The End of The Retail Worker in Israel…and Everywhere Else?

When Office Depot in Israel shut down and fired hundreds of retail workers, it was not an isolated incident. It was a harbinger, or the beginning of the end for physical retail. More ominously, it is likely the end of the line for the retail worker.

If you are a worker at Supersal, Hamashbir, Ikea, Cellcom or any other retail chain in Israel, you should be worried about your job security. If you work in a mall in Israel, or anywhere else in the world, you ought to be concerned as well because retail is concentrated in malls and the days of the mall are numbered. If you are a responsible government official, you ought to be making plans for what to do with the tens to hundreds of thousands of retail and mall workers whose jobs are at risk.

You see the internet is eating retail. If you look across the Atlantic Ocean to the United States, you will notice two trends conspiring to derail retail and retail workers. First is the inexorable growth of ecommerce with mobile commerceaccelerating the trend faster. Ecommerce with its unlimited selection, ease of payment, larger warehouses, robotics andnow distribution hubs in manufacturers facilities, is taking ever more share from traditional retail.

Second, commerce vendors like Amazon, eBay and Google are starting to figure out same day delivery and local distribution. There is no question that automated same day delivery is less than 2 years away and it will not require human beings and will have the unlimited selection of internet commerce.

Israel is a small country, which makes local delivery even easier than in a big country like the United States. People in Israel are already ordering many goods from overseas where there is bigger selection and cheaper prices. Ecommerce sales from China to Israel are up over 70% year over year. (Ironically, much of the international payment and shipment is enabled by an Israeli start up called Borderfree.) Local delivery from commerce sites with warehouses run by robots will be relatively easy here in Israel. Rents in the malls are high in Israel, adding to the price of local goods. Hence, Israel is ripe for disruption.

Business owners are less at risk than the employees in this global tear down of retail. The owners can and will convert in some measure to ecommerce with local delivery. And, frankly, they have the capital to start again. The malls and the workers will not survive that transition. Many of these companies are considered the large employers in Israel yet many, if not all of them, will meet the same fate. Many of the tens of thousands of employees who work in malls and retail will be out of work and no Shelly Yechimovich redistribution will help this problem.

We therefore require a new set of policies that gives incentives and tax breaks to anyone who sets up a small business in Israel. Instead of taxing independent small businesses more like we do today, we need to tax them less and incentivize them to train and absorb the workers that will be spit out of the downward spiral of retail. Instead of beingone of the most difficult countries in the world to start a small business, we need to become the easiest with the most lax regulation. Incentivizing small business has the added benefit of being what Nassim Taleb calls anti-fragile. When Ace, Cellcom, Pri Galil or other big companies lay off people it can shake a town or an area because of the sheer number of people who need to be absorbed into the workforce. When, heaven forbid, a small business or even a few small businesses close down, it is less impactful on an area or the overall economy.

The next decade must be about small business. Not the middle class. Small Business. These small businesses should serve the domestic market and the global market via the internet. We should encourage laid off workers to start small businesses and give them the tools to do that and we should encourage small businesses to train and hire the people laid off by the big employers (המעסיקים הגדולים במשק that the government has wrongly focused on for all of these years.

[Originally published on 30th November 2013 by MIchael Eisenberg]