Source: Amazon
Is e-commerce a job builder or killer?
While the loss of retail jobs caused by shifts to online selling has become a regular news story, one economist believes the growth of e-commerce is adding net retail jobs, and at better wages to boot.
According to Michael Mandel, head of the Progressive Policy Institute, the problem with the government’s tally of e-commerce jobs is that it ignores jobs in fulfillment and distribution centers. Analyzing job statistics on a county-by-county basis, Mr. Mandel estimated the e-commerce industry created 397,000 jobs in the U.S. from December 2007 to May 2017 versus job losses of 76,000 in the traditional retail industry in the same period.
The e-commerce jobs also paid 30 percent more than those at brick-and-mortar stores and are often full-time and come with benefits. Finally, the lower-skilled jobs involving the building and managing of fulfillment centers are showing up in “places you haven’t heard of in a while” and thus supporting economically-challenged regions.
Some question Mr. Mandel’s math since it assumes a high proportion of jobs in “general warehousing” are associated with e-commerce.
Speaking to The New York Times, Mr. Mandel said there are equal risks that he may be underestimating job growth as overestimating. For example, Amazon.com has said it has 12,000 employees in Kentucky while the Bureau of Labor Statistics reports that state has only 2,640 e-commerce workers and over 23,000 general warehouse workers.
Beyond supporting retail jobs, the time saved through e-commerce is supporting overall job growth, contends Mr. Mandel. By his calculations, the shift to e-commerce over the past nine years has saved American households roughly 64 million hours per week in reduced shopping time, the equivalent of 1.6 million full-time jobs, he wrote in a blog entry on the institute’s website.
The “unpaid hours of household labor” involved in driving to the store, searching for parking, walking store aisles, etc. are shifting to the market sector “as fulfillment center workers and drivers took over the tasks that consumers used to do.”
- E-Commerce as a Jobs Engine? One Economist’s Unorthodox View – The New York Times
- Why eCommerce Will Create More Jobs Than It Kills – PYMNTS
- Amazon, Whole Foods, and the Simple Arithmetic of Household Time – Progressive Policy Institute
- Package-Delivery Jobs Rise as More Consumers Shop Online – The Wall Street Journal
Discussion Questions
DISCUSSION QUESTIONS: Does it make sense that job growth at warehouses, delivery firms and around other online functions are offsetting losses at traditional retail? Are the majority of online-related jobs better than traditional ones working in retail?
Poll
BrainTrust
Mark Ryski
Founder, CEO & Author, HeadCount Corporation
Ralph Jacobson
Global Retail & CPG Sales Strategist, IBM
This is a question of twisted math. I fail to see how saving time using e-commerce equates to job growth. The answer to the question of e-commerce jobs replacing retail job is yet to be discerned. But one has to wonder about the skill level required of each type of job. They are not similar, so comparing them is apples and oranges.
I love the focus on the job creation/loss conversation. Whatever we are seeing today is likely to be spun on its head within 18 months, as retailers continue to refine resource allocations and robotics achieve higher accuracy and adoption. Today, my sense is that jobs are netting out pretty close to even as traditional in-store service and operations are reduced in favor of ecommerce support and operations.
I agree that many of the jobs provided by e-commerce companies are appealing to employees who might have worked or would be working in a retail store. One of the biggest complaints about retail store jobs is trying to get enough hours, so the fact the e-commerce companies are providing many full-time jobs with better pay and benefits makes them more attractive. But some employees like retail because they like the live interaction with customers, something e-commerce cannot offer. As brick-and-mortar continues to reinvent itself with fewer stores and more technology, the store associate jobs of the future may turn out to be a higher paid position granted to those who are qualified based on experience and talent working with customers.
Any bump in fulfillment center job growth is likely to be short-lived, as these jobs involve repeatable processes that can be handled using automation. So while it is plausible that e-commerce is creating jobs on a net basis, I wouldn’t be hopeful that it will drive long-term retail job growth.
Exactly my thought Tom. While Amazon and others are bringing massive employment to areas surrounding their DCs, in the long-term (likely after the period agreed upon for tax benefits) these jobs will be automated. And on the other side, we will see more automation and robotics in the customer-facing retail environment as well.
How can retail employees protect themselves in the store or the warehouse? Add more value by providing more personal touch and high-touch experiences to your customers, whether in-person or remote, and within your company or to the end consumer.
These figures seem peculiar in that e-commerce is supposed to be more efficient, using less people-power per unit sold. However if these figures are correct, the opposite effect has taken place which seems odd.
