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Retail in a Tailspin

The U.S. retail industry is in the midst of an internet-driven collapse that stands to affect hundreds of thousands of workers. The New York Times reports:

E-commerce players, led by the industry giant Amazon, have made it so easy and fast for people to shop online that traditional retailers, shackled by fading real estate and a culture of selling in stores, are struggling to compete. […]

This transformation is hollowing out suburban shopping malls, bankrupting longtime brands and leading to staggering job losses.

More workers in general merchandise stores have been laid off since October, about 89,000 Americans. That is more than all of the people employed in the United States coal industry, which President Trump championed during the campaign as a prime example of the workers who have been left behind in the economic recovery.

There’s no question that competition from online shopping sites has been crucial to the shuttering of brick-and-mortar stores. But it’s also worth noting that the alarming data are coming in after two years of frenzied minimum wage hikes in cities and states across the country. Retail is a labor-intensive and generally low-wage industry; the minimum wage hikes might not have contributed directly to the evaporation of retail jobs, but they certainly haven’t helped.

We are living at a time when technology and automation seem likely to continue to eat into less-skilled sources of employment for the foreseeable future. This creates an obligation for us to find ways to help the workers who are displaced. But wage floors that put even more people out of work and accelerate the process of dislocation will make the social consequences of this transformation even worse.

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  • ——————————

    A lot of the problem is that we have become a nation of employees instead of a nation of employers over the last 100+ years, often because the financial barrier to entry is so high in many businesses because of having to compete with large B&M retailers and other corporations. Yes there is Amazon and other large online retailers, but it is easier for a small guy to compete against them than against a Macy’s.
    There are now so many opportunities to start a business and sell on the net. Glad to see the internet help level the playing field as much as it can. At least many of those selling online are lining their own pockets and creating their own destiny, instead of slaving away for some big retail corp. Maybe this will help change the thinking of the general population back to the mentality it once had of ‘I can do it myself’ instead of ‘save me big corp and give me a paycheck every week’.

    We can’t have a nation of $9 an hour employees, so something has to change….

    • FriendlyGoat

      You’re right on one level, but it’s worth remembering that many, many, many start-ups of all kinds actually lose money in both the short and long terms and do not ever provide their owners with even $9/hour for their efforts.

      • LarryD

        Under capitalization kills most startups. Be prepared to go five years before your new business gets into the black.

        • FriendlyGoat

          People who need to earn $9/hour often cannot go five weeks or five months, let alone five years. I’m not arguing that entrepreneurship is a bad thing. I’m arguing that there is no circumstance under which self-employment replaces employment for the majority of people. Places in that economic condition are usually those described with people selling vegetables in an open-air market.

          • LarryD

            To start with. Hong Kong, Singapore, and Ireland have grown out of it.
            The old joke is: “What is the secret to success. Working half days. And it doesn’t matter which half.”
            Start up entrepreneurs don’t pay themselves $9/hr. Their business can’t afford it, not until they’re in the black.
            Once a business gets into the black, it can grow. And hire people.

          • ——————————

            People don’t usually “need” to make $9/hr, they more often don’t have a choice.
            The internet will get more people into their own business, and that is what matters. The eventual proportion of employed/self-employed is anyone’s guess.

            What is wrong with people selling vegetables in an open-air market? At least they are self-made…which is a lot more character-building, and intellectually stimulating than collecting a paycheck…no matter what level you are on….

          • FriendlyGoat

            Successful self-employment is a wonderful state of being. I actually did it for a time. Because I try not to write too many self-identifying things into the anonymity of these comment sections, I won’t get too detailed here. But, mine was one-person (no employees), involved selling physical work and then personally performing it over and over—–on a travel basis. It was low-investment and profitable within six months from the beginning. My customers treated me like a guest and I never had either an accident or a customer complaint. The whole thing (except for being out of town more than I had ever imagined) was WONDERFUL—–great exercise, plenty of jobs and delightfully nomadic. I would wish the sense of independence of it for ANYONE.
            I just know that there are many, many reasons why most people aren’t going to get the chance. You are correct, of course, that the Internet makes the possibility of new gigs.
            (Mine was pre-internet and did not involve the modern connectivity beyond land-line phones.)

          • ——————————

            Cool story!
            I wonder how much better your business would have been if the net was at the stage it is now?

            Another thing to think about is that the net can also provide those low wage people a low-cost and simple way to bring additional money into the house, and from the house, even stay-at-home moms, especially the single ones.

          • Jim__L

            Critical thing — the tax code needs to be reformed. Did you know that the Standard Deduction does not apply to “self-employed” income?

            Small changes like that would be an immense help to small-time entrepreneurs. If the IRS could simply turn its attention away from individuals making a modest living, the country would be in better shape.

          • D4x

            NYC subsidizes people to start-up selling fruits and vegetables from carts in neighborhoods that are ‘food deserts’.

      • ——————————

        No it is not ‘always’ easy, and some will fail…and often try again.
        But the internet is, IMHO, the greatest thing to happen to entrepreneurial spirit and small business in history.

        And often from the convenience of ones own home….

        • D4x

          Still prefer trying on shoes in a store!

    • f1b0nacc1

      Spot on… Note that while it is never easy to be a small business, small retailers can partner with Amazon (for instance), while no such option is common for the bricks and mortar crowd.

      The financial barrier is only part of it though, and perhaps not even the biggest part. Over regulation (financial and otherwise) impacts ‘physical’ start ups to a far greater degree than virtual ones, and this is also helping to undercut bricks and mortar retailers.

      • ——————————

        Selling on eBay and Amazon is a great way to get instant sales. It’s like opening a store on a busy downtown street with high foot traffic, but without all the expense. You then use those sales to drive traffic to your own website where you don’t have to pay the Amazon and eBay fees on your sales.
        The best things to sell on the net are unique, hand made, or hard to find items. That way you are not competing with the large sellers, and you can also get a following of people who like your specific product.
        And you can do all this from home, at least until you get going.

        Watch Shark Tank TV show. You will see many who have large internet sales before they even come on the show.

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