Bloomberg has an excellent article on Retail Apocalypse, filled with some neat data visualizations, which I highly recommend. (Read the whole thing!)
While media and political discussions have generally focused on the outsourcing of manufacturing jobs (e.g. Carrier, Rexnord, etc.) and the death of certain industries (coal, mining – which actually hire relatively fewer people than retail), I have always thought that there has been relatively little attention on Retail Jobs that have been lost in the past few years.
For sure, Retail has been undergoing an accelerated sea-change due to the growth of e-commerce, historic suburban over-storing decisions, and the influence of changing customer tastes. However, at the heart of this crisis, is the loss of retail jobs and livelihoods.
Tracking data of store-openings and store closings over the past 5 years, it is clear that store closings are up (over and above what’s expected from “lag” in closings, or geographical resorting within the US), giving a sense of the number of retail jobs lost.
Here is a neat chart in the same article on retail (in red) compared to other jobs (in black), showing the growth in the number of jobs and change in wages over the last few years. (Credit: Bloomberg)
- Many better-paying retail jobs were lost during the Recession. Examining the chart, it is apparent that Retail bore the brunt of recession (see 2008 to 2010): Retail shows almost the same percentage loss in numbers as the total private sector, but retail had a lower wage growth during the same period, indicating that better, higher-paying jobs in retail have been cut at larger numbers than other industries.
- Every year since 2010, Retail has shown worse growth (both in numbers and wages) compared to growth in private sector jobs. In fact, it appears that Retail employment may have already peaked.
Are Retail Jobs becoming Warehouse Jobs?
While it is true that some of the retail jobs have been converted to warehouse jobs, I see two big structural issues in guessing why this won’t happen, at least in the scale that people may imagine: A. Location of warehouse jobs and B. Efficiency of warehouse jobs.
A. Location: Most e-commerce warehouse jobs serve Metro Areas from low-cost exurbs.
Retail jobs used to be in high-traffic areas (cities, suburban malls), etc. In-contrast, warehouses are in low-real estate locations, to maximize warehousing costs, usually in exurban areas with good connectivity to the cities. Here is a figure from NYT that supports the argument. Add to this, the increasing costs of home-ownership, many former retail employees are not in a position to move their families to a different location to take up Warehousing jobs across state or country.
B. Efficiency: Warehousing e-commerce jobs tend towards more capital-intensive and less labor-intensive jobs.
Most warehousing jobs are designed around monotonous efficiency based on meeting delivery estimates. Warehouses need fewer employees per SKU that is sold than retail jobs. This is the first-order problem for lost Retail jobs.
Secondly, Warehousing jobs are more likely to be automated, than retail jobs.
A good analogy to understand this issue would be to compare the current progress in warehousing, with the history of the evolution of Manufacturing jobs. Warehouses are now in Ford-assembly line mode (the early 1920s), instead of much more design-oriented Toyota Production system (post World War II) that integrates human ingenuity with process automation.
So how we do solve the social problem of replacing these lost retail jobs? How will warehouse jobs evolve over time? I hope to explore these complex issues further on this OWL blog.
[Although I have used the United States to discuss the retail issues, these structural problems are also emerging in China, India, and Europe. Each of those situations needs tailoring of solutions to meet socio-economic, demographic needs].