NYC COVID-19 Vaccine Orders Bring Uncertainties to Retailers

New York City retailers could be next to require COVID-19 vaccinations for customers and workers.

On Tuesday, New York City Mayor Bill de Blasio mandated proof of COVID-19 vaccinations from employees and customers of indoor eateries, gyms and entertainment centers, one day after he mandated vaccinations for all new hires by the city.

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Now the new order, which goes into effect Aug. 16, has the city’s retail community scurrying to figure out if they need to respond somehow, and if they will also, at some point, be ordered to require proof of vaccinations from customers and employees. Amid rising fears of the Delta variant, retailers are bound to ramp up e-commerce efforts and online marketing, step up social distancing and buy online, pick up in store services, and double up on sanitizing stores.

Even without any additional requirements imposed on retailers, the rising cases of the Delta strain could discourage shoppers from visiting stores and malls, and dampen the outlook for the back-to-school and holiday seasons at retail. The nation’s labor shortage and bottlenecks at ports could also hurt retail in the weeks and months ahead.

“At this time, we’re looking into the new guidance to see how it impacts our approach,” said a spokeswoman from Nordstrom, which operates a women’s flagship and a men’s store on Broadway and 57th Street in Manhattan, as well as Rack off-price and Nordstrom Local service centers around town.

Macy’s had no comment on the New York City mandates specifically, but a spokesman did say that effective Wednesday [Aug. 4], Macy’s Inc. will require masks for all colleagues in high risk (orange) and substantial risk (red) level states as defined by the Center for Disease Control and Prevention or as mandated by local orders. “For our customers, our current policy remains unchanged,” the spokesman said. “Masks are recommended for vaccinated customers in our store locations, except where state or local mandates require them. Masks are required for unvaccinated customers in all stores.”

The mayor did not impose any COVID-19 orders on retailers or malls, indicating during his press conference Tuesday morning that the city is “very purposely focused on where people went for enjoyment that were not the most essential services and where we think there’s a particular need because folks are in close proximity, eating, drinking, exercising, whatever it may be. This is a very, very important place to make this change.”

He did, however, say that the city “will now look at other areas as well, other types of businesses and absolutely consider whether it makes sense to do something similar, but this was the right place to begin, and a place where I think we’re going to have a particularly profound impact.”

S&P Global Ratings issued a report Tuesday indicating that rising cases of the COVID-19 Delta variant in many parts of the U.S. and new mask guidance from the Centers for Disease Control, even for vaccinated people, mean retail and restaurants are in for another potential round of social-distancing mandates that could hamper the push to fully reopen.

However, S&P did temper its outlook, stating that the impact of a virus resurgence would “pale in comparison to 2020 and that an economic recession is still unlikely. Instead, we believe retail and restaurants would remain open with regional pockets of capacity limitations. We believe fear of the virus and reinstated social-distancing mandates would likely vary in impact across the sector but remain largely manageable for multiple reasons.” These include:

• Consumers are unlikely to give up their rediscovered out-of-home activities easily. “They may grudgingly limit extraordinary experiences like travel or special events and curtail some in-person interactions, but we believe they’ll continue to engage in activities where they can still practice social distancing, including patronizing shops and restaurants.”

• Consumers have learned how to shop safely, and retail and restaurants have learned how to operate while protecting customers’ safety. Consumers who are wary of in-person shopping would likely return to the digital channels they had success with in 2020. E-commerce as a percentage of total U.S. retail sales spiked to 16 percent during the pandemic from about 11 percent pre-pandemic.

• The U.S. Census Bureau’s monthly retail numbers paint a picture of consumers on a shopping spree, which is no wonder given the $2.3 trillion in excess savings they’ve accumulated from forgone experiences during the pandemic and government transfers.

While stating that most restaurants, retailers and consumer products companies continue to benefit from consumer spending, “the Delta variant could throw a wrench in recovery prospects for some issuers — especially what and how consumers buy. Issuers with negative outlooks may not be able to avoid a downgrade,” S&P said.

