outbreak in China has disrupted global supply chains of retailers.
“Something like 90% of all footwear under $100 at retail are coming out of China,” said Lundgren, who was Macy’s CEO from 2003 to 2017. “And we all need to diversify that strategy.”
(Adapted from CNBC.com)