If these counter-intuitive figures are correct then this is great news. It also bodes well for omnichannel retail — which gives retailers and consumers the best of both worlds. The consumer gets the time savings and value add of having their merchandise ready and waiting for them when they arrive for a pickup. It also means retailers can use staff more effectively by using slow periods throughout the day to fulfill online orders (whether for delivery or for pickup).
History shows that the jobs in disrupted industries shift to the disrupters and other industries. For example, in the music industry records were replaced by cassette tapes, which were eventually replaced by CDs/DVDs, which were eventually replaced by streaming. In each of these shifts, jobs were lost — and new jobs were created. The same thing is happening in the traditional retail industry. Jobs are shifting to other parts of the retail industry. We’ve heard of the circle of life. This is the circle of jobs.
It makes sense that online activity is creating job growth in the distribution and delivery sectors, but whether these are sufficiently offsetting traditional retail jobs is hard to say. As noted in the article, the data is murky. I’m not sure that the online-related jobs being created are “better” than traditional retail jobs, but they are different. As stores close, jobs of front-line associates/managers who serve customers are being lost and ultimately this will negatively impact shopping experience. Replacing front-line retail jobs with warehouse and logistics personnel to support online may keep some people employed, but it’s not the same. And as automation continues to advance, these warehouse and logistics jobs will also be impacted.
The traditional retail shopping paradigm has shifted and, consequently, this is causing a transformation of the retail workforce which is centered around a fusion of the digital and physical worlds. Digital, when done right, can strategically drive business across all channels, even the brick-and-mortar models.
While the demand will increase for demand fulfillment functions, the store itself will be an essential part of the omnichannel retailing model, particularly with the move to a showroom-like experience (and the need for the capabilities to support the all-important BOPIS model). There will continue to be a demand for knowledgeable sales associates, “Geek Squads” and showroom guides to help close the deals and provide outstanding customer experiences.
In the short term the transformation may prove to be impactful to traditional retail jobs, such as cashiers, as the move to a self-service model and integrated app checkout is increasing in scale and scope. This will require significant retraining and education to leverage these resources in the new shopping model.
I have long been bothered by economic reporting that was built around manufacturing and too often fails to reflect broader economic benefit. The high level definitions of standard industry classifications and employment categories have failed to reflect changes that inspire investment and workplace education. When technology-based commerce does not reflect real-world inputs and outputs it is left to micro-analysis at the business level to struggle to make productivity improvement decisions. Creating distance between economic development policy and business development means that the cogs of commerce are less synchronized when a new gear makes more sense.
We are witnessing a shift in job growth. Staffing fulfillment of warehouses may not be done with the same caliber of people with which one staffs retail stores. However, there are other job growth areas tied to the growth of e-commerce and so the overall picture may be a zero-sum game.
Mark’s comment resonated with me as I think he hits home on a key point — the online created jobs may or may not be better jobs, but they are indeed different.
We are friends with author/data guru Chris Surdak and had a similar conversation with him last week in relation to AI (artificial intelligence). He was sharing his perspective that AI will not force great people out of good jobs — it will make those people even better at their jobs. For those already substandard, they will be propelled into rudimentary task positions. In relation to retail, will the rudimentary stuff be warehouse/logistics? Or something different?
Another thing I often ponder is how much impact we are talking about. Many research studies point out that the younger kids prefer shopping brick-and-mortar. Some theorize that this is because they can control their physical shopping while so much of the digital stuff is “automagical,” therefore not interesting or stimulating.
There aren’t enough e-commerce jobs offsetting traditional retail jobs. And things will only get worse for people when robots start doing more and more. Yes we will need people to fix them but they aren’t going to be the people who worked in retail.
I wouldn’t say online jobs are better than working in retail, they are just different. I can tell you the we just joined Instacart (grocery delivery) because they signed Wegmans and it was the most fantastic online mobile somewhat-interactive experience ever!
I highly recommend it. (They aren’t my client, not being paid to say this) I’m not sure if our delivery person loves or wanted that job, but it sure made my mom happy. We did tip her and she seemed happy. Instacart rules!
E-commerce is a job changer, not really a job creator. We are seeing shifts from brick-and-mortar staffing to warehouse jobs — not really an even trade since most of the warehouses of any scale (and that offer benefits, etc.) are tightly concentrated in certain parts of the U.S. whereas the brick-and-mortar jobs they are replacing in this analysis are scattered across the U.S. If we are talking about non-brick-and-mortar, then we are talking about a fundamental skills mismatch between retail workers today and the skills required to launch and run an e-commerce operation. And that is even before we talk about the far fewer people required to actually run an e-commerce operation than a traditional retailer.
