How Our Business Got Hit by COVID-19 Event-Cancellations Whose Effects Now Cascade Through the Industry

This is in a microcosm what businesses of kinds all across the US face.

By Aaron “Ripp” Ripplinger, Strategic Director, Anton Sport & DesignAShirt.com. For WOLF STREET:

Wolf here: “Ripp,” a long-time commenter on  WOLF STREET, was instrumental in creating the WOLF STREET beer mugs, and he set up and runs the WOLF STREET STORE, where you can buy these “Nothing Goes to Heck in a Straight Line” mugs.

Major League Baseball announced Thursday that it will be suspending Spring Training in response to the continued spread of the COVID-19 virus. This is just another case in a long list of events that have been cancelled or postponed due to the ongoing pandemic. The latest figures estimate that over 30 million people have been affected so far by these changes.

Here in the Phoenix metro, MLB spring training is a big deal. According to the Arizona Governor’s office, spring training has a $600+ million-dollar impact on the local economy. Over a million out-of-state fans arrive each year from the end of February through March to watch the highest concentration of games in the country. The median visitor stays four nights, attends three games, and spends over $400 per day. This influx supports over 6,400 jobs each season.

This is big business in Arizona, and the suspension of the season is a blow to the local businesses that were expecting another big year catering to this annual event. This, coupled with the cancellations of just about every other event in the near future, is sending a cascade of order cancellations through other industries.

My company is in the custom decoration/promotional product business, and events are one of the biggest markets we cater to. We supply everything from custom t-shirts, hats, and jackets to logoed keychains, pens, and mugs. We’re behind all of those free (and mostly useless) swag items companies give away, the t-shirts the staff wear, or the merchandise being sold.

In the past week, we’ve been getting calls and emails from clients around the country who need to cancel their orders because the event they were hosting or attending has been cancelled or postponed. Some of these clients had purchased for events well in advance, and are now stuck with items they may not be able to use.

The 26th annual Arizona Aloha Festival was scheduled to begin on Saturday, March 14th, but was cancelled on Thursday night due to a ban on all city permitted events. They are now sitting on hundreds of T-shirts they were hoping to sell at the festival.

We are working to help them create an online store to try and sell this merchandise and offset the loss caused by this last-minute cancellation. This story is being played out around the country from others in our industry as more and more events are cancelled. Hopefully most of these items can be used for other marketing purposes, but many will be relegated to storage rooms, charity boxes, or landfills.

The uncertainty has sent panic through Arizona’s public university system. ASU and NAU have both moved all classes online for at least two weeks. All athletic events have been cancelled, and I expect most campus events will follow suit in the coming week.

These events are big time business, and generate millions of dollars of revenue for the promo industry. We’ve had nearly twenty university orders cancelled in the last few days alone, and those were all just the athletic events. This is the scenario in just about every city in America right now, and the waves are being felt by everyone downstream.

This isn’t just an issue with huge events or major corporations canceling their orders either. A local Little League just received an order, and a few hours later they postponed their current season indefinitely. Several customers have cancelled their shirt orders for family reunions because they are unable or unwilling to travel. The Baker-to-Vegas Challenge Cup law enforcement relay has been postponed along with their updated official merchandise order. Local businesses and events are hesitant to spend money on these types of products right now because they are afraid of an uncertain future.

On the other side of the spectrum, we’re now starting to face issues from our own suppliers. Inks from overseas are facing major delays with no known delivery dates, and stockpiling is only making the issue worse. Many of the custom products from China are either on backorder for weeks or lost in transit completely.

Our own industry trade shows and training events are also getting cancelled, which again cascades through other businesses in those local economies.

The promotional products industry, like many others, has been booming for years now. Online marketplaces and direct fulfillment have made it easier than ever to get custom orders made and delivered all over the country.

