Introduction

My last piece explored some of the labor saving technologies being introduced into both the goods and the services industries. It suggested that “labor saving” is a major reason for the “weak feeling” US recovery and growing income inequality. The labor saving impact in manufacturing is pretty clear cut. Here, I look at how these technologies are impacting service industries. Specifically, I look at e-commerce effects on retail sales and employment in department stores and malls. I also look at the presumptive winners and losers from these changes. The winners appear to be the package shipment companies with primary losers being malls and department stores.

Internet Sales

 A variety of sources collect data on online sales. According to emarketer, online sales worldwide were $1.3 trillion in 2015. China and the US are by far the world’s leading ecommerce markets. China’s e-commerce is by far the largest ($563 billion in 2015) and growing most rapidly (32% in 2015). The US is second with $394 billion sales in 2015 and a 14% annual growth rate. In the US, online sales increased from a 6.3% share in 2011 to 10.6% in 2015.

The move from department stores to online purchases has resulted in far more than a 10.6% share. It is important to remember that total retail sales include, in addition to department stores, supermarkets, hardware, drug and other stores. Online sales for these entities are extremely low.

That means a good part on the online increase is coming out of department store sales.

Table 1 provides a breakdown of total sales by type of store for the largest 100 US stores. If one assumes all of the increase in online sales came from the department store segment, the online share of department stores would have grown from 15% in 2011 to 26% in 2015. It takes time to change buying habits but it is clear that a move from buying in department stores to buying online is well underway.

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