Surviving businesses plunge into second round of COVID restrictions better prepared than they were 8 months ago

Like many business owners in Washington state, sisters Tara Espinoza and Sabrina Rinderle, proprietors of Queen Anne Dispatch in Seattle, were neither surprised nor unprepared for Gov. Jay Inslee’s second round of COVID-19 restrictions.

Since the first restrictions in March, Espinoza and Rinderle have largely reengineered their combination boutique and mail-services business. Staff is fully trained in safety protocols. Floors are marked for social distance and the inventory mix is more “grab-and-go.”

The finances aren’t great. Sales are a fraction of pre-March levels and this time there’s no federal Paycheck Protection loan. But their landlord is working with them and, importantly, customers are no longer in shock. Unlike in March, when “nobody was coming in the doors,” customers are more “comfortable with the safety precautions,” said Espinoza. “They know what to expect.”

Across Seattle and the state, employers, workers and consumers are plunging into the second round of restrictions better prepared in some waysthan they were eight months ago. 

Of course, there have already been some reprises of the panic buying that followed the first restrictions in March. Another wave of closures and layoffs is probable, only this time quite possibly without the first COVID-19 shutdown’s billions of dollars in small business loans, enhanced unemployment benefits and other federal relief, or the millions in local philanthropic relief.

But in other ways, this time may prove less dire for those businesses that have survived. Since March, much of the economy has adapted to COVID-19. Consumers are hardened to the new realities. Many businesses have come up with new strategies that, despite lower expectations for revenue and profit, could help operators get through this latest shutdown.

Critical systems such as supply chains also have been upgraded as companies incorporate lessons and strategies from the pandemic.

At the other end of the business spectrum from Queen Anne Dispatch is e-commerce giant Amazon. It too has adapted, though unlike many companies its sales have ballooned as more consumers shop from home. Amazon has poured $7.5 billion into its distribution network since the start of the year, hoping to avoid a repeat of its scramble early in the pandemic to stock distribution centers with cleaning supplies and home office equipment.

The company faced an onslaught of criticism as the ensuing ripple effect of shipping delays reverberated throughout its ecosystem of third-party sellers, and fulfillment center employees said they feared catching COVID-19 at work.  

Amazon beefed up COVID-19 precautions in its distribution centers, hired 250,000 workers to meet surging demand for online shopping and expanded the square footage of its logistics infrastructure by 50%, Chief Financial Officer Brian Olsavsky said during a third-quarter earnings call. By midsummer, Amazon’s own distribution network delivered nearly two thirds of the packages purchased on its site, up from roughly half in 2019 and just 20% the year before.

Amazon was “caught flat-footed” at the start of the pandemic, said e-commerce consultant Rick Watson. “That’s all lifted now.”

Amazon’s sales during the pandemic have soared, tripling its profits compared with last year — though the company says much of the gains will be plowed into the company’s efforts to stay one step ahead both of surging pandemic demand and new health risks at its warehouses.

Many other retailers, from Costco and Kroger all the way down to mom-and-pop shops, are also benefiting from pandemic-proofed supplier networks and distribution systems.

Central Co-Op, which has a grocery store in Seattle and another in Tacoma, has not only seen improvements among its big suppliers, but also has broadened its supply chain to include more smaller local vendors. As a result, ”we don’t have out-of-stock problems the way we did back” in March, said CEO Catherine Willis Cleveland.

Some retailers have also changed how they manage anxious shoppers, and were quicker to impose per-customer buying limits on some items.

QFC, for example, has “proactively put product limits on toilet paper, tissue, cleaning wipes and bleach,” said Tiffany Sanders, spokesperson at QFC’s regional office in Bellevue. “We have plenty of food and other products in the supply chain but want to ensure everyone has access to it.” 

As a result, while runs on essentials like toilet paper and hand sanitizer once again left some grocery store shelves temporarily bare after the restrictions went into effect Monday night, so far those appear to be more short-lived and sporadic than they were in March.

“The last time the governor announced restrictions, the next day, we had people lining up outside, but this time, it’s been so chill I’m on the verge of being bored,” said a midlevel employee at a Seattle-area Safeway who asked not to be identified. Safeway did not respond to questions for this story.

Businesses also have refined their protocols for hygiene and for occupancy restrictions, with things like special hours for seniors and suggestions that customers limit the size of their shopping expeditions. “We are recommending families try to only send one person from their household to the grocery store,” said QFC’s Sanders. 

Some retailers have adopted new strategies for controversial issues like masks. At Safeway, for example, maskless customers are now simply offered a mask instead of being asked whether they have a condition that prevents them from wearing one, said the Safeway employee. “And that works like nine times out of 10,” the employee added. “We haven’t had any big outbursts or scenes.”

Other industries that were thrown into turmoil by shutdowns in spring were allowed to continue work this go-round.

Homebuilders raised a ruckus earlier this year when statewide orders temporarily shuttered construction sites. Thousands of contractors emailed the governor’s office in the last week of March alone, asking to be listed as an essential business, public records show. Construction work reopened — with added safety measures — after an aggressive lobbying campaign by industry groups.

