How retailers are getting ahead of curve as COVID-19 cases surge

Convoy's Director of Economic Research Aaron Terrazas joins Yahoo Finance's On the Move to discuss what trends in shipping and the freight industry say about the state of retail.

Video Transcript

- Welcome back to Yahoo Finance. We got the big retail sales numbers earlier today. They were up in June 7.5%. And that was on top of what we saw the prior month from that, , up over 18%. But one of the best ways to track what's happening in retail is shipments. Aaron Terrazas is Convoy's director of economic research, and he's joining us now to talk about, you know, the retail sales numbers, but what Convoy is saying as far as retail outlets getting ahead of the pandemic and restocking. So welcome to the program. And what are you seeing in regards to that?

AARON TERRAZAS: Hey, Adam. It's great to see you. We are seeing retail start to pick up again. You know, I think in some of those hot spots there was initially some worries that we'd see another consumer surge like we saw in March and April. But as you noted, I think in our data, in shipments of consumer staples going into some of these hot spots, it looks like retailers are getting ahead of the curve. They don't want to be caught flat footed again, and so I think they're stocking up stores and warehouses in those hotspot areas before consumers start panicking, if they do this time.

- So Aaron, it's Julie here. Judging from sort of the flow of goods that you watched in the past, what is the risk, then, of overinventorying, overstocking, and then do you tend to see sort of a dip in shipments following a period like this?

AARON TERRAZAS: You know, I think, particularly if you look at where the hot spots are right now in the South, in the West, the risk of overinventorying is pretty low right now, just because these are the same areas that are likely to be hit by hurricanes, wildfires over the next couple months. If they have extra, you know, household essentials in those warehouses, you know, that's probably going to be used within the next two to three months. So I think, you know, that risk is pretty low at this point.

INES FERRE: Aaron, Ines Ferre here. What do you make of the cost of the last mile of delivery? So if consumers are permanently shifting towards ordering everything online, will the cost of delivery eventually be passed on to the consumer?

AARON TERRAZAS: I think this is an important question right now. You know, not only the cost of the last-mile delivery, but all of the additional steps that businesses are having to take. There was a survey from the New York Fed just today that showed over half of manufacturers in the New York area say this is a major burden, [? all the cleaning ?] that they're having to do. They're going to have to pass that cost along to consumers. They could pass it along directly in the costs. They could start to kind of reduce, you know, implicit inflation, kind of reducing the size of the packaging. But you know, consumers are spending. It's a lot harder for producers to produce right now. That should signal, you know, some kind of rise in prices.