A MarketWatch article last week by Rex Nutting posited that Amazon could destroy as many as 2 million jobs, which are as many as one study said were lost to China.
While the China estimate strikes me as low, Nutting’s math on Amazon appears reasonable. Basically, more and more people have become habituated to online shopping, even for categories like apparel. I have to confess I’ve done a fair bit of the little clothes shopping I’ve done in the last couple of years on line. On the one hand, I hate dealing with stores because finding anything is so hit or miss, but at least when you find something that looks good in the mirror, it’s usually a keeper. On the other hand, with online shopping, you can find targets more efficiently, but the “hit or miss” element shifts to fit, color, and quality of fabric/tailoring. And if you don’t have time or patience for returns, you wind up with stuff in your closet that eventually goes to a charity.
Here is the guts of Nutting’s argument:
But for retail workers, Amazon is a grave threat. Just ask the 10,100 workers who are losing their jobs at Macy’s. M, +0.43% Or the 4,000 at The Limited. Or the thousands of workers at Sears SHLD, +1.00% and Kmart, which just announced 150 stores will be closing. Or the 125,000 retail workers who’ve been laid off over the past two years.
Since 2012, department store jobs have shrunk by 250,000, 14% of that sector’s total employment.
Retailers now employ 16.5 million, and Nutting backs out categories like gas stations that aren’t subject to competition from Amazon. Bear in mind that Amazon is trying to move into groceries, but Nutting deems those jobs to be safe for now. He deems the 12 million workers to be at risk, particularly the ones in stores classified as GAFO, for general merchandise (think everything from sporting goods to hardware and electronics), apparel and accessories, furniture and other sales.
GAFO merchants are still mainly brick and mortar operators, and rely heavily on malls, which is where Amazon is doing the most damage. Mall anchors like Macy’s have been particularly hard hit by competition from Amazon, and once a mall loses an anchor for good, it’s on its way to a death spiral. Nutting again:
There’s not much retailers like Macy’s, The Gap, Best Buy, and Barnes & Noble, can do about it. Their business will be much, much smaller. And now that Amazon is getting serious about groceries, even Wal-Mart is threatened.
Although retailers have been laying off workers, they probably aren’t laying off enough, considering how quickly their sales are eroding. While sales fell 0.6% in 2016, employment at the GAFO stores increased by 1.6%, or about 95,000. You don’t make money by hiring more people to sell less.
So what’s the big deal? Won’t the people who once worked at Macy’s just work at Amazon instead? Well, no. Amazon needs about half as many workers to sell $100 worth of merchandise as Macy’s does…
What’s most troubling to brick-and-mortar retailers and their workers is that Amazon’s sales growth is accelerating (19% in 2014, 20% in 2015 and 28% in 2016), and shows no sign of plateauing. Amazon isn’t just taking sales from brick-and-mortar stores; it’s also taking market share from traditional retailers’ online stores….
Could Amazon actually kill more American jobs than China did? It’s quite likely. Economists David Autor, David Dorn and Gordon Hanson have estimated China’s manufacturing exports to the U.S. may have cost as many as 2 million jobs.
If Amazon can capture 40% of the GAFO market within five years (as seems likely), about 1.5 million jobs at brick-and-mortar stores could be lost. Add in the jobs Amazon will kill at grocery stores, drugstores, warehouses and delivery services, and the total would be well over 2 million.
And unlike the manufacturing jobs lost to China, which were clustered in a comparatively few counties, those retail jobs are located in every city, town and hamlet in America.
It’s a remarkable admission of elite blindness for Nutting to depict manufacturing losses as “concentrated in a comparatively few counties.” Has he ever looked at a map of Rust Belt states? And let us not forget that Obama himself touted Amazon as generating “middle class” jobs, when its warehouse jobs are both physically exhausting yet poorly paid. As we wrote in 2013:
Obama needed a visual to show that, no, really, truly, jobs really are being created somewhere in America for yet another one of his exercises in trying to pretend that he’s on the side of ordinary Americans. But it’s hard finding any really good success stories in an economy with 12.2 million counted as unemployed and over 28 million as “disemployed” which is the number of people out of work relative to normal labor force participation rates when the economy is in good shape. So Obama chose as his backdrop an American success story, Amazon, which is opening a new a warehouse in Chattanooga and hiring 7,000 people….
If you had any doubts that that vision of middle class life was on its way to extinction, the Obama speech made it official. Amazon has been repeatedly cited here and abroad for abusive conditions in its warehouses….
So notice, first, that those 7,000 jobs aren’t in Chattanooga, but all over the US. Second, Amazon’s cash comp is markedly below local averages. And although it offers a “benefits package,” it’s not clear that it’s better than what other area employers offer. The article doesn’t add that some of these 7,000 jobs are part time and/or seasonal.
A quick look at a Chattanooga job site shows the hourly for a comparable job at $9 an hour for someone with a minimum of six months recent experience. That’s just above the living wage for a single person in that city of $8.92….
