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The Death of Retail

With the continuous rise of new online shopping platforms and the equally continuous flow of brick and mortar retailers filing for bankruptcy, is it reasonable to make the assumption that physical retail is coming to an end? As you cross your buildings’ postage block and see it brimming with Amazon branded packages, we should ask ourselves if we have reached a new era of retailing and shift in industry.

Statistical data has shown a steady growth of the E-commerce’s market share in business to consumer (B2C) transactions, having increased its share by 6.7% over the last 4 years, and accounting for 11% of retailing transactions, and the trend shows no sign of slowing down.

U.S. retail flagships are currently faced with a crisis: a steady decrease in demand for in-store purchasing, whatever the good sold may be. Consumers are shifting their purchases to online platforms. This shift can be explained by the ease of access people have to whatever consummatory market there may be. Indeed, most of these B2C transactions occur on a smartphone or computer, from the comfort of one’s own home. Being able to read a set of reviews on a product without feeling pressured by the salesperson looking over your shoulder, having perfect price transparency and larger selection of goods to choose from are undeniable advantages that evidently attract every type of customer.

If you want to start your online venture, cost of entry has never been as low. Every entrepreneur can easily open a website with a set of printed on hoodies and start his business. The ability of using data is also a critical player in the appeal of E-commerce, contrary to a physical store, you can target specific client with advertisement. This decreases the cost incurred if you advertise to a party that is not likely to be interested anyways. The reasons behind the online revolution are obvious and intuitive. If we look at Shopify’s data, we see that in 2018 there have been more than 820,000 merchants hosted by the website. Resulting in sales amounting to 41.1 Billion, largely surpassing Macy’s’ 24 Billion. This trend of growth isn’t U.S. specific, online shopping is forecasted to represent 50% of retail sales by 2028 in the UK. Stores are also closing both in the US and the UK (with the bankruptcy of Barneys NY or Debenhams closing 50 of their stores).

At a first glance, the situation doesn’t look that dramatic, 32,000 jobs have been cut by department stores whereas non-store retailers have added 29,000. This trend could be assimilated to a simple shift in industries.

According to Jason Bram, research officer in the Federal Reserve Bank of New York, the main issue is that geographic distribution of employment is very different for online retailers and brick and mortar outlets. Department stores are incentivized to spread out employment in proportion to the general population, they’re doing business in person and want to have the largest area of contact with clients. Online retailers are not faced with the same constraints. They’re already maintaining a widespread contact through their online platform. Therefore, they will concentrate all their workforce into a few locations, which, contrary to department outlets, are often not situated in highly urbanized areas. It is a fair assumption to say that the workforce that is dropped from the department stores doesn’t necessarily represent the recruited profile for the non-store retailers. This concludes that employment opportunities for the retailing sector are fading away in urban areas. According to the ILO (International Labor Organization) there will be 1.2 Billion new entrants in the world labor market by 2025 and most of the new jobs will have to be created in cities. The migration of retailing jobs to rural areas will surely not help to foster growth and might even contribute to the rise of urban poverty.

This conclusion stems from an extreme train of thought, after confronting it to the truth we notice that online retailers have to face a number of constraints. First, an essential part of the shopping experience is to feel and try on the goods, which obviously isn’t possible when ordering online. Second, the rise of eCommerce’s is accompanied by the downfall of its sustainability. As dealers get more orders, they have to raise their logistical capabilities, often that comes to the detriment of a sustainable option. Indeed, if we think about Amazon, they enable us to receive low cost items after one day of purchase with their prime subscription. Can this way of supplying goods survive the next coming years? Or will we have to restrict the intensity at which it operates? No one but Earth and the consumers will tell us.

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