This Is Starting to Feel Familiar

As case counts mount, employer plans are changing.

Good morning!

Here are today’s highlights:

• New York City is already feeling the impact.

• Professional sports teams are scrambling.

• Retailers are seeing a surge in costly returns.

• Chipotle is opening a digital-only kitchen.

THE COVID ECONOMY

Employers are mandating boosters, postponing return dates, and bracing for the surge: “Office workers this week watched as events unfolded that were at once familiar and jarring in their persistence: Covid case counts ballooned, and employer plans deflated. The United States is reporting an average of more than 120,000 new Covid cases each day, up 40 percent from two weeks ago, according to a New York Times database. New York City is experiencing a spike in cases larger than any since last winter. Employers that had been growing bolder in their plans — reopening offices, mandating or strongly suggesting that workers report back, promising holiday blowouts — are now scaling back their ambitions for in-person business and socializing.”

• “Companies forging ahead on in-person work face the question of whether to require booster shots, as the need for extra protection against the Omicron variant becomes increasingly clear.”

• “After a year of email and Slack correspondence, corporate teams had been eagerly anticipating holiday parties. But as New York City’s new Covid cases rose significantly after party invitations went out, dozens of companies scrambled to cancel their plans.”

• “Vincent Chee, head of people and culture at Bevel, a communications consultancy with 30 employees, had started making arrangements for the company’s holiday celebration in late September: It would involve a scavenger hunt, a make-your-own snow-globe session and hot cocoa.”

• “Last week, when an employee tested positive for the virus, the company shifted to virtual celebrations.” READ MORE

New York almost seemed to be getting back to normal: “Just as the city was getting more crowded and office vacancies were starting to shrink, an about-face has people again on edge. New cases of the virus are at the highest since January. Businesses are asking workers to stay home, schoolrooms are shutting and testing sites have long lines snaking around city blocks. And Broadway shows and restaurants are closing down as staff shortages and pockets of Covid outbreaks sprout up around the city at the busiest time of the year for tourism. ‘We’ve never seen this before in NYC,’ Jay Varma, public health adviser to Mayor Bill de Blasio, said Thursday on Twitter. ‘Test positivity doubling in three days.’”

• “Contento, a Peruvian restaurant in East Harlem, closed Tuesday after a fully vaccinated staffer got Covid. Contento closed in March 2020 and had reopened in June 2021.”

• “Yannick Benjamin, co-owner of Contento, said he aims to reopen next week but is prepared to miss the lucrative holiday season if Covid cases get worse. ‘We’ll figure it out and we’ll get ourselves back,’ he said.” READ MORE

Amid player outbreaks, the NFL, NBA, and NHL are scrambling to salvage their seasons: “For sports fans in America, the severity of the Covid-19 pandemic became abundantly clear on March 11, 2020, as the NBA shut down, followed the next day by the NCAA canceling its national tournaments and the NHL suspending its season.”

• “Over the past week, scores of players and team members in the NFL, NBA, and NHL have tested positive for Covid-19 or come in close contact with someone who has.”

• “The NFL alone saw around 100 players test positive over the past three days, and a number of teams—including the Atlanta Falcons, Los Angeles Rams, Minnesota Vikings, Cleveland Browns, and Washington Football Team––are now being made to increase their team-wide testing and to follow stricter safety mandates.”

• “Earlier this week, the Chicago Bulls placed 10 of its players in Covid-19 protocols, leading NBA officials to postpone two of the team’s games. The Brooklyn Nets are reeling from an outbreak of their own, with seven players named on its Covid-19 protocols, including superstar and former league MVP James Harden.” READ MORE

Music acts are seeing 20 percent no-shows: “The phenomenon is the latest sign of Covid-19’s lasting imprint on entertainment. No-show rates tend to be highest for concerts that have been rescheduled multiple times. They also reflect persisting concern about the spread of Covid-19—fears that could increase due to the Omicron variant. No-shows hurt venues, promoters and artists, since they mean fewer beer, food and merchandise sales and boost the risk of overstaffing. Veteran acts have been among the artists with significant no-show rates, raising questions about the risk tolerance of older fans whose wallets are important to live-music industry revenues.”