I don’t think many of these businesses ever considered something like a global pandemic – and likely subsequent economic downturn – would affect them to this degree. We’re prepared to weather the storm brought on by these events, but there will probably be a few less boats in the water when it’s all over. By Aaron “Ripp” Ripplinger for WOLF STREET

How will Canadians service $1.56 trillion in mortgage debt plus other debts such as credit cards? What about tenants who can’t pay their rent? Read... No One Knows How the Coronavirus Will Impact Canadian Real Estate, But Here Are My Thoughts

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  54 comments for “How Our Business Got Hit by COVID-19 Event-Cancellations Whose Effects Now Cascade Through the Industry

  1. c smith says:

    “We’re prepared to weather the storm brought on by these events…” How many businesses, large and small, can say the same? Hasn’t bailout after bailout over the past 25 years actually encouraged people to operate leveraged to the hilt and with very little financial cushion? We’ve done it to ourselves, and the federal government and central bankers have been encouraging it all the way.

    • Kirk says:

      That is spot on. High risk high reward paid off even in losing, now the company’s or person’s who managed accordingly and didn’t take on more then that could afford or handle will be the ones knocked out. Sad day in America when we bail out the fullish, reckless. Old saying never spend more than you earn and you’ll be alright.

    • joe says:

      Exactly. Ponzi foreva.
      Financial sector bros gone wild.
      WTF, finance is supposed to be a utility like garbage disposal.

      • wkevinw says:

        A lot of truth, Joe.

        Finance needs a lot of regulation (e.g. FDIC, Fed, etc.), and as such is similar to a utility- or is supposed to be.

        Their supposed “creativity”, e.g. making derivative/structured products, is nothing more than repackaging debt instruments. There is a famous quote by Galbraith that basically says this- ~”all financial innovation is just tinkering with debt”.

        The leaders in this country have been complicit in this dysfunction; both parties, financial firms, academics, regulators, legislators, media- it goes on.

        Both political parties’ elites have been leading the way!

        https://d33wjekvz3zs1a.cloudfront.net/wp-content/uploads/2016/02/Glass-Steagall-Signing-Repeal-Clinton.jpg

    • Wisdom Seeker says:

      After the cash flows dry up and force loan defaults and bankruptcies, the lenders will own the borrowers. Those with viable businesses will revive them. But it’s going to be painful.

  2. Joe says:

    I sort of see two seperate markets in which over the decades with the advent of computers has advanced credits markets into the billions in borrowing for all kinds of adventures. This is Wallstreet and rampant inflation…
    Now comes the US Federal Reserve who is the only entity allowed to create cash.
    Do you see the problem here?

  3. chillbro says:

    Tax cuts during the good times, bail outs during the bad times. Corporate socialism!

    If you are a large enough creditor or investor, you will be made whole!

  4. CoCosAB says:

    There is the usual and daily moronic human behavior… and then there is the SARS-CoV-2 human behavior!

  5. Stay calm and carry on. So long as you have a bit of cash left in your account. But wait … if 30% of the population isn’t allowed to work, then give it about 10 days and we’re going to need to start handing out money to feed them. Not allowing people to work is going to be a touch expensive.

    • Keith says:

      Basic minimum income and MMT, here we come!

    • Frederick says:

      The first problem you have is that your money is “ in your account” If you don’t hold it, you don’t own it

    • Paulo says:

      It is more than 30%, imho. This morning I drove 75 miles down to Courtenay (Van Island) to get a gas gauge repaired that has a mysterious ‘issue’. I talked with the owner of the small specialty mechanics shop and said, “I would imagine your business will still be able to operate okay”. He said no, that they were just day to day. He had a scare last week from the one known case in the Valley, and obviously there are likely others. He is continually cleaning his debit keys, door knobs, etc throughout the day. He doesn’t know how long he will bother staying open? He has two full time techs, young guys with families. I just left my rig with him and will pick it up in a few days, or whenever. Multiply this everywhere. The techs don’t even deal with customers, but……

      • Thomas Roberts says:

        In my area, I have also begun to notice alot less people go inside of the gas stations, instead they just use the credit card reader built into pump and drive off. For those who don’t know, gas stations lose money overall, selling gas and make it up on the inside store/restaurant.