The message from Obama is clear: Americans are now expected to celebrate when companies are willing to pay at or not much above a living wage. As long as you pay enough that the workers don’t wind up having to seek public assistance in the form of food stamps or emergency rooms for medical care, you’ll now be promoted as creating better conditions for Americans. That’s true as long as you remember that the Americans that benefit from this grinding down of ordinary citizens are Obama’s backers and other members of the elite.
Sadly, the Nutting article indicates that the Amazon-induced hollowing out of America could still have a long way to go.
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Neofeudalism full steam ahead!
Yep Feudalism 2.0 progresses.
The workers get nothing and like it and the (Amazon) equity owners take the productivity improvements in share price and dividends and run with it, and will only cash out for a better rent extraction or productivity based profit opportunity down the road.
Tim, we workers don’t like it.
I think most workers HAVE bought into the Late Stage Capitalism mythologies. (See Coal Country-bring back the GLORY DAYS of mine fires and black lung disease! Vote Trump!)
Surely you know that’s not what the miners are saying? I know it’s fashionable in some quarters to frame workers as stupid, but really!
For the last decade or so, I’ve thought of Amazon as the WalMart of online shopping. It hadn’t occurred to me that they might be the WalMart.
Every year or two, I find a new reason not to do business with Amazon. Guess I just learned my reason for 2017.
I have been wondering whether in the long term, things like 3-D printing
will affect even companies like Amazon in that if one could make an
item in ones home, why order it as one could immediatly see, smell or wear the item.
True, while 3-D printers that an individual can buy are not very versatile,
I have seen videos of clothes made by 3-D printers and I wonder if such machines
will ever be affordable.
There is a limit to 3D printing; namely the ‘ink’. Most use thermoplastic, which is fine for things that can be made with plastic. The handful of other things that can be 3D printed need a whole different kind of printer, not just a different ‘ink’ cartridge.
Yes, that’s a clear limitation to the current technology. Another is that you still have to order the “ink” from somewhere. What happens when everyone’s out of blue ABS plastic #2 ?
There are industrial (-grade, -size and -price) 3D printers that can produce objects in a variety of materials, including metallic ones.
There are still plenty of restrictions on the kinds of “ink” that can be used reliably though, and the costs are astronomical for large series — for which traditional manufacturing techniques are much more economical and flexible regarding materials.
yes, I’m picturing the stockpile of raw materials one would need to construct quality items and thinking it won’t work, but there is a remote chance it could work in a community/co-op situation, I’ve heard that someone involved with the lopez island dump wants the community to buy one so there is less shipping waste (styrofoam, peanuts, etc…)
3-D printers should at some point become extremely cheap providing the materials necessary to construct the 3-D printer itself aren’t prohibitively expensive.
Just program the printer to make a copy of itself and there you have it – Amazon is toast. Unless of course Amazon becomes the sole supplier of the ‘ink’….
Middle class jobs in warehouses; what do the working class do?
Has anyone asked the one percent how they stratify themselves nowadays? I imagine that it is old money knickerbockers at the top with graduations down to
pushy-trashy-grabbers at the bottom.
As I understand it, Downtom Abbey was a big hit stateside. Was this something to do with the one percent becoming more prominent after 2008? For us Brits, Downton depicts a version of a pond we all used to swim in. The pond water has changed somewhat since then, but the old stratifications were fairly rigid. For that reason we measure ourselves against the good old – bad old days, and of course, money and the ‘right’ education still count for a lot.
Us Brits don’t like talking about our money, but will talk endlessly about class. From the British point of view, Americans are more than happy to talk money, but seem to be very reluctant to talk about class. I realise that these are broad generalisations. What are the current trends?
Would anyone agree that those who deny the existence of the class-war are those who have already won it? Nothing to see here; just a police-action.
Downton was a big hit on our PBS, but while PBS has some squillionaire angels the audience likely tends to be upper middle class for their popular Brit tentpoles. These viewers probably saw Downton as a how to guide for gracious living as much as an entertainment since drama-wise the show was impossibly dull.
That said, the much better Poldark import was decidedly class war-ish as was Indian Summers. I’m not sure you can use these pop entertainments as some sort of barometer for elite sentiments. Also here our public television depends heavily on pledge drives and contributions and the programming reflects this need for a well heeled audience.
As for Brits talking endlessly about class–interesting. What do they say?
I would add Call the Midwife to the list of PBS British programs that deals with working class issues, with particular focus on the positive effect of the UK universal healthcare system in its early years.
“These viewers probably saw Downton as a how to guide for gracious living as much as an entertainment since drama-wise the show was impossibly dull.”
Oh yes, I think I managed to make it through one episode and never again.
The real deal was Upstairs Downstairs, it was everything that Downtown is not.
Downton played as it did because so many Americans see themselves as temporarily embarrassed millionaires.
In America talking about class, religion or politics in polite society is viewed as unacceptable behavior. I come from a working class background, my wife more middle to upper-middle class. She advises me to avoid these subjects when in contact with her relatives. Money on the other hand …
Voters in Pennsylvania’s Luzerne County, which flipped to Trump, turned thumbs down on warehouse jobs. They’re crapified.
