To paraphrase Mark Twain, the report of the death of brick-and-mortar shops is an exaggeration.
Certainly, online shopping has altered the retail landscape across the United States, with companies such as Amazon.com tapping into an e-commerce industry that was unfathomable 25 years ago. These changes have led to frequent predictions of the demise of traditional shopping, but a new study from the University of Chicago provides evidence to the contrary.
While online purchases have grown exponentially over the past two decades, warehouse outlets such as Costco have grown even more rapidly. As researchers Ali Hortacsu and Chad Syverson write: “This segment of the retail sector is just plain large. Its four largest firms accounted for almost 8 percent of total retail sales in 2012. This is almost 50 percent more than all e-commerce retail sales that year.”
Yes, Costco, Wal-Mart, Walgreens, and Target account for significantly more in sales than all online purchases in the United States. This is significant for both social and economic reasons. As the authors note: “Physical retail is a necessarily social and public process. Our archetypal views of historic eras often involve the look of the retail space of that time, from the town squares and downtown streets of the early and mid-20th century, to the malls of the 1980s, to the more recent big-box store islands floating in parking lot seas.” In other words, how we shop in the United States often comes to define how we live.
Washington’s role in this is significant, as the state long has been a leader in innovative industry. Issaquah-based Costco is the nation’s third-largest retailer as far as U.S. sales, according to the National Retail Federation. And Seattle is home to three other retail giants: Amazon, which ranks ninth; Nordstrom at No. 32; and Starbucks at No. 42. The differences among those retailers reflect the diversity involved in 21st century shopping. Costco, while maintaining a robust website and providing online-only coupons, is the modern incarnation of a brick-and-mortar outlet; Amazon was founded as — and remains — a groundbreaker in the field of e-commerce.
What is left out of this equation is the question of the future of small business in the United States. According to the Small Business Administration’s 2014 report, companies with fewer than 500 employees accounted for 98 percent of businesses in Washington and employed slightly more than half of the state’s workers. And while there has been small-but-steady growth among the state’s small businesses in recent years, times are difficult for small retailers. The prevalence of big-box stores and e-commerce has helped to render traditional mom-and-pop stores uncompetitive, a fact that often sends local dollars to far-flung corporate headquarters rather than keeping them in the community. As one study from Civic Economics found, of every $100 spent at a local business, $68 remained in the local economy, while $100 spent at a chain kept $43 in the region.
Lawmakers at both the federal and state levels must be cognizant of these facts in formulating economic policy; shoppers must be cognizant of these facts in making purchasing decisions. Support for local retailers provides benefits to the community that often outweigh the convenience of a little more selection or slightly lower prices.
Meanwhile, in-person shopping remains the driving force in the economy despite the growth of e-commerce. As Hortacsu and Syverson write: “Although online retail will surely continue to be a force … its time for supremacy has not yet arrived.”