“In New York City where vaccine mandates are now being imposed on some private businesses such as restaurants and gyms, I wouldn’t be surprised if major retailers such as Macy’s and Nordstrom did this as well, although they would prefer the ‘cover’ of a mayoral mandate,” said Greg Sterling, vice president of Insights at Uberall, a software provider helping companies improve their online operations and connections with consumers.

“Such a rule could alienate some customers but most would likely welcome it in a city that is overwhelmingly pro-vaccine,” Sterling told WWD. “And once major retailers embraced a ‘vaccine passport,’ competitors would feel compelled to do the same to showcase their commitment to customer health and safety.”

De Blasio said the mandate, known as the Key to NYC Pass, would encourage increased immunizations to combat the spread of the Delta variant. All affected customers and workers can show their vaccination cards or upload their proof of vaccination to the Excelsior Pass application.

In the last few weeks the number of businesses requiring vaccinations has been gradually growing. Weeks ago, Radio City Music Hall began admitting guests and employees only if they were vaccinated, and on Monday, Equinox said it will require all members, employees and visitors at its Equinox clubs and SoulCycle Studios in New York City to be vaccinated by early September. Disney said it would require all salaried and non-union hourly employees in the U.S. to be fully vaccinated against COVID-19 by the end of September. Broadway theaters and other cultural venues will be requiring employees and the audiences to be vaccinated.

New York Gov. Andrew Cuomo (who is under increasing pressure to resign due to State Attorney General Leticia James’ investigation findings that he sexually harassed 11 women) has mandated vaccines for employees of the state’s MTA and Port Authority, and state hospital workers. Cuomo is also encouraging asking private businesses such as bars and restaurants to require proof of vaccination, but he did not specify retailers.

“Now that some of the biggest employers are doing soft mandates that will require either vaccines or regular testing and masking, more companies may implement similar protocols to stay open safely and keep and attract talent,” said Andrew Challenger, senior vice president of global outplacement and executive coaching firm Challenger, Gray & Christmas Inc.

The National Restaurant Association and the New York City Hospitality Alliance issued a statement expressing support for increased vaccinations but opposing the city mandate. “Checking vaccination status isn’t like ID’ing a customer before serving them a drink — staff receive training on how to do that,” Larry Lynch, the group’s senior vice president of science and industry, said in the statement. “Now, without training, our staff members are expected to check the vaccine status of every customer wanting to eat inside the establishment.”

The New York City Hospitality Alliance also stated that the new measure would be a “difficult step and controversial,” but added that it could help forestall “new occupancy restrictions and shutdown orders that will again devastate small businesses and workers who have not yet recovered from the pandemic.”

S&P said in its report, “Increased consumer mobility and out-of-home activity has been accompanied by a need to refresh wardrobes. With a resurgence, activities like dining out and travel could slow, which in turn could reverse apparel’s upward trajectory (especially in noncasual segments such as workwear) and accessories. For example, Cole Haan faced disproportionate declines during the pandemic given its concentration in workwear and accessories. We downgraded the company one notch to B- given the low demand and uncertain recovery timeline.

“On the other hand, spending on home improvement, furniture and durables like appliances — categories we expected to come down from pandemic highs — could enjoy a longer tail if consumers return to homebound life. We would expect the pandemic shift toward outdoor activities to remain sticky given health and wellness trends and its safety attributes. Apparel companies such as Nike, VF and Under Armour could see a longer benefit regardless of variant threats. Despite consumers’ recent return to dining out, grocery has held up surprisingly well. We attribute this in part to the portion of time spent working from home, which is likely to remain at a higher level than pre-pandemic. If fears of the Delta variant push out return-to-office plans, we think grocery, packaged foods, consumer basics, and athleisure and sportswear are even more likely to remain at high levels.”

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