So it only took four years for the reality of Obama’s con that warehouse jobs are “good jobs at good wages” to bubble up into press reports. I would imagine working people, er, worked it out the con much more quickly than the political class did.
If there is anything that demonstrates the weakness of organized labor in the U.S., it is the lack of all out effort to organize Amazon warehouses. Virtually all of them are brand new and built with significant public financial support for which job promises have been made, so the relocation threat should be basically non-existent. Yet as far as I can tell, there is no real organizing taking place.
Manufacturing jobs were sh1t jobs in the 1930s (and many are again sh1t jobs now) before the unions made them better. Amazon ought to be the #1 organizing target in the U.S. right now.
From what I’ve read about it, I suspect the micromanaging nature of the Amazon workplace makes it very difficult to organize. Any small stray from the company policies by an employee can cause one to be written up and fired shortly after if more rabble rousing “occurrences” happen.
Probably enough desperate unemployed/underemployed wastrels who will take what they can get from the company in the cities where the warehouses are that allow for easy replacement.
Akin to working in a police state environment.
Per previous articles on NC re: amazon warehouse working conditions, it is amazon policy to ‘retire’ most workers after about a year. In addition to not paying benefits, this practice no doubt puts, a damper on organizing.
When I read these two wonderful posts by Outis on Amazon (here and here) the idea struck me that Jeff Bezos’s true innovation was creating a workplace that would be impossible to organize. It seems that the workers are completely isolated from each other.
Its gotta be remembered of course that malls cost a lot of retailing jobs as well. Big box and out of town stores have significantly fewer employees per $ of sales than traditional town and city centre shops. So my sympathy for those companies is somewhat limited.
I do wonder though why Amazon isn’t cheaper and more profitable if it has so few employees per item sold. Is it that the delivery process itself is so expensive? If so, it may be a case of displaying costs from wages to capital (or even just to fuel costs, if its all in complex delivery movements). Although this may be balanced out by people needing to travel less to shop. But I think it does suggest that the commercial advantages are limited.
I’m inclined to think there is a natural level for online shopping. A friend of mine who had a baby alone last year became obsessed with ordering everything on Amazon as she hated to leave her home. It was understandable at the time, but I’ve noticed that now the baby is a bit more mobile she is doing more ‘conventional’ shopping. Amazon was useful, but it meant I had to make weekly trips to her apartment to help her put together all the stuff she ordered, and doing returns was a major hassle. there are lots of things that are simply better to see and touch before you buy (not least clothes), and shops are generally better at providing support and help for things like buggies or bike trailers (I persuaded her not to buy the latter online as I knew I’d end up being the mechanic for free).
Commercial advantages always come 2nd to perceived political advantages (e.g., that drivers are less likely to organize, because they have much less time to interact with colleagues, than store personnel is/was). Also, they’re less likely to get in your way / get close to you.
Profitable: Have you ever stopped to consider exactly all of the industries Amazon is involved in? They are far beyond retail and getting more vertically integrated every day. Their vision was always far-ranging. In many ways, their investors floated them for the last 2 decades to disrupt the industries they are in as well as local governments. e.g., Book sales, distribution and publishing. Movie / tv development, streaming and distribution. Server farms and database development internal and sold to 3rd parties. 3rd party sales on new and used items via their marketplace. Social media: Good Reads, etc. Device development like the Kindle and Fire. Robotic development for their warehouses. Shipping: their own delivery fleet, eventually drones, potentially tankers or at least their own logistics fleet which would probably be open to 3rd parties like most of their other offerings. Financial services. etc., etc., etc.
As far as cheaper is concerned, many items listed for sale on Amazon are not sold (some aren’t shipped) by Amazon. In fact, I’d say you really have to pay attention to individual listings instead of simply clicking buy now.
It sounds like Walmart has gotten more serious about competing with them. Free 2-day shipping on orders or $35 or more. No annual membership required. Considering that Walmart is much cheaper on single item grocery items and well other things, they could give Amazon some competition if they can break into Amazon’s online brand loyalty, especially if they decide to go into the entertainment venue. Wouldn’t it be interesting if they did something like buying Netflix and creating their own annual membership fees. Another wedge would be ordering online for Walmart and picking up your order same day at the store. Plus the local returns. Interesting times. I suspect Target will be next.
Of course, there will be a lot more cardboard recycling required and someone has to be around to accept the deliveries. Think also about the current Walmart workforce, distribution centers and product lines. How can Walmart both leverage and streamline it if they break into Amazon’s online market. Once you start thinking about all the industries these giants touch, you realize that the job disruption could be much deeper (and more seemingly indirect) the more successful they get.
Yes – this is why I think the threat of Amazon is less on the obvious – online delivery – and more on its overall strategy, which seems to be all about carving out monopolies.
