Effects of Hurricane Sandy on the Retail Industry

Effects of Hurricane Sandy on the Retail Industry

By Jenny Tsai, Project Analyst

Hurricane Sandy broke records in October, 2012, dubbed the largest Atlantic hurricane and the second most costly Atlantic hurricane to Hurricane Katrina. Damages are estimated at $20 billion with losses related to business interruption that surpass $50 billion. Business interruption stemmed from power outages, gas shortages, transportation interruptions, and warehouse, retail, inventory, and other business related equipment damage. The Sandy relief and restoration process has been tedious and slow, with thousands displaced from homes and businesses in ruins, weeks after the storm. Given the obvious results from the storm’s effects, retail distribution may or may not suffer.

Retailers that heeded the one-week Sandy warnings and who took measures to plan ahead are operating on proactively released inventories. Home Depot had ordered truckloads of inventory to release ahead of the storm to retail distribution centers. Local retailers along the Atlantic shorelines that held off ordering heavily in anticipation of the upcoming holiday shopping influx suffered minimized losses in inventory damage. While New Jersey and New York are amidst active recovery and rebuilding, consumers have shifted their almighty dollar to more philanthropic means in aiding family, friends, and neighbors, rather than overindulging themselves. Others may shift their priorities for the holiday in investing in home and business repairs against personal gifting agendas. As the holiday season passes into the new year, monies and contracts will be released into the construction, design, and building industries as residential and commercial properties and major transportation avenues are rebuilt and repaired, boosting national spending and creating jobs. October’s retail analysts have verified that consumers are still confidently spending. The question now is where and on what are they spending their cash.

In the short term, while the nation’s financial hub is cogged in motion; retailers will shift their weight to strengths in locations in other major US cities to offload its burden. Inventories that are “stuck” en route will be remarketed heavily in after holiday advertising strategies. Black Friday sales for the Sandy-ravaged areas may be bleak while local retailers remain closed and “in the red” for the short term. But, as history has proven, where there is demand there will be supply. The demand will be for strong contingency plans for utility and natural resource suppliers in natural disaster scenarios, pursuing near shore opportunities for finished goods, and encouraging retail, manufacturing, and distribution to deploy contingency plans to reallocate resources to minimize losses.

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