  6. doug says:

    Thanks for the inside view, which is being replicated across the globe.
    Also thanks for helping with the mug. The shipping container was amazing like the mug itself.
    And yes, if you can come out on the other side of this, there will be less competitors.

  7. Harrold says:

    The coronavirus just might kill all of the Unicorns.

  8. Mike says:

    Many US Small businesses are effectively heading right into the teeth of a depression. zero revenues. zero profits. paying wages during no revenue periods. Tell me how these businesses survive ? governor of illinois shut down restaurants and bars completely. at least NY allowed same businesses to have a fighting chance, by allowing take out and delivery to continue.

  9. RD Blakeslee says:

    “We’re prepared to weather the storm”

    Sincere congratulations and thank you for the work you did on my mug …

  10. Danno says:

    I am sincerely very sorry about your unexpected loss of business. And by no means what I have to say next is a personal attack on your, your staff, etc but:

    How much crap do people need? I take t shirts, tote bags and water bottles each year to donate in Cuba and I find these items (99% monogrammed) for next to nothing at thrift stores, disposed often days after the event where people received them….

    Again, I hope the best for your family but a solid belt tightening for the general population may help us after all.

    • Ripp says:

      Danno,

      Tangible marketing has become more and more popular as traditional marketing avenues are losing their impact. That coupled with the proliferation of custom “merch” has only increased the recent boom. People don’t need any of these things, but they do love free, custom, or limited edition stuff.

    • Rome says:

      Why stop there?

      Let’s think of all the things that nobody really needs:

      – ski lifts – think of all the waste involved there — for people to go up then down then up then down

      – holidays — do we really need to pile into a tube and jet to a concrete building and sit at the pool

      – motor boats — is there any purpose to owning a boat and racing around a lake — and pulling water skiers!!! what’s with that!!!

      I could list thousands of useless activities and businesses.

      • James McNeill says:

        Skiing on snow and water is blissful for many of us. You are attacking the leisure economy, and that line of thinking has no endpoint. We don’t need anything. But its all awesome. We are learning the folly of our excess consumption in terms of externalized costs. (pollution). And we are transforming the entire world to run on renewable energy. We are also in a massive transformation from labor producing goods to mechanical production, which frees us to consume much more. The financial system that got us through industrialization now must transform with the shift to leisure economy. We need UBI now. Business should self organize based on crowdfunding what we want produced. Not by one person ‘guessing’ what will be in demand and taking out loans to produce it. Also, if we had no debts and a UBI, this CV issue would not be an issue. We would just pause our economy, as we are, except for food and home entertainment, and then continue when the threat was over. Its the monthly debt payment cycle that is making the system break down. Increase the money supply at the consumer level instead of the bank lending level is the answer.

  11. Unamused says:

    It was a grave mistake to encourage people to act on their own worst instincts and to promote irresponsibility and narcissism in the general population. Maybe a third of the US has been conditioned so it isn’t prepared to operate any other way, and that problem will feed every other problem, delay recovery, and possibly prevent it. And several other memes are at least as serious.

    Salvaging the present situation requires getting the plague under control ASAP, and that requires testing. The inability to conduct testing on anything near an adequate scale can be expected to continue for weeks, and until it is the damage to the US economy will continue. The real extent and course of that damage will take weeks to reach Wall St. and the banks, and they will not be able to restore themselves by bleeding the real economy this time. The hole is getting deeper, the CDC is flying blind, and the national leadership, so called, is malicious and incompetent. Cooperation and charity are now essential, but widespread social breakdown is increasingly likely.

    Surreal, I said, not so long ago, as the markets marched higher. Kafkaesque. And that was before cov-19.

    • cesqy says:

      When 60% of the population has caught the plague, the virus will self contain. All other efforts will just slow it down. I think that the new cases in China is decreasing because a large percentage of the population now has antibodies.

      • Rome says:

        The virus has ‘abated’ in China because the CCP said it would abate in March.