Online delivery isn’t really all that new or original. There have been catalogue retailers for decades, many very successful. Ordering from a catalogue is just a little less convenient that ordering online. And there have been many varients. I was reading a while back a history of a prosperous suburb in south Dublin, and like many at the time, the retailers in the Main Street had set up an instant order delivery service, serving a wide area and all the retailers, with deliveries 3-4 times a day. Essentially, you could call any shop, order groceries, flowers, hardware, etc., and they’d arrange for it all to be collected from the individual shops and delivered to your door within an hour or two of your call. This was very successful for years. I’m not sure exactly why it eventually failed, but I think it was mostly the arrival of mass car ownership and supermarkets – i.e. it was bigger retailers destroyed the notion of regular home deliveries – in effect, its been a circular change, nothing new.
It’s also a payment service, buying things through Amazon is about as secure as buying anything on the net can possibly be (from simple criminals stealing credit cards that is, I’m not worrying about the NSA here, but theft). I’ve had my credit card hacked several times buying directly from retailers. But PayPal? Well PayPal is really not user friendly and it sucks, so PayPal’s act is most certainly not together. If there was a better alternative to the suck that is PayPal in wide use then more people would buy direct from the company. It’s true the credit card company will generally eat the loss on theft if using a credit card, but who wants to go through that?
I should have said above that the system I was reading about lasted I think from the 1920’s to the 1950’s, and there would have been numerous similar systems. Of course, payment would have been on tabs, paid up in cash at the end of the month. A much more secure method than credit cards.
I don’t know much about business but I’ve made an interesting observation. There is always a top dog and several pups that want to be the top dog. Today we have Walmart as the top dog with Amazon trying to take over. My observation is that no business is the top dog forever. Eventually their place at the top gets eroded by the competition and or poor management. Think of Sears. Once they were at the top of the heap and now it’s predicted they will go out of business. This seems to happen with all retail businesses. They exist either at the top or as one of the pups for a time then they disappear. If you made a list of once profitable businesses that no longer exists it would be a long lis.
And Tennessee gave Amazon corporate subsidies (corporate welfare) as part of the deal:
http://www.nashvillescene.com/news/article/13038454/the-messy-truth-behind-amazons-tennessee-tax-tradeoff
For which, Amazon was so grateful the company turned around and threatened to leave if Tennessee adjusted sales tax revenues
See Race to Bottom: http://www.nakedcapitalism.com/2017/03/race-bottom-cities-states-spend-45-billion-per-year-competing-jobs.html
If one looks at the broader picture, it’s as if government pays companies to gut wages.
#RaceToTheBottom
Lots of courier jobs! and eventually a drop in miles driven/gas sales.
The other interesting one is the junk you can buy from China on Ebay etc. I can buy items for 99 cents with free shipping! In what universe is that a remotely viable strategy? (and yes the items do get here and if they don’t I get a refund). Still scratching my head on these ones.
Freeee schipppping. You know how USPS does that? It is subsidized by customers that ship packages long distance, where the price increases are double digit percentage points. Something that does not affect Amazon with their government subsidized warehouses plopped where the subsidy is greatest, so I suspect the negotiation between Amazon and USPS goes similar to this.
Amazon: raise prices on long distance shippers to lower ours, unless it’s really long distance and coming from China.
USPS: We are happy to slaughter businesses for you.
Yes, Amazon may only employ half as many people to sell $100 but there should at least a few relatively stable union jobs added with delivery companies. In the long term…Has Amazon broken even yet? We simply just don’t know how competitive it REALLY is with brick and mortar stores because every sale is subsidized by investors.
While that might have been true in the early years, I believe Amazon is funding virtually all of its more recent growth with internally generated cash flow.
yeah, hide the profit, feed the metastasis….
Define *job*,,,There are other ways to be poor that don’t hurt so bad.
If already not stated the above of course also applies to Europe.
Amazon warehouse jobs ($13 hr max) were never meant to be more than temporary (2 years avg.) as a job with a “future” would be expected to offer benefits. As to Eddie Lampert’s Sears his Randian mid-level executive department competition plan is the primary reason the company is hemorrhaging money. Both companies are poor representatives of any place to look for a job with a future. And on the east coast Baltimore is a boarded and abandoned shell of its once thriving manufacturing working class base, Uber, Lyft and casino gambling are its greatness now.
Add Bridgeport, CT to your list. The recent arrival of a Bass Pro Shop, and its’ attendant 300 retail jobs, was the best news in decades.
Well Amazon is the most horrible of horrible — but OTOH, kids are being priced out of automobile ownership and my observation is that if you make it to your late 20s w/out a car you (wisely) aren’t so sure you want one. But this is just an observation since I’m not only a Baby Boomer but also a gearhead…
So the idea of shopping that requires a car seems like it is maybe on its last, um, legs.
The true suburban idea, driving everywhere to buy anything, was somewhat only made possible by unpaid female labor anyway (doing all that driving around to shop). Before that there were a lot of delivery services, so that idea is not new.
>>Mall anchors like Macy’s have been particularly hard hit by competition from Amazon,
Do the stats support this statement? electronics and home goods I absolutely see losing to Amazon but apparel too?
comparing online sales to ‘mall-type store’ sales isn’t apples to apples.
I thought Macy’s was more a symptom of declining real income for the ol’ suburban middle class. And people spending less on clothes and deciding to buy clothes from Wal-Mart/Target instead of Macy’s/JCP.
