The changing face of shopping - and employment

Three articles over the past week or so have provided some interesting glimpses into what's happening with brick-and-mortar stores in our modern economy.

First, CNBC talks about Target's problems:

Consumers are still shopping, they're just finding other ways to shop. And a lot of it is online. And companies like Target are not the company people think of when they think, "online shopping."

A lot of analysts believe that is the core of the problem. David Schick, retail analyst at Stifel, believes that HALF of all retail spending growth is now occurring online. In other words, spending is happening, it's just that a lot of it is not happening in stores.

. . .

But look at Target. Look what it sells. Everything from paper towels to cleaners to sundries and fans. A lot of this falls into categories consumers can easily buy online. You can have paper towels delivered every eight weeks regularly, if you want.

Then there's the change in the way consumers buy things. Ten years ago, the consumer said, "I want to feel the sheets before I buy them." A lot of consumers (myself included) still want to feel the sheets, but a lot of consumers who grew up on the internet (millennials) want to read 10 REVIEWS that say these are the best sheets. That's a big change.

There's more at the link.

Next, the Wall Street Journal confirms that shoppers are 'fleeing physical stores'.

U.S. retailers are facing a steep and persistent drop in store traffic, which is weighing on sales and prompting chains to slow store openings as shoppers make more of their purchases online.

Aside from a small uptick in April, shopper visits have fallen by 5% or more from a year earlier in every month for the past two years ...

. . .

New data from Moody's Investors Service shows that the shift to online sales has prompted retailers to scale back store openings and will likely lead them to pare back their fleets even more in coming years, as more than $70 billion in lease debt expires by 2018. Growth in store counts at the 100 largest retailers by revenue has slowed to less than 3% from more than 12% three years ago, according to Moody's.

The pressure comes as consumer tastes are changing. Instead of wandering through stores and making impulse purchases, shoppers use their mobile phones and computers to research prices and cherry-pick promotions, sticking to shopping lists rather than splurging on unneeded items. Even discount retailers are finding it harder to boost sales by lowering prices as many low-income consumers struggle to afford the basics regardless of the price.

. . .

The lease obligations set to expire by 2018 provides companies that overbuilt in the past decade with a way to reduce their retail footprints. The change will be particularly apparent at office supply stores, where more than two-thirds of retail leases are set to expire, and specialty retailers and convenience stores, where roughly half of retail leases are primed to expire by 2018.

Again, more at the link.

Think of what such a reduction in the number and size of physical stores means for local economies.  It means fewer occupied stores in shopping malls and precincts;  fewer jobs for sales assistants and related occupations such as deliveries, stocking, etc.;  and lower sales tax receipts for towns and cities, making it more difficult for them to fund essential services.

In that light, Re/Code's perspective on changing employment prospects in the retail environment offers a glimpse into what might be the future for both physical and online shopping - at least in major urban environments.

Buying something and getting it delivered is not a new concept. But today, due to a rush of recently launched on-demand services, delivery is becoming modernized and mobilized. In many American cities, you can now get just about anything delivered, at the touch of a smartphone button, within an hour.

But it can be too easy to forget that people make “instant” happen. And, generally, these people are not a traditionally stable workforce. They are instead a flexible and scalable network of workers — “fractional employees” — that tap in and tap out as needed, and as suits them.

. . .

And so, at its core, you might think of the instant gratification economy as a story about jobs — new kinds of jobs. Here’s how it works: People like to get stuff when they want it. And, because of smartphones and smart logistics software, deliveries can happen much more cheaply and quickly, especially in cities.

So, the availability of on-demand services generates more demand. To meet it, companies bring on more workers. And ultimately, finding one of these jobs — or often, more than one of them — can create living wages for people who might otherwise be out of work.

But it’s not all shiny happy job creation. It’s not terribly uplifting to think that the future of labor is delivering stuff to rich people.

And more practically, many of these delivery gigs require people to already have their own bikes and cars. Startups tend to be flaky; they change strategies and structures unexpectedly. There’s also a strong risk they’ll go out of business.

. . .

The smartphone is at the center of the sharing economy. Every company mentioned in this series on the instant gratification economy runs on worker smartphones. GPS, texting and mobile-app notifications are the ways to make flexible work actually work.

. . .

It’s very common for people to pick up gigs from multiple services — in the morning, grab some grocery orders on Instacart; then when you get tired of lifting large bags, run a shift during Sprig’s prime lunch hours; then when you get lonely from ferrying around inanimate objects, sign into Lyft to interact with an actual person.

NYU business school professor Arun Sundararajan’s summer research project is counting the number of jobs created by the sharing economy. He doesn’t have an estimate yet, but he points out that the U.S. workforce is already 20 percent to 25 percent freelance.

Sundararajan says he sees a lot of good in the sharing economy. “It will lead people to entrepreneurship without the extreme risks.” He thinks of platforms like Uber as gateways. “It’s even easier than finding a full-time job, which is easier than freelance.”

More at the link.

The Re/Code article suggests that such 'instant gratification'-related employment might replace many jobs that have been lost in other fields of employment.  Trouble is, that'll only work in areas with a high concentration of consumers who can both afford to shop in that way and who expect - and are willing to pay for - the additional costs of 'instant gratification'.  Many smaller towns and lower-income cities (particularly in the so-called 'rust belt') probably won't qualify.

Where will this take the US economy?  I have no idea - but I don't think the experts do either.  It's going to be interesting to see how it plays out over time.  Certainly, our children's children will probably be trying to find work in an employment scenario very different to our own.

Peter