        And the CCP is a dictatorship. And the virus either abates, or it ends up in a concentration camp.

        So it has abated (sarc)

  12. Iamafan says:

    I am sorry, but what do you expect? All my relative’s and their friends’ business are getting business order cancellations.
    Better hold on to the rails. If you are not solidly into cash, pray.

  13. Missouri Jon says:

    It looks as though the governor of Missouri might use a declared emergency to shut down local activities.

    In other words, they have to destroy our communities’ living in order to “save” us.

    Our school district is a major employer in the area (about 18,000 people live in the district, school employs ~500). Take that away, even for a couple of weeks, and it will put a black eye on every business (mostly restaraunts, clinics, and auto repair) except maybe the law firms, and grocery stores for a time.

    The long-term effect for the district is the real killer, because the inevitable decline in local and state revenues will have knock-on effects for the district (state provides about 45% of revenue, local is about the same.) Health insurance was already exploding the budget – the district drained its already low reserves from 19% down to 11% last year alone to cover unexpected insurance costs. This is against a backdrop where the district is indebted at ~75% of its legally allowed bonding capacity, and carrying a relatively minor $450,000 loan.

    Plus, just to complete the picture, long-term maintainence had been deferred to the point that the district is facing about $500,000 of unbudgeted, mandatory repairs every year for at least 5 years.

    The district budget was nominally $42 million this past year, but that was inflated by a $12 million bond issue passed 2 years ago (which didn’t get spent on maintainence, but on new structures.) So the district budget is actually about $36 million, 80% of which pays salary and benefits.

    The district feeds, hosts, and educates about 3,300 students. Enrollment peaked in 2006, levelled off, and then has slowly declined since 2008.

    What the state is doing, regardless of any health benefits, will murder schools’ already shaky finances. Our district was about middle-of-the-road when it came to health insurance problems, and they are too big to manage for us. Now comes our substitute governor with a surefire way to kill local economies, which were already going to suffer from wary consumers (a sizeable minority here) and supply shocks via China.

    It’s like solving a rat infestation by buring down your house, or cutting off your hand to get rid of a painful rash. The cure is worse than the disease.

  14. Unamused says:

    FEMA has found that 40% of businesses shutter in the wake of a disaster. And of the business that reopen, only 29% survive the next two years.

    You are all Keynesians now.

  15. Denise says:

    Same happening here in Jupiter- Boca. The only gatherings over 50 people that have not been canceled seem to be Trump fund raising events at Mar-A-Largo. Festival by the Sea, Spring Training, Seasonal fund raisers canceled. My daughter in Denver had a baby shower over the weekend with many people loosing or worried about their jobs. The father of the baby only has 2 two week stints left in the oil patch. Those catering to leisure and hospitality are already suffering. Inspirato apparently has let go of staff.

    My youngest daughter works for Moorings/Sunsail as a financial analyst and they feel like they can not get a break in the Caribbean Basin.

  16. Brant Lee says:

    My gal down at the local liquor store said if she has to lock up, she’ll be inside.

  17. HTSP says:

    Appreciate the insight. A friend in a recreational tour business posted his tour cancellations yesterday. It was painful to look at. It will pass if he can survive the interim.
    I am a tiny customer of DesignAshirt.com -I have ordered several one-off custom shirts and can confirm they are tremendous at customer service and value.
    I wish you the best from Nashville TN.

  18. Gian says:

    Rumor has it here in WA that the gestapo (Inslee) will order banks and landlords not to collect mortgage payments and rents, respectively. Wonder if they will be so benevolent with forgiving (or refunding) property tax payments?

    • Old-school says:

      There are two ways I can think of to allocate resorces. One is by market prices, the other is by political intervention. The first is not fair, the second is more not fair.

      • Unamused says:

        Let’s hear your ideas for a ‘fair’ solution, one that doesn’t involve any government preventing the population from getting ripped off by ruthless corporations.

        Take your time. I’ll wait.