I’m not sure why focusing on mall anchors matters. Historically, they only became commonplace about forty years ago, maybe a bit more. Before that, roughly speaking, there were downtown department stores, neighborhood or small-town clothing shops and shoe stores, and the Sears catalog (and a few others) for people too far from those resources. If the major chains wipe out, it is only after having themselves destroyed more local and independent stores, and there is some temptation to say bad cess to them.
What surely does matter is what happens to jobs and to people’s ability to find the things they need, as distinct from those someone wants them to buy, but those problems have been growing for a long time. As far as I can see, Amazon is part of a long ugly trend rather than a novel villain. As the latest part, it’s currently the ugliest, but God knows things could still get worse.
Huh? Town centers were displaced as the main nexus of shopping by malls. To say, “Oh it was different 40 years ago” is like using the world pre-personal-computers as a benchmark for today.
Macy’s is an important guide because until it was displaced by Amazon last year, it was the largest apparel retailer in the US.
You can see that its store closures are almost without exception in malls:
https://www.thebalance.com/macys-store-closings-2892434
I didn’t find any stats in 5 mins on Google, but I am pretty sure that for bricks and mortar apparel stores, that malls were a higher % of total sales than “high street” locations.
Yes, but what I think Katherine is implying is that there are large downsides to malls and that the death of them, if you could rebuild brick-and-mortar retail in a more social way, would not be a bad thing. I hate Amazon but I will never be a mall shopper. It can’t be that those are the only two options going forward.
> if you could rebuild brick-and-mortar retail in a more social way, would not be a bad thing
It would be great, but if it needs to be done with local tax revenue, how does that get bootstrapped, with the mill gone, and the mall gone?
“What’s most troubling to brick-and-mortar retailers and their workers is that Amazon’s sales growth is accelerating (19% in 2014, 20% in 2015 and 28% in 2016), and shows no sign of plateauing.”
Wow, those are big time sales growth numbers.. the technological displacement is going to happen either way, we might as well just get this thing over with and face the music. Either the government is ok with millions of people living in cardboard boxes, or we will finally get some kind of BIG/JG when demand goes down the tubes.
I find it intriguing that a lot of economists and commentators don’t take the opportunity to talk about jobs in the macro context of what is going on.
This whole setup is a poor construction that doesn’t add to our understanding of either the production or distribution of resources. Neither companies nor countries (nor robots, for that matter) kill jobs. They create (or destroy) leisure time, time that we have as human beings to do things other than work to produce the basic needs of keeping our species going. How we distribute leisure time is what determines the quantity of jobs, since number of jobs is a dynamic ratio, not a constant (to simplify, total jobs = total # of hours worked divided by avg # hours per job). If productivity increase decreases aggregate hours required from 40,000 to 20,000, that doesn’t necessarily reduce the number of jobs from 1,000 to 500. It could reduce the work week from 40 hours to 20 hours instead. That’s a policy choice, not something decided by economic laws or corporate competition.
It’s particularly ironic in the context of retailers. The economic activity of shopping is heavily dependent upon people having large amounts of time not at work. Macy’s was a quintessential example of this. Their model of the department store was for an adult to spend all day there. Get your hair done. Eat lunch with friends. Browse the merchandise. This can only occur if you have free time and disposable income, and is only fun if you also have friends with free time and disposable income.
Just some food for thought from 30,000 feet.
Aye. That’s an interesting observation. Especially when you note that the workforce is becoming stratified into two distinct populations: Full-time workers who get good wages and benefits, but have less free time than ever before due to the increasingly “Internet-tethered” nature of work, and part-time workers who have more free time but get lousy wages and benefits and can barely make ends meet. Friends with both free time and surplus disposable income are becoming increasingly rare. [That’s certainly the situation in my own social circles. They’ll have one or the other, but not both. Only retirees with good pensions get the best of both worlds, and we all know what’s happening to pensions…]
Perhaps it’s time for a 32-hour work-week?
the lack of time is probably part of why they internet shop yes. It’s hard to say if they shop less or more though, I’m going with less because of no time, but working so much also forces compensatory behaviors (shop therapy sometimes but also buying stuff rather than any more time consuming way of solving whatever problem one would solve by buying something – say maybe by fixing something one already has etc.). Life is lived more sensibly overall with time to breath.
Lack of time is definitely why I typically Internet shop. I barely have time to haul myself to even one store to look for something. And if I strike out and have to seek out a second store or (shudder) even a third… There goes my down time and then some. [Amazon does provide me with a true service in that regard: They save me time. Something I greatly value these days.]
I’d quite cheerfully hand back 20% of my paycheck in exchange for a 32-hour work-week. But given that the per-employee overhead expenses (i.e., healthcare and other benefits) wouldn’t go down along with it, I don’t see the corporate world going for this unless legally required to do so.
