Buying Has Gone Online And The US Retail Industry Had Better Accept It

On 16th August 2017, the President of the United States, tweeted, “Amazon is doing great damage to tax paying retailers. Towns, cities and states throughout the U.S. are being hurt — many jobs being lost!” The tweet went viral, and Amazon lost a whopping $6 billion in market capitalization!
Unfortunately, the President seems to be unaware of the recent trends in the retail industry — how digital consumers like to access products, technology powering the industry, and how new age, competitive retailers need to connect with their customers.
Consumption is the United States has been growing quarter on quarter, since the 1950s. This trend is likely to continue as e-retailers make products available to increasingly remote places, and the population continues to grow[1]. Why then are retailers closing shop?
To put it simply, because buying patterns are changing and many retailers owning physical spaces have failed to anticipate the change and adapt.
Consumers, across age and location are turning to online shopping. Thanks to the convenience, cost-efficiency, improving quality of products, shrinking delivery time, and positive buying experience it offers. According to a report by the US Department of Commerce, the total e-commerce sales in 2016 was $394.9 billion, and accounted for 11.7 percent of the total retail sales. This is a growth of 15.6 percent over the previous year[2]. And the opportunity continues to be huge for e-commerce, with consumers delighted to shop online.
E-commerce is benefiting consumers
Thanks to e-retailing giants like Amazon and hundreds of smaller companies, consumers who once would have had to invest time and money traveling long distances to shop, or make do with the limited choice available in their vicinity, now have the opportunity to choose from a bigger array of products, access competitive rates, and have the products delivered right to their doorstep. In a large country like the US, the logistics industry itself can burgeon (as it is preparing to do in China) and potentially employ thousands of people. Including those losing their jobs in physical stores.
But even with the growth and potential of e-retail, it does not mean that physical stores will vanish all together. Why else would Amazon, and more recently Alibaba launch physical stores? Some digital consumers like to locate what they wish to buy online and then quickly step into a store to grab the product. Retailers from Walmart to Ikea are offering consumers alternatives as well, for instance, to buy online and pick the products from the store. No waiting in queues to make the payment and consumer gets the product as fast as they need it.
E-commerce is benefiting retailers
The endeavor of any retailer is to increase sales, and it would be a dream come true if they could do this while keeps costs down. What better way than to reduce ones physical real estate and expand ones online presence — through a virtual store.
Analytics from online customer behavior allows retailers to better connect with potential customers — create promotional offers on the fly, make advertising more targeted, promote products when consumers are most likely to need them, customize promotions based on the customers likes, and thus make the shopping experience wow. A retailer with only a physical store is likely to feel the heat of declining sales if he/she have failed to read the signs and create an online presence.
Smart retailers have understood the ‘impulsive shopper with growing disposable income’. They have done away with large shop fronts, expensive rent, high maintenance, and reduced staff. They have created online sales outlets through their websites and partnered aggregators like Amazon.
Keeping up with the times is not a choice but an imperative. Retailers either adapt their business model to the fast paced, demanding, digital consumer or perish. To blame Amazon or any other e-retailer for capitalizing on these trends and giving consumers what they want is like missing the trees for the woods.
Is e-commerce responsible for job loss?
At a superficial level, it may seem so. But the e-commerce industry needs people. It needs manpower across the spectrum, for both physical and intellectual work — to drive the increasingly complex supply chain, demanding logistics, and develop and maintain the technology that even as you read this post is rapidly evolving. So the big question is, can the salesperson who just lost his job at the retail store find employment in the new and evolving e-commerce, logistics, and software industry? This is a question that needs to be posed to three sets of people.
· At an individual level, the salesperson needs to ask, am I skilled to do another task? Can I reskill to do another task? If you are reskilling, ensure it is to do a task that requires critical, creative thinking.
· At an industrial level, the question can be, can we reskill and retrain are redundant workforce to do other emerging jobs? For instance, to manage and maintain the robots in the warehouse, or become delivery agents.
· At a societal level, the government needs to ask, how we can work with individuals and industry to ensure a smooth transition from older jobs to newer ones. How can we take proactive steps to prepare people for this new age of automation and artificial intelligence? After all, the retail industry is just the first, and more — from healthcare to insurance, and logistics will get increasingly automated.
When these questions are answered, we will realize that the e-commerce industry offers just as many jobs and opportunities as physical stores.
Preparing for the age of automation
To digress a little, when agriculture in the US began getting mechanized in the early 1900, jobs were lost too. But machines could do better and more, and none could stem their advance. Food production increased, and those who lost their jobs were either supported by the government, as they were too old to be reskilled, or went out and reskilled for other jobs.
The retail industry is at a similar juncture and technology is the iron of our age. The retail industry needs to up itself and grab this opportunity that automation offers. So must those people who can power it — relearn, reskill, retrain and grow.
[1] https://tradingeconomics.com/united-states/consumer-spending
[2] http://marketingland.com/report-e-commerce-accounted-11-7-total-retail-sales-2016-15-6-2015-207088
