Coronavirus Inc.: Profiting off a pandemic
For big-box stores like Costco, coronavirrus has been a boon to their bottom line, with fear driving Americans to go on toilet paper shopping sprees. But it may not last.
SALT LAKE CITY — A month ago, face masks were being sold online for cents apiece. Now — as the number of new COVID-19 cases and deaths continue to rise — a pack of 60 masks is being sold for $623. A 24 pack of 2-ounce hand sanitizers has jumped from $10 per box to more than $400. Even doomsday gear such as hazmat suits, body armor and full-face respirators are flying off the shelves.
The sellers of these goods and others are profiting off of coronavirus fears, even as the stock market plummets.
“February sales benefited from an uptick in consumer demand in the fourth week of the reporting period,” wrote Costco officials in a March 5 statement. “We attribute this to concerns over the coronavirus.”
But Costco’s coronavirus boost may be short-lived — and the people who actually stand to profit from coronavirus in the long term might surprise you.
A ‘massive negative’
Costco reported that same-store sales for February were up by more than 12% thanks in part to the boost from coronavirus. And it’s not just big-box stores like Costco that could see an uptick in sales because of the virus.
Any industry that provides services that can be enjoyed at home, such as entertainment (Netflix vs. movie theaters) or fitness (Peloton bikes vs. gyms) could enjoy even greater demand during this period due to quarantines and illness, said Jacob Kirkegaard, a senior economist at the Peterson Institute for International Economics.
However, said Kirkegaard, these benefits will be short-lived. Retail stores could soon run into disruptions with the supply chain, as demand outpaces supply, which could quickly undo any boost they’ve seen thus far due to coronavirus, he said.
“There are these short-term, temporary benefits to some sectors,” he said. “But overall I don’t think there’s any doubt that this will be a massive negative for the overall economy.”
While people may be spending lots of money right now on toilet paper, if the virus continues to spread, people are likely to keep far more money out of the economy than they are putting into it, said Paul Sheard, a senior fellow at the Harvard Kennedy School.
“The long-term negative effects on the market economy would occur if people stop going to conferences, stop flying, stop taking hotel bookings and stop eating at restaurants,” said Sheard.
But even if the economy heads toward recession because of the virus — a real possibility in the eyes of some economists — there are still some people that may continue to make a profit.
Reaping a windfall from fear
Amazon has come under fire in recent weeks for what some see as a failure to prevent price gouging, when retailers take advantage of spikes in demand by charging exorbitant prices for necessities. In most states, price gouging during a time of emergency is illegal and a violation of unfair or deceptive trade practices law — though only a few states have declared a state of emergency due to coronavirus at this point.
In a letter last week, Sen. Ed Markey, D-Mass, said the company needed to crack down on coronavirus price gouging, asking Amazon CEO Jeff Bezos to explain what he was doing to protect consumers.
“Although Amazon and the other sellers on Amazon.com have a right to expect a reasonable return on the products they sell, they do not have a right to impose unjustifiably high prices on consumers who are seeking to protect themselves against the coronavirus,” Markey wrote. “No one should be allowed to reap a windfall from fear and human suffering.”
Amazon said Tuesday it has already removed more than 1 million listings over price gouging, according to ABC News.
“There is no place for price gouging on Amazon,” an Amazon spokesperson told ABC News. “We are disappointed that bad actors are attempting to artificially raise prices on basic-need products during a global health crisis, and, in line with our longstanding policy, have recently blocked or removed tens of thousands of offers.”
But counterfeit products can still appear on Amazon, and it’s difficult to detect and prevent fraud on the site, said Ryan McConnell, a lawyer with the R. McConnell Group, a Houston-based firm that specializes in e-commerce fraud.
“If you had some counterfeit item, some sort of snake oil that you thought would prevent coronavirus, it would be relatively easy for you to get on Amazon today and start selling your wares now,” he said.
Part of the reason for that, according to McConnell, has to do with a series of laws that protect Amazon from being legally liable when it comes to price e-commerce fraud committed by third-party sellers who post items on Amazon’s site. While a brick-and-mortar store like Costco could be sued from selling fake products in its store or on its website, no such restrictions apply to Amazon, which is seen by the law as an “advertising platform” allowing third-party sellers to showcase their wares, rather than a direct seller itself, he said.
“There’s a federal law that says that advertising on those platforms is protected speech,” he said. But coronavirus could potentially push states to change those laws and put Amazon and other e-commerce sellers on the hook for fraud that occurs on their sites — which could cut into the company’s bottom line.
“With the public buying masks and other things that they think will make them safer, people are starting to ask: Are companies doing enough to prevent fraud on their platforms?” he said. “And if e-commerce companies like Amazon and Walmart aren’t doing enough, should Congress roll back some of these protections that they’ve historically had for treating these platforms like an advertising marketplace, when they make so much money off of the platforms?”
Are millennials more vulnerable to scams?
As if worrying about one kind of virus isn’t enough, there’s another type of virus that people should be watching out for — the kind of virus you can download onto your laptop.
“Anytime where there’s a crisis like this, criminals will look for ways to take advantage of it,” said McConnell.
The cybersecurity firm Check Point announced last Thursday that more than 4,000 coronavirus-related domains have been registered since the beginning of 2020, and believes many of those sites could be used in phishing attacks — emails that appear to be from a trusted source, even your own employer, and trick you into providing bank account info or downloading malware.
“National emergencies and/or disasters add a fear factor that acts as one more hook for hackers to get what they need,” Ron Culler, senior director of technology and solutions at ADT Cybersecurity, told Vox. “When fear is added to any targeted campaign — be it a legitimate or scam campaign — the effectiveness of that campaign is increased.”
Earlier this week, the World Health Organization put out a warning about phishing attempts that attempt to imitate representatives from the organization, and the Wall Street Journal reported the agency is receiving coronavirus phishing attempts almost daily.
“There are people out there who will always panic and those people are the ones who unfortunately will fall for the calls, fall for the phishing emails,” said Jane Rupp, president and CEO of the Better Business Bureau serving northern Nevada and Utah. “It’s really about consumers not panicking and researching everything to make sure it’s actually true.”
Often these types of scams — which can also come in the form of texts or voice calls — will claim to have discovered a silver bullet or cure for coronavirus. That’s one reason why millennials may be more vulnerable than other populations when it comes to scams, said Rupp: Millennials have young children and may feel desperate to believe or do anything to protect them.
The best strategy for consumers of any demographic? Don’t buy anything that promises to prevent or cure the virus, she said.
“Just don’t do it, because there’s nothing out there at this point, no treatment or cure,” said Rupp. “When something like that does come out, it will come from the CDC, it will come from our state government. It’s not going to come out from some company on Shopify or on Google. It’s going to come out through a legitimate source.”