For me, too. I have no car, and it takes two hours for the bus to get me to the mall, and two hours to get back (and the last bus back leaves downtown, unbelievably, at 5:15PM, so I can’t even eat dinner downtown!). If I’m going to have a day trip to the Bangor Mall, heck, why not just go to Boston? More expensive and time-consuming, for sure, but orders of magnitude more fun…
I would like to know how many jobs total were offshored from the 80s on. To read here that China only displaced 2 million US jobs (manufacturing) – it is a mind-boggling pittance. The effect is greater. Because those jobs slowed retail which in turn finally couldn’t compete with Amazon buying cheap imports (textiles and manufactures, in bulk) and clearly demand is down so nobody’s gonna start the next LLBean any time soon just to import cheap stuff and put their label on it. And etc. And also too, the biggest culprit is automation. It all looks like industrial policy by default to me.
The biggest culprit is not automation. It is reliance on short term profits and the bottom line. I see any number of retailers who are now realizing that they have overbuilt (same store sales declining while gross receipts increase only slightly), relying on subsidized construction and real estate costs, when they should have built stronger customer service teams with more reliable and greater selection/sizes of products.
Exactly. What all the wailing and gnashing of teeth drowns out is the fact that the retailers mentioned are all public owner companies that have chosen Shareholder Value over running an outstanding business.
I order from Amazon half the time because a retail store is out of stock of what I need. Or the lines are too long because some MBA titan of industry is watching labor budget dollars. The shopping experience is so crapified at these big stores that Amazon is a better experience. It’s not evendors about the money for me, it’s about my TIME and frustration with stock.
I have read statistics that claim that the United States has 3-8 times as much retail space per capita as most “advanced” economies. All in the pursuit of customer convenience. Why go to a monolithic faceless slice of Big Box Generica (The National Automobile Slum) when one can more easily buy on line and avoid the horrors of the power centers and suburban megamalls?
Walmart killed local small community retail, Amazon is killing big urban retail.
There is no question that retail locations over built and over expanded nation wide. There was bound to be pull back. However, this retail pull back is beyond what everyone was expecting and the culprit is Amazon and other on-line retailers.
I have stores in two of the old line large residential communities in the Chicago area. The big chains are pulling out leaving empty storefronts. The small retailers that appear to have been successful for years are closing, leaving even more empty storefronts. Both communities are doubling down on large cash retail grants, land gifts, zoning variances and Sales Tax Rebate Programs to new business to come in. And they are doubling their efforts with developers to build apartments on top of what? More retail space. Insane.
Just depressing. Malls and big retail killed our towns. Now Amazon is killing the malls. Soon waiting for Amazon to deliver will be the American equivalent of waiting in the queue at the GUM — the Main Universal Store on Red Square in the bad old USSR. Obama claiming that working at an Amazon fulfillment center is “middle class” was no different than Brezhnev’s Nomenklatura and Apparatchiks showing up in their black limos to exhort the workers at the tractor factory.
Why shouldn’t American life be as dreary as life was depicted to be in the Soviet Union? After all, Steve Bannon claims to be a Leninist…
A huge feature of those Soviet-style queues is hoping that soap or heads of cabbages will still be in stock by the time you reach the head of the line.
I live in a respectably large metropolitan area, and I’m finding that I have to order more and more of my everyday supplies online simply because I can’t count on finding them in my local stores at any given time. I’ve also found out a long time ago that if one store is out of an item, chances are really good that its competitors will also be out of that item as well. What’s really frustrating is when items are also out of stock online.
I’ve had to come up with an absurd little inventory control system to make sure I always have these items available. For example, there as several items that I make sure I always have one extra container on hand, and for a few other items (like my favorite store brand of skin lotion) I have to make sure I have at least three extra containers on hand to get me through those 6-8 week dry spells when they’re just not available anywhere.
I believe I read a few months ago that Wal-Mart isn’t even trying to keep their shelves fully stocked because they want to save costs by having people purchase their products online from warehouses rather than from their more labor-intensive stores.
Gah. It sounds like the management fad of “just-in-time” inventory management has finally hit retail. We’ve been dealing with it for years in heavy industry, where “inventory turns” somehow became a key metric to be maximized. But somehow, nobody accounts for the customers who get mad because their desperately-needed spare part takes forever to be shipped because it has to be JIT manufactured from components bought from a third-party supplier that also practices JIT inventory management that in turn buys sub-components from yet another company that’s on the JIT bandwagon. In theory, it all works. In reality, there are too many possible sources of delay. And if you acknowledge the reality of Murphy’s Law, you can see how this will happen far too often.
I can’t imaging this making retail customers happy. It’ll only push them to online sellers. Or into maintaining their own inventory management schemes, like you’ve done. It’s enough to make a person grumpy.
Inventory management has cost plenty of big retailers to lose my dollars. Most recently, I walked away from Petsmart after continued frustration of them being out of stock. There’s only just so many times I was willing to go to another store in order to (maybe) complete my shopping trip.
I started ordering a few things from Amazon at first, then they offered me discounts if I set up subscriptions. I now subscribe for deliveries of food and cat litter. I’ll never darken Petsmart’s doors again because I kept running into empty shelves and they wasted my time (and gas) too often.