So overall we are seeing a shift in the mix but I would be hard-pressed to say that we are going to see dramatic increases in overall employment stemming from the shift to e-commerce.
To the store associate with 14 years in and a decent paycheck that just received a store closing notice the evolution of retail doesn’t matter. And it matters less to the person out of work for months or years that just got a job in a new e-commerce distribution center. What does matter is that job/career stability is a lot like Santa, the Easter Bunny and Superman; a myth, as in, never was and never will be for the vast majority. As the transportation and shipping industry gear up for world wide trade the trend towards large distribution will fall dramatically as well. Training for new market trends takes time and costs money for industries and people. This means there is an opportunity to revamp the continuing education market with more relevant options and capability. Moving forward, no matter what individuals are told or sold change is coming — ready or not. If we are accepting of that and prepared, change is good as well as inevitable.
The job market is definitely evolving as we speak. Traditional blue collar jobs are transforming into “new collar” jobs. Companies are hiring staff, often without college degrees, to be trained for newer job roles that are driving the e-commerce ecosystem. Are these jobs better or worse than traditional retail jobs? I’d say they are different, however the sentiment is definitely up to the staff themselves to determine.
Another example of churn and comparing numbers that are apples and oranges. Unless one compares numbers from the same source or is very careful about reading definitions of what counts as what, comparisons are not accurate. There are different jobs requiring different skills — does that mean there will be full employment with a strong middle class? Not necessarily.
if I take e-commerce as a marker for technology in general, then the question goes to the crux of what happens to jobs as we increasingly adopt and become dependent upon technological breakthroughs.
As long as we subscribe to a paradigm where economic progress is defined by higher productivity, greater efficiencies and reduced costs, then jobs become an outcome and not a defining element of this situation.
Let’s not blame or laud technology when it comes to job creation or elimination. Instead shift the conversation to consider the nature of the economic system that is designed to create wealth. For me, jobs have to shift as economies “progress” over time.
It’s axiomatic that automation reduces jobs in the short term (indeed that’s the whole point of it!). Historically, though, it hasn’t mattered because incomes rose and people simply shifted their buying to areas they previously couldn’t afford. But of course that has been less true the past few decades, so it will be more of an issue.
As for the “undercounting” of warehousers et al., should this really be called retail? Certainly the jobs are dependent on retail to exist, but much as an accountant who works for Ford or a janitor in a hospital, their jobs really aren’t represented by the industry they’re “in” … so many of the issues we talk about on RW — predicated upon contact with the public — don’t exist in that type of work.
E-commerce is clearly a job builder, technology creator, and business builder. Getting “out” of the traditional retail platform creates more than just traditional jobs, but also has a trickle down effect on everything from carriers to deliver products, distribution centers, customer service center creation, website creation and updating, electronic banking and data management, etc.
Recent history proves the ongoing consolidation and fragmentation of the retail industry. The emergence of supermarkets consolidated consumer spending from individual stores (butcher, grocer, bakery) to a single store. That shifted jobs from mom and pop small businesses to multinational retailers. And now we see a resurgence in boutique/handcrafted food products.
Ecommerce is now shifting consumer behavior and jobs with it. Our needs have changed, and people don’t want to go back to writing lists, driving to the store, finding a park, walking to a store, filling up their car and driving home again.
Now these companies must employ or subcontract for jobs that consumers no longer want to do. Yes, a lot of those jobs will soon be automated. But who are the employees behind these new robotics manufacturers or consulting firms who help retailers implement this new technology? There will be an entire system of jobs required beyond just the picking & packing that automation will kill in the near term.
The economist is doing a bit of grandstanding for himself, but we should pay attention anyway. And the idea of “more jobs” shouldn’t be surprising to any of us.
But let me suggest that while “more jobs” always has a nice ring to it, he’s documenting a negative — that the COSTS for doing business via ecommerce are higher than the costs for doing business via bricks. (As we are reminded in this post.)
Where are the jobs added? In a retail store, the consumer does their own pick-n-pack. They search out the product, put it in their basket, and get it to the checkout. Then they haul it out of the store and transport it home. In ecommerce, the retailer has to absorb all those costs — by paying people to do all that.
This economist leaves out reality that not all jobs are equal when it comes to their impact on society and the employee. While floor jobs in retail aren’t always the most exciting they DO offer some room for independent action and problem solving (both keys to employee satisfaction). By contrast, fulfillment house jobs generally don’t have room for an individual’s independent action.