The post-COVID-19 world is going to incur a material extra cost to doing street level business, at least if they want to do things “by the book”, which includes abiding by yet another layer of regulatory burden from health and worker’s compensation board agencies, lest the authorities pull your business license. Individuals can flaunt the unwritten laws of social distancing with little consequence, but businesses have much more to risk if they do not toe the line.
Getting plexiglass installed, and distributing masks and faceshields to employees, isn’t free. The labour to disinfect everything and to maintain it, isn’t free. Having your square footage utilization ratio decrease by a factor of 2 or 2.5, most definitely is not free, especially in urban centres where retail leasing prices are (or were) sky-high.
Good example of an article: Shops are reopening after COVID-19, and some are adding a new line to your bill to pay for it.
Psychologically speaking, a surcharge is ill-advised in competitive businesses. Customers will feel like they’re getting ripped off. Smarter businesses will embed it into the sticker price.
But the underlying point is that within businesses that have to deal with other human beings close and up-front, fixed and variable costs are going to increase. This is a cost burden that all such businesses will have to face, so it will give a natural competitive advantage to those that don’t have to put up with such costs, or those that can amortize fixed costs over a wider base.
These costs are not going to materially add value to the customer, but because they will be spread amongst all in-person business participants, the customer will have to pay for them.
If it isn’t obvious already, businesses that do not have much in the way of a physical presence will gain one more competitive advantage, relative to those businesses that serve customers in-person.
Localization (de-globalization) of supply chains and direct COVID-19 related sanitation practices are likely inflationary, I agree. These will probably be offset by the effects of TINA and ultra-low rates on the WACC of corporations, which ought to allow surviving companies the ability to absorb costs in the form of lower returns on capital. Also, demand-side weakness will be deflationary. However, I think we also will see a tendency toward oligopolies as weaker firms collapse, which will be inflationary unless regulators really pull up their socks vis a vis anti-trust.
On balance, it will be interesting to see which forces have the biggest impact.