Target lost my business for much the same reason. I’ve cut my trips to Home Depot in half and order many things online now. How’s that Shareholder Value working out for y’all?
That’s very different from my experience here in Queens. I never order online, and I easily find everything I need in the many thousands of retail stores within a thirty minute subway ride from my home. I do, however, often have to do some online research– to discover where these retail outlets are located.
Contrast this to the approach of having lots of stuff, along with plenty of well-trained staff, that I find whenever I shop at a Wegmans upstate. No wonder they are the most popular grocery store in the country!
To see the future just watch the movie Elysium
Yep. :(
I think it’s less Amazon killing jobs as corporate America killing jobs left and right. If there were no Amazon, all the big retailers would be selling more items through their online channels–but the retail jobs would still be suffering as a) people have less disposable income and b) retailers can sell stuff with fewer jobs by shipping straight from the warehouse (and they want to cut their costs as much as they can). Plus, as others have noted, online shopping saves time, something that’s also in short supply. Amazon happens to be the most successful company in the online retail space but they’re the beneficiary of the trend that would be occurring anyway in my view.
Over the last ten years, I’ve seen a real drop in the availability of building materials. Items that used to be same day delivery now require 3 day lead time. Consistently, flooring is 6 weeks out. Lumber is wet, it’s no longer kiln dried (or if it is, it damn well doesn’t look or feel it) and don’t get me started on the various things called “metal”
Increasingly, everything is coming out of a warehouse overseas. If we don’t start manufacturing items again in the US, the day is going to come where we can’t get anything and the shelves are bare. Amazon or no Amazon.
> I’ve seen a real drop in the availability of building materials.
Yikes.
Why the focus on Amazon? Much retail activity will be moving online with or without Amazon. It’s not like Amazon has a lock on the technology: the online shopping cart is ubiquitous. Amazon is a threat primarily to other online retailers, not to brick-and-mortar stores, which are doomed anyway.
I don’t agree with the thesis.
Last month the wife’s food mixer started to fail. The motor is too small to mix bread dough. After two years it was scratching the bowl. I order a UK brand from Amazon USA and it was delivered to me in Hong Kong the following day. Not only that but it was 60% of the price in the local shops where we had wasted half a day searching.
Then there’s Tesla. No servicing required. If Tesla discovers your car is not performing optimally it reprograms your car’s computer whilst you are asleep. No more carless days waiting for a mechanic to do his job.
Habit and routine are being replaced by original thought and America is way out ahead.
Who is going to have the income to support your cheaper shopping? You have lost sight of the fact than if people have to work as a condition of survival, it becomes a responsibility of the ruling classes.
The end game of your little contented shopping is vastly more income and wealth disparity, which is highly correlated with shorter lifespans, even for the rich due to the greater stress of living in a highly stratified society, and more violence. I do not want to live in a society where rich people have snipers on their roofs, as I have seen in some countries. But you seem just ducky with the larger externalities as long as you have your easy shopping. Gah.
Very well said! “Gah” seems like the mildest expletive possible to respond to such a stunningly selfish statement!
Thanks for hosting a good discussion of this topic, Yves. There was another good discussion on Reddit.
I stand by my statement that manufacturing jobs are more concentrated in “a comparatively few counties.” This is not, as you “a remarkable admission of elite blindness” on my part, but a simple acknowledgement of the facts. You should really look at map of the Rust Belt if you don’t believe me.
According to the Commerce Department, there were 181 counties (out of 3,141 total) where manufacturing accounted for at least 20% of employment. Most of these counties are the Midwest and South, and most of them are rural or micropolitan areas. Manufacturing accounts for only about 7% of national jobs, but more than 20% in Indiana and Wisconsin, and more than 14% in Iowa, Michigan, Ohio, Kansas, Alabama, Arkansas, South Carolina and New Hampshire.
Retail, by contrast, is spread fairly evenly across the country.
Thanks for replying but the statistics you are citing are not relevant to your claim. Looking at where jobs are now does not tell you where jobs were before the losses occurred.
In 1973, manufacturing employment as a share of the civilian noninstutional population was 2.5 times what it is today. At its peak in 1977, manufacturing was 22% of nonfarm payrolls.
Challenge accepted.
The vast majority of manufacturing jobs lost between 1967 and 2014 occurred in just 173 counties out of more than 3,100. (National manufacturing employment fell from 19.3 million to 11.9 million, as employment in these 173 counties dropped from 12.4 million to 4.4 million). Net manufacturing employment actually rose in the remaining counties.
Specifically:
4.1 million jobs were lost in 50 counties, including Cook County, LA County, Wayne County, Cuyahoga County, and Allegheny County. Employment in these counties went from 6.7 million to 2.6 million. Chicago lost 78%, Detroit lost 82%, Pittsburgh lost 81%, Dayton lost 76%.
A further 2.4 million jobs were lost in 26 other counties, where employment went from 2.8 million to around 400,000. These counties encompass New York City, Philadelphia, Baltimore, Boston, Newark, St. Louis, Atlanta, Gary, Providence and San Francisco. Manhattan lost 96% of its manufacturing jobs.