        • Old-school says:

          The fairest allocation is where you have a lot of choices. Mowing your lawn, getting a haircut, repairing your car, obtaining food, heating your house, obtaining clothes, transportation from one city to another to name a few. You can choose between numerous suppliers or you can do it yourself.

    • Don says:

      Did you just start that rumor?

  19. Old-school says:

    It might be a tough time for a lot of people and I am sympathetic especially to families. I slowed down my life around 2007 when all my children were grown. I stopped buying crap, going out to eat, watching tv and paying to be entertained. It’s a good life with a small circle of friends and family that look out after each other. No life change for me except more washing hands.

    • Paulo says:

      Yeah, same for us. When I left the mechanics shop today I said, “Well, back home for some more social isolation, our normal lifestyle. I’ve got a greenhouse to finish”.

    • TXRancher says:

      Yes same here. I did go to a convention of more than 50 attendees this morning but not one talked about the Wuhan virus. Of course they were in the pasture and only mooooed.

      I did send yearling calves to the sale last week and average $1.45 per pound which over many many years is unusually high for live cattle. But I hear that there is no meat in the supermarkets.

  20. Michael Engel says:

    1) Europe is Druggie by NR. Germany and China
    ate Italy and France for lunch.
    2) DAX (DAXK, x3 BU) > CAC > MIB.
    3) Italy MIB never recovered. Its a zombie for 13 years. Druggie tried to help, gave Italy vaccine. It didn’t work.
    4) France CAC, a lower high, below 2007 peak and below 2000 all time high.
    5) The 40Y IXIC got drunk in SF party, fell on backbone and is now recovering from his injuries in a hospital.

  21. Lisa_Hooker says:

    Ripp – You sound pragmatic which is a good thing. Please put me down for an “I survived the pandemic of 2020” tee shirt. Might even buy a couple of “We survived the pandemic of 2020” shirts for my treasured neighbors and spice (spouces?).

    • Ripp says:

      Funny you say that Lisa_Hooker. Back during the H1N1 outbreak, one of our most popular shirts was a “I Survived Swine Flu 2009” design.

  22. Michael Engel says:

    1) WTI was down to 28.52.
    2) Putin sell gold for support.
    3) Gold is down from 1,704 to 1,454.
    4) The snakes are eating their tails.

  23. Optimist_Tim says:

    Sorry your area was hit so hard Ripp. The mug is excellent work and people always appreciate quality in the long run. At work they gave us safety award jackets with embroidered logos that everyone wears with pride for years to come.

    Around here in Alberta (oil country), Canada, they just closed K-12 schools for this season and all kids will get final grades based on their work to date. Daycares are closed too so now parents have to scramble.

    This is tough but I am buying companies with solid earnings records on the way down, for the long term. I don’t know how to day trade but look for value. Earnings will pick up in a year or so and we’ll be better prepared for next time.

  24. MC01 says:

    This is like what my great-grandfather went through in WWI: sit tight in a trench, hold to our Adrian helmet and hope our own generals don’t kill us all through sheer incompetence.

    Best wishes everybody: I am not afraid of Covid-19. But I am downright worried about how the bumbling buffoons in top management and their voters are reacting.

  25. Whatever says:

    We’re shutting down a country of 330 million because a few dozen have died and it might go into the thousands. Hospitals “might” be overwhelmed.

    This is not aerial Ebola. The death rate keeps going down with new data and ranges from zero to kids to .1% of the vast majority of healthy adults in the economy to a very scary 6% for octogenarians.

    To save a small fraction of the population we making millions suffer. There is absolutely no cost benefit analysis going on, but at the end we’re going to be talking millions and millions of dollars for every life saved, and tens of millions of people having a lower lifestyle as a result.

  26. Cliff says:

    “Over a million out-of-state fans arrive each year from the end of February through March to watch the highest concentration of games in the country.” Really? Arizona has 15 teams. Florida has 15 teams.

    • Ripp says:

      Cliff,

      Florida has 15 teams, but they are spread over 13 cities across the state. Here in AZ, they are all in the Phoenix metro.

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