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Should Nonessential Retail Close Due to Coronavirus?

By Daniel B. Kline - Mar 18, 2020 at 11:19AM

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Some areas aren't giving them a choice.

A number of retailers have chosen to close due to coronavirus. Apple (AAPL -1.92%), Microsoft (MSFT -0.40%), and Nike (NKE -1.23%) have all voluntarily decided to close their stores, as have a handful of others including big retailers like Macy's and Gap which sell things most of their nonessential goods online.

In some parts of the country, non-essential retailers aren't getting a choice. They're closing because mayors or other political leaders have mandated that they do so.

For retailers that still have a choice as to what to do, the answer isn't as easy as it seems. Closing may benefit the overall public good but remaining open while adhering to strict protocols may be a way to keep chains from having to lay off employees.

A closed store sign.

Retailers are closing due to coronavirus. Image source: Getty Images.

What should retailers do?

Closing probably makes the most sense but social distancing does not have to mean sheltering at home. Stores may consider operating with rules designed to keep people safe. That could mean moving to an appointment-only system or limiting how many people can enter its stores at any given time.

Stores can also post rules about people maintaining a healthy distance and limit contact between employees and staff. While that's happening, retailers can also implement enhanced cleaning procedures and do a deep cleaning at the end of each day.

Those are options but the real consideration should be based on whether the retailer sells items that people need during the crisis. That's not such an easy decision either.

Yes, grocery stores and chains like Target (TGT -2.57%) and Walmart (WMT 1.25%) offer essential items people need to live. But, what about a toy store that sells games, puzzles, and other items people want to buy in order to pass long periods of isolation? That same argument could be made for bookstores and even crafts stores.

Ideally, the government will take steps to make closing easier for business. The U.S. Chamber of Commerce Monday called upon lawmakers for more action, NPR reported.

"We need big, bold policy moves now to ensure businesses continue to function, meet payroll, and keep American workers employed," said Chamber CEO Tom Donohue. "We must not let this public health emergency leave a lasting, permanent impact on our economy, small businesses, and American workers."

Should retailers close?

If staying open serves the public good then it makes sense for retailers to stay open even with very strict rules in place. That may extend to stores that go beyond serving basic needs into chains that offer items that will help people pass the time during extended periods of being stuck in their homes.

The challenge for many retailers is that being closed cuts off most revenue (some will come from online sales for most stores). That makes it hard to pay employees and could force some chains to close.

Ultimately, the right decision should be the one that keeps customers and employees safe until the coronavirus threat passes. That could mean closing or it might mean remaining open if the risks can be managed and the items being sold are at least relatively essential.

It made sense for Microsoft, Apple, and Nike to close their stores. People may still need computers and related items but they can buy them online as easily as they could in stores. Sneakers and athletic apparel generally require an in-store visit to check for fit but few people have an urgent need for either.

Most retailers should probably temporarily shut down or greatly restrict operations. That's a painful decision to make but it's probably the safest one for the most people.

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Stocks Mentioned

Apple Inc. Stock Quote
Apple Inc.
$140.36 (-1.92%) $-2.75
Microsoft Corporation Stock Quote
Microsoft Corporation
$259.62 (-0.40%) $-1.03
Wal-Mart Stores, Inc. Stock Quote
Wal-Mart Stores, Inc.
$124.13 (1.25%) $1.53
Target Corporation Stock Quote
Target Corporation
$149.95 (-2.57%) $-3.95
The Gap, Inc. Stock Quote
The Gap, Inc.
$9.47 (-8.32%) $0.86
Macy's, Inc. Stock Quote
Macy's, Inc.
$17.61 (-4.14%) $0.76
NIKE, Inc. Stock Quote
NIKE, Inc.
$107.29 (-1.23%) $-1.34

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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