By Roger Showley
The San Diego Union-Tribune
WWR Article Summary (Tl;dr) A very interesting look at the rise of e-commerce and the affect online sales have had on brick and mortar operations. This is a simple Q&A surveying a varied group of professionals who give their take on what has happened and what may very well happen in the future.
Q: Is there an economic downside to shifting sales from stores to online websites?
Kelly Cunningham, National University System
Clearly there is a downside to stores not adapting to consumer’s changing online shopping behavior. Many opportunities also exist for retail businesses to benefit from online shopping. Stores can offer “personal shopper” apps activated when entering the store, mapping and smart navigation to find available in-store inventory, and offer the flexibility of preordering and picking up merchandise in-store or providing home delivery. Traditional retail stores can adapt and thrive or see their business dwindling away.
Phil Blair, Manpower
We are all trying to do more of everything but at lower costs and still within the 24 hours we are all allotted. The retail trade will never be the same now that the immediate gratification of shopping in a store is now matched with same-day delivery of the exact size and color, and everything is always in stock. Retailing has always been a mainstay for entry-level, white-collar jobs, and especially for teaching essential skills such as customer service, personal interaction and even appearance. How these hundreds of thousands of retail jobs will be replaced in the future is the real concern here.
David Ely, San Diego State University
Many of the retail organizations that are losing customers to online websites are redesigning and refocusing their brick-and-mortar stores to improve the shopping experience for customers, such as offering more personalized services that cannot be easily duplicated by online retailers. This transition can result in fewer available traditional retail store jobs. Also, as traditional retailers increasingly promote their own online stores, some local brick-and-mortar stores and the associated jobs will disappear.
Gina Champion-Cain, American National Investments
Online sales export labor and revenue out of local economies. Further damage is caused by store closures, leading to vacancies depressing commercial retail valuations. Online sales not only require less labor but eliminate the all-important human interaction training that occurs in brick-and-mortar stores. Reduced entry-level workforce training opportunities hurt economies. This shift along with increasing minimum wage costs will cause major disruption and hardship for the low skill workforce.
Alan Gin, University of San Diego
As sales shift to the Internet, traditional brick-and-mortar retailers are closing more stores, which results in less employment in the retail sector. While more people will be employed in online retailing and in delivery services, there will likely be a net decline in employment. While those jobs were not great in terms of pay, they did allow young people to get started in the workforce and provided opportunities for those who could only work part-time.
Jamie Moraga, intelliSolutions
With approximately 15.9 million people working in the U.S. retail industry, the economic downside includes the loss of jobs for those working at brick-and-mortar stores and the shuttering of stores by retailers to cut costs, leaving vacancies at shopping malls and storefronts. Consumers are all about bargains, convenience, and more options. Spending at online retailers has shot up an estimated 10.7 percent from a year ago. Companies need to adjust quickly to the changing market or face going out of business.
James Hamilton, University of California San Diego
Many people have invested their lives in making brick-and-mortar sales successful. There is a lot of physical and human capital committed that cannot easily shift to some other activity. Although online sales bring more efficiency to the operation and benefits to customers, adjusting to any new technology always imposes costs on those who have depended on the earlier ways of doing things.
Gail Naughton, Histogen
Brick-and-mortar businesses must face the fact that they would be foolish to ignore the Internet as a substantial sales channel. If they don’t, they will lose significant revenue in a similar way that small mom and pop stores lost their revenue to malls. Online purchases are convenient, support less stocking of product, are not subject to theft, function 24 hours per day, and allow far more marketing data to be collected.
Gary London, The London Group Realty Advisors
On the macro level, it’s a wash. People spend what they spend. The only issue is where, and whose economy and government those purchases benefit. Local retailers and shopping centers lose out everytime the purchase is made online. That loss contracts the local economy. Local government doesn’t collect the sales tax if the purchase is not made within its jurisdiction. But the state of California collects its taxes regardless.
Austin Neudecker, Rev
There is economic upside for both consumers and businesses. Small businesses will be disproportionately affected with increased competition from more efficient/cheap labor locations. Many small shops will close. Consumers will lose the ability to try/feel multiple products and the help of sales reps. The upsides, however, include convenience, increased choice, easy comparison/review shopping, and often lower prices for consumers. Businesses that are able to take advantage gain geographic reach, focus, and scale.
Norm Miller, University of San Diego
There are several observable trends including: smaller stores of all types except for CVS and Walgreens which have expanded; thinner profit margins on all products with more informed consumers; shifting inventory and distribution to cheaper warehouse space; fewer workers per retail dollars spent. There are winners and losers in all such shifts. The percentage of retail tenants that sell no products has increased dramatically in the last decade, such as fitness centers, and this is likely to continue.
Bob Rauch, R.A. Rauch and Associates
Those places that are entertaining and provide an experience that allow people to “shop the mall” are staying vibrant. Today’s consumers yearn for and will continue to visit those high energy, unique shopping places. Locations where people simply go to the store to purchase commodities are feeling the real brunt of that online competition. Hence, the ultimate shift is from mid-market, commodity driven department stores to online.
Lynn Reaser, Point Loma Nazarene University
All disruptive technologies produce collateral damage, with job and income losses in industries impacted or displaced. The shift to online retailing is no different. However, the overall economic gains will exceed the losses. Consumers are benefiting from greater choice, increased competition, and time savings. Entrepreneurs with new product ideas are gaining easier access to markets. Logistics firms are realizing higher demand. Retailers who cannot adapt will fail, but those who can will survive and thrive.
John Sarkisian, SKLZ
Local retail employment will decline. It is unclear how the economy will be impacted by the resulting excess retail space. It may create an economic upside as that space is repurposed to other uses. What I do know is the shift from traditional retail to online is happening quickly. All related businesses will need to adjust to this new way of doing business or find themselves no longer relevant to the consumer.
Dan Seiver, Reilly Financial Advisors
The Internet has been a disruptive force in many industries, but perhaps none more than retail. The brick-and-mortar segment of retail will probably continue to shrink, which will mean fewer jobs and lower incomes. But disruption also creates new growth in other industries — example: Amazon warehouses — and reduces costs and increases choices for consumers. We once employed hundreds of thousands of telephone operators and gas station attendants.
Chris Van Gorder, Scripps Health
The economic downside includes fewer jobs because online transactions don’t require the sales and other staff a brick and mortar store does. Online retailers are growing sales by providing lower prices, convenience and greater selection. Traditional retailers will need to differentiate themselves, perhaps by offering personalized customer service and a better shopping experience. If they don’t, they will continue to shutter stores. And that will result in the permanent loss of jobs.