• “‘People are increasingly choosing to not go,’ [Dave Brooks, senior director of live music and touring at Billboard] says. ‘And that’s frightening, because what’s going to bring them back? It’s not clear. If people get in their heads the idea that they’re not safe, you could lose a lot of customers, forever potentially.’” READ MORE

LOGISTICS

Retailers are confronting rising return costs: “Free returns are certainly not free for retailers. In fact, the cost of processing returns will increase this holiday season, according to logistics forecasts, especially against a backdrop of rising inflation, labor shortages and Covid precautions. The average holiday return will cost retailers two-thirds of the original price for the item when factoring in labor, transportation and warehousing costs, new data from commercial real estate firm CBRE and return technology company Optoro showed. CNBC received an early look at the annual CBRE-Optoro report, which indicates a 7 percent increase in the cost of returns, also called reverse logistics — with electronics like computers, tablets and mobile devices having return costs as much as 15 times higher than clothing, because workers must remove personal data.”

• “The National Retail Federation estimates online sales during November and December will expand about 13 percent to more than $222 billion. The CBRE report projects that $66.7 billion of those online sales will become returns — also up 13 percent year-over-year and nearly 46 percent higher than the previous five-year average.”

• “Approximately 30 percent of e-commerce sales are returned compared to 10 percent of brick-and-mortar sales, according to CBRE.” READ MORE

The supply chain crisis is hitting Africa especially hard: “With U.S. retailers willing to pay almost any price to get their goods to American shores in time for the holidays, ocean carriers have redeployed container ships from the developing world to the more lucrative Asia-to-United States trade lanes, where rates for some shipments this fall were 15 times pre-pandemic levels, according to the Freightos index. That’s helped fill American store shelves — and carriers’ coffers — but it has battered many African shippers, according to interviews with more than 30 maritime analysts, shippers, freight forwarders and cargo carriers in the United States, Africa and elsewhere.”

• “As the world’s largest cargo ships rush to the United States with all the clothes, furniture, toys and electronics that American consumers might want, Aditya Awtani is feeling neglected.”

• “The chief executive of Mega Garment Industries Kenya, which supplies brands such as Calvin Klein and Izod, sometimes must wait more than two months — twice as long as usual — for shipments of the imported Chinese fabric he needs to make clothes in his high-ceilinged factory in Mombasa, Kenya.”

• “The shipping headaches, along with freight costs that have nearly quadrupled, are carving a hole in his profits, straining his relations with customers and threatening his 5,800 employees’ jobs.”

• “‘There are days when I walk into the factory and I see workers with their arms folded because the containers have not come, which is a very depressing sight to see,’ Awtani said.” READ MORE

TECHNOLOGY

Chipotle is opening a digital-only kitchen in Ohio this month: “The new restaurant format will only serve customers through digital orders. Customers place orders online or through the Chipotle app, then pick them up via a walk-up window or a Chipotlane, Chipotle's version of a drive-thru. The digital kitchen format is a sign that Chipotle is continuing to embrace the dominance of drive-thrus and digital orders over the fast casual chain's original model, where customers ordered inside and watched workers construct their burrito bowls right in front of them.”

• “Digital sales made up nearly half of all Chipotle orders in the third quarter, at 42.8 percent of sales for $840.4 million. They were up 8.6 percent over the same period in 2020, which was the year digital orders really grew thanks in part to the Covid-19 pandemic.” READ MORE

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THE 21 HATS PODCAST

The Vomit List: This week, Jay Goltz and William Vanderbloemen talk about what it takes to hold on to your best people, the ones whose departures might send you looking for a trash can. They also discuss whether “hire slow” still works, whether it’s a good idea to rehire a former employee, whether it’s still possible to do a meaningful reference check, how to use 360 reviews and personality tests, and finally, whether Jay and William would be ready to sell their business if someone were to come along and offer them twice what they think it’s worth.

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