China supply-chain concern 'overblown,' real issue is demand: former Toys R Us CEO

Retailers will have to deal with 'fear of going out,' Gerald Storch says

Former Toys R Us CEO Jerry Storch told FOX Business' Stuart Varney on Tuesday that concerns about disruptions to China's supply chain amid the novel coronavirus outbreak are "overblown," and the real issue for retailers lies with "demand."

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"The supply-side issue has been largely overblown," Storch said during a Tuesday appearance on "Varney & Co," adding that China appears to be getting back to work.

Storch added that "the real issue has always been demand," which will have a direct "effect on the economy."

Empty shelves are seen in a supermarket as people begin to stock up on provisions in Madrid, Spain, Tuesday, March 10, 2020. (AP Photo/Manu Fernandez)

WHAT IS A SUPPLY CHAIN?

The coronavirus has exposed China's global dominance in the medical supply-chain industry, FOX Business correspondent Grady Trimble reports.

A drugmaker warned the Food and Drug Administration in late February of "a shortage of a human drug" related to COVID-19 and manufactured in China "that was recently added to the drug shortages," highlighting concerns that the virus' impact on Chinese citizens could also weaken its supply chain efforts to meet demand from other countries like the U.S.

A number of U.S. lawmakers have prepared or introduced bills in recent weeks to incentivize bringing the supply chain for U.S. medicine, which is heavily impacted by China, back to America so that the next time an outbreak like COVID-19 comes to the country, it can supply hospitals and health centers with U.S.-made drugs faster.

Trimble mentioned the FDA's shortage notice and added that the administration is monitoring 20 other drugs that source an active ingredient from or are produced in China. He said the Council on Foreign Relations has suggested short-term U.S. drugmakers should scale up the manufacturing of active ingredients.

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Rosecliff Founder Michael Murphy similarly said a short-term solution drugmakers can employ right now is making more supplies to meet demand, but in the long-term drugmakers should reconsider supply chain methods.

A pharmacy worker attends to visitors at the store entrance in Beijing, China on Thursday, Feb. 20, 2020. (AP Photo/Ng Han Guan)

Storch said the act of "social distancing," or physically keeping people away from each other and out of public areas to help prevent the spread of coronavirus, is a more serious concern than supply-chain disruptions. He added, however, that this suppressed demand due to social distancing is "a short-term glitch."

"We have to watch how that goes. Do we see what I call 'FOGO' — a 'fear of going out'?" Storch explained. "Are people afraid to go out to shopping malls, etc.? So far, we really don't see that in large numbers, but if that were to ramp up, then I think you have a demand-side issue, and that's where President Trump is focusing on the right side of the equation."

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He added that there appears to be a strong correlation between retailers and supplies that people need "to live every day."

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"Going to the mall and buying apparel — going to a department store — that's very discretionary, and that part of retail is already suffering, so that could ... accelerate that shift from the losers to the winners," he added.