After the Storm

For a Florida retailer that has just been through a storm like Milton, there is a huge relief that the unknown is now known.

However just because the effects of the storm are known does not mean the stress level has dropped. There is now a new source of stress.

Hurricanes do not just blow, they suck dollars out of the discretionary goods economy. The way insurance policies are written in Florida there is a Hurricane deductible that is a percentage of the total coverage. For a $500,000 policy it means for a 2% deductible the policyholder will take care of the first $10,000 in damage out of pocket (Deductibles go as high as 5%). This is only for the house damage. If there are trees, fences or any other damage not specifically connected to the house those are not covered in any way and are out of pocket as well.

Those dollars required to repair are not discretionary spending but they are also not in anyone’s budget. They shrink the discretionary spend for a given area. So even if a retailer’s storefront came through the storm without damage,? many consumers in the area will have unplanned expenses that will decrease their spend on discretionary goods. They will be using their time to clean up and repair their homes and property.

For my former store, we saw the largest economic effects from Hurricane Matthew in 2016. This storm did not make landfall in Florida, however it skirted the east coast very close and caused damage from surge, flooding and wind damage on roofs and trees. This led to a revenue decline close to 30% for the following 2 months.

Immediately after a hurricane, the weather is actually some of the best weather we get in Florida. The storm pulls much of the humidity out of the air and seeing the sun come through brings welcome relief. The goods economy has this sense of relief much later as the insurance checks get spent either with tradesmen repairing homes or on the replacement goods that were destroyed in the storm.

What is the course of action for a vendor?

Communicate with the affected retailers and plan with them a way to bridge the gap in revenue in the short term. This flexibility and partnership pays outsize dividends in the long term.