Government Shutdown Could Have Residual Effects on Retail Throughout 2019

Following a successful holiday season in 2018, the retail industry was immediately shaken by the longest-lasting government shutdown in U.S. history. Initially, some thought the impact would only affect the first financial quarter, however, as the shutdown lingered, the impact could be felt through the rest of 2019.

The federal government shutdown cost the economy $11 billion, according to a report by the nonpartisan Congressional Budget Office (CBO). The CBO report released on Mon., Jan. 28, estimated a loss of $3 billion in economic activity, or 0.1 percent, during the fourth quarter of 2018. The impact was projected to be greater during the first quarter of 2019: a total of $8 billion, or 0.2 percent of the GDP. While the percentages may seem small, they represent a significant amount of money.

What does this mean for the retail industry, and particularly e-commerce? More than 800,000 government employees didn't receive paychecks during the shutdown, which had a domino effect on their families. Even more, thousands of contractors who work for the government didn't get paid at all.

The number of those directly affected surpassed the 1 million mark, and had the rest of the country concerned about the economic impact as well as our own financial futures, too. The government shutdown has opened people’s eyes to how much they spend on essential and nonessential items, how much they depend on each paycheck, and the importance of saving — if they have the luxury to do so.

As a result of many consumers’ loss of income and/or commitment to fiscal responsibility, businesses have seen slumped sales. As the CEO and president of a wholesale distribution company that sources products worldwide, I saw my sales go down significantly year-over-year in January, which I believe is a direct result of the government shutdown. My primary business is wholesale distribution; whether it’s overstock, package change, past season, closeouts, excess goods, or other opportunities, we carry it.

Most of my large retail clients are in the discount or off-price retail category, which gives them an advantage during hard times, as consumers will always search for bargains and low-cost items that give them bang for their buck. However, during the government shutdown, all retail sectors took some form of a hit as many consumers only shopped for the bare minimum essentials.

With President Trump calling for a national emergency in the last week, economic and retail projections that seemed clear are now uncertain. The irreparable damage for the first quarter has already been done. The hope is that it's early enough in 2019 that the residual impact for the overall year will be minimal and a strong, speedy recovery for retail can occur.

Brett Rose is the founder and CEO of United National Consumer Suppliers (UNCS), a wholesale distribution company that buys manufacturer closeouts and overstock inventories in bulk then sells it in smaller quantities to retailers.