Those measures have kept job sites humming in the week since Inslee announced the latest restrictions, which exempt construction work.

At the Columbia City construction site of local homebuilder David Coats, the founder of NEST design + build, prominent pandemic adaptations include masks, social distancing signs and a portable hand-washing station.

“We’ve built all kinds of things, but we’d never built a small wash station for outside,” Coats said. “How are you going to drain it? How do you bring water to it? What kind of faucets are the right ones to use?” Sourcing protective equipment was also an initial hassle — but with those learning humps overcome, Coats said, the COVID-19 protocols have become so second-nature as to be boring.

For many businesses, the pandemic has forced revisions to entire business models.

In the past 10 months, Lakewood-based plastic fabricator Custom Edge has gone from making brochure holders for Microsoft’s now largely empty Redmond campus to producing a full line of COVID-19 protective equipment: sneeze guards, grocery store shields and polycarbonate face shields.

The transition was one of necessity, said owner Scott Felk. Pandemic restrictions torpedoed his contracts with office buildings and retailers, including Nordstrom. In the first months after the pandemic, Felk said, his business “kind of puttered along” with only two employees instead of its regular 10 as he learned more about how to compete in the new COVID-19 marketplace.

Because of the demand for protective equipment, Custom Edge is on track to finish the year with roughly the same sales volume as 2019, he said.

Molly Moon Neitzel, owner of the eponymously named local chain of ice cream stores, is also counting on several pandemic adaptations to help get through the new restrictions.

Since March, she has launched a wholesale operation — Molly Moon’s is now sold in more than 120 regional locations. She has also started ice cream deliveries, which now account for 10% of total sales, and is bringing out a two- and four-serving size dessert tailored for the smaller gatherings mandated by the governor.

She’ll also revive a punch card that lets supportive customers pay in advance for 11 pints for the price of 10. After the first shutdown, card sales covered two months of health insurance for the 90 workers she had to lay off. She doesn’t expect card sales to be as high this time, “but I think we’ll get some kind of bump — and that will be helpful,” Neitzel said.

Still, Neitzel knows her adaptations are only a stopgap. Even before the new restrictions, overall revenues were down around 40% compared with a year ago, and without some major improvement, she expects to be out of cash in five months.

“I have until May to figure out what I’m going to do,” Neitzel said.

That’s an all-too-common concern. While some larger players, such as Amazon or the big grocery chains, are likely to weather this new round of restrictions, it’s a far less certain path for smaller businesses, many which were already barely hanging on.

Even before the new restrictions had been announced, industry estimates suggested that 35% of the state’s restaurants and 49% of the state’s hotels will permanently close due to the pandemic, the Washington Hospitality Association (WHA) said. Grim forecasts also await many smaller retailers as well as businesses, such as gyms, that must close entirely during the governor’s restrictions.

Those scenarios would be playing out with only a fraction of the government aid provided to businesses and their workers last spring.

Congress hasn’t extended its earlier program of small business loans and enhanced unemployment. On Friday, Gov. Inslee proposed a relief package worth $135 million as well as cuts in businesses’ unemployment tax — but that’s dwarfed by what the state’s business community faces in total lost revenue.

Other relief is also drying up. The first lockdown saw private philanthropic efforts supplement public aid. But as the 10th month of the pandemic approaches, some of those initiatives have wound down or focused their efforts on a smaller subset of businesses.

“Donor fatigue is real,” said Lillian Sherman, the executive director of the Pike Place Market Foundation, which has given nearly $500,000 to market businesses to help them roll out new products and transition to delivery.

Amazon, which since March has funneled millions in charitable giving to Seattle schools and organizations serving people affected by job loss, continues to offer free rent to business tenants in buildings it owns. But its $11 million Neighborhood Small Business Relief Fund and a short-lived program to help restaurants ramp up food delivery are both closed.

Between March and May, Ellen Kuwana, the one-woman dynamo behind pandemic relief effort We Got This Seattle, had raised nearly $60,000 to buy food from local restaurants to feed front-line health care workers. The aid helped at least one restaurant stay current on rent, she said.

But as the pandemic drags on, the pace of giving has lagged, her publicly accessible records show. So far in November, just three people have donated a total of $80.

Kuwana is exhausted, she said. “I was sleeping four hours a night and running like crazy,” she said of the early months. She’s gearing up to restart coordinating donations for this round of lockdown, but, she said, “I’m going to have to be much more selective this time.”

Even those businesses that have managed to pivot say they haven’t necessarily found a new equilibrium. They may be more prepared to withstand the current realities of the pandemic than they were in March, but even a minor setback can threaten the precarious new balance.

Since the pandemic, “we’re a smaller company than we were, personnel-wise,” said Felk. “And what’s going to happen on the other side, when all the [sneeze] guards go away? Will our other customers come back?”

Moon sums it up:  “A pandemic” she said, “is bad for business.”