About 1.5 million jobs were lost in 97 other counties.
In many of these 173 counties, more than half of the jobs were lost. On average, they lost 48% of their factory jobs.
To sum up: Manufacturing job losses were concentrated in a comparatively few counties. Manufacturing was and remains highly concentrated. By contrast, retail job losses hit nearly every city and town in America.
When you present the identity of these “counties” in terms of total number of inhabitants, it undermines the minimization of “relatively few counties” which comes off as trivializing the hollowing out of manufacturing. Most readers would assume that those “few counties” were in the Rust Belt, not huge urban centers. To say that it was concentrated in line with where population historically was concentrated is not consistent with the impression you give.
The raw data is that more manufacturing jobs WERE lost than Amazon could displace. Manufacturing was a higher percentage of total employment, at 37%, than retail ever was, at roughly 10% per the BLS. And the BLS does not project that the percentage of people employed in retail trade will decline by 2024. And those jobs were on average higher paid. Thus it appears that you’ve cherry picked statistics to make the possibly waning future of retail employment to be more consequential than the fall in manufacturing jobs, when it isn’t.
A couple of impressionistic responses:
I’m not sure “counties” is the right way to think of this. For example, I don’t think of Los Angeles as a “county,” I think of it as a city. If — I’m guessing — manufacturing distribution follows a power curve, not a bell curve, we would indeed expect to find a very few counties (cities) at the top of the curve, followed by a long tail of manufacturing in the rest of the country (counties without large cities).
I am a railroad fan, and looking at the articles and the models built from the 50s, it was quite normal for many, many towns to have railroad spurs for the local lumber yard, the brewery, the furniture factory, the metalworking shop, and so on. Much, even almost all of that, is gone now. (See Chris Arnade’s photographs). This is what I remember growing up, in my home town, and driving across the country. And where those workplaces were boarded up, communities were destroyed as well.
In order words, manufacturing can still be “highly concentrated,” and yet its destruction at the long tail could also have massive effects on communities across the entire continent.
My apologies if the evidence doesn’t lead where “most readers” or you would like it to.
Most of the manufacturing jobs lost were lost in large urban centers, mostly in the Rust Belt stretching from New England to the Great Lakes. That’s just a fact. But because (some) big cities are good at creating jobs, people have found other work. There is no nostalgia in Manhattan for the factory that is now gone, the way there’s nostalgia in Milwaukee, Buffalo, Baltimore or Youngstown. It’s in the smaller cities and towns where there’s a problem, because once the factory leaves, the only employment left is the Wal-Mart. There is a huge hole in those towns that cannot be filled.
Here is the point: Retail now occupies the role manufacturing once did: It supplies a lot of jobs for people with very few skills. And I raise the warning in a clickbait-y way that those jobs are in danger of being lost forever to “technology.”
But this time it isn’t the evil Chinese doing it, it’s Jeff Bezos. (Of course, a significant portion of those manufacturing jobs were lost to technology as well, not to the Chinese, but that’s something we must never mention because it spoils the narrative.)
The working class that fell from manufacturing to retail will now fall another rung. They’ll have to find other low-skilled work. Probably in health care and other minimum-wage social services. Or they will go on disability and Oxycontin. Or I suppose they could improve their skills and move to where the jobs are. … Nah!
This economic transformation accompanying the loss of retail jobs is likely take a different character than the loss of Rust Belt manufacturing did, because retail jobs are spread out more evenly across the country. It’s possible no one will even notice, except the millions who’ve fallen further from the American Dream.
> Retail now occupies the role manufacturing once did: It supplies a lot of jobs for people with very few skills.
I disagree that manufacturing does not involve skill. Let’s not confuse skill with credentials or with symbol manipulation. See “Credentials, Jobs and the New Economy” by Tressie McMillan Cottom.
On “most of the manufacturing jobs were lost,” see my comment above on a possible long tail; it’s community impact that matters, I think, and not numbers per se.
Yes– because it’s sooo easy for an unemployed autoworker in Lordstown, OH, to abandon his elderly mother, get a master’s degree in a STEM field at Stanford, and “network” his way into working for those wonderful employers out there like Uber!/s
“The truth about these dysfunctional, downscale communities is that they deserve to die.”
http://www.nationalreview.com/article/432876/donald-trump-white-working-class-dysfunction-real-opportunity-needed-not-trump
> On the other hand, with online shopping, you can find targets more efficiently, but the “hit or miss” element shifts to fit, color, and quality of fabric/tailoring.
Being a guy, I have my products. I don’t want new ones; I want the same product when the old one wears out.
Online doesn’t help with that at all. I have a brand and make of pants that I like (khaki, I’m a WASP, mkay?). Ordered some a few years ago, from Amazon; ordered the “same” pants again last summer, and the manufacturing quality was a lot worse. Worse zipper, worse stitching, no tacks where I expected them, worse fit though the “size” was the same. Online does not, in other words, prevent crapification. (Except through the reviews, I imagine, but multiple outlets sell the same products, and so reviews don’t aggregate by product.)