Is the Retail Industry Dying?


When was the last time you passed by a blacksmith during your morning commute? What about a haberdashery? Are you even aware of what a haberdashery is without the use of Google? The reality is that some professions – due to technological, social or cultural advancements have gone the way of the dodo.

Although labor shortages and unemployment aren’t an issue specific to any single industry, these issues are no more prevalent in the retail sector.

Most, if not all, of you are aware that technology is rapidly affecting the brick-and-mortar retail industry. The World Economic Forum estimates that between 30-50% of jobs are at risk of automation once the technology is implemented on the store level, while the business consulting firm McKinsey & Company have posited that, although around 53% of activities can indeed fall victim to automation, only about 5% of jobs have the potential to be eliminated.

The emergence of companies that offer online retail services like Amazon are no doubt the nail in the coffin for retailers like Sears and Zellers. Most physical retailers now offer delivery services in order to compete with the online shopping giant. Traditional retail sales are at an all time low; with stores like Payless closing outlets left and right, the future seems dire.

At least that’s the narrative we’re routinely fed.

In reality, the retail industry is actually facing a major shortage of workers across the US and Canada. According to a report published by the BDC last year, labor shortages in Canada are at an all time high. The report found that 54% of employers in the retail sector are having difficulty hiring.

The US is facing a similar problem. The Bureau of Labor Statistics found that, as of July 2018, there were 757,000 retail job openings across the US – up from 100,000 the year before.

The fact is that due to the aging population of “boomers” and the majority of people avoiding work in the retail sector, it’s forced brick-and-mortar stores into one of two categories: either automate or employ immigrants. Which makes for good soundbites, but isn’t indicative of an actual crisis.

I want to make myself clear; I am not trying to make the argument that we aren’t losing jobs due to them going overseas; nor am I saying immigration and automation aren’t threatening low skilled workers. However, I do believe that, due to nostalgia and the six-o’clock news, we’re looking at this issue all wrong.

Like it or not, immigration is the cheapest short term solution. With more and more natural-born, Canadian citizens opting for higher education in order to get a degree, Canada and the US are sorely lacking unskilled workers. With immigration being such a hotly-contested issue, it’s difficult to implement.

According to a study by MIT, a typical 4-lane, self-service checkout setup costs $125,000, although an open-source platform is available that can reduce the costs by nearly 10 times.

Automation can initially be a costly solution – especially for “mom & pop” stores. However, it is relatively inexpensive for chain retailers to invest in things like self-checkout lanes; the biggest complaint from consumers being that there often aren’t enough lanes available. Another issue is that of consumers refusing to use a self-checkout lane due to the perception that they take jobs away from workers.

Amazon is routinely cited as a major factor in job losses, which couldn’t be further from the truth. Retail lost around 29,000 jobs in 2017, but bear in mind that Amazon also created 135,000 new jobs in transportation and warehousing positions that same year. According to investment firm Morgan Stanley, in Amazon’s top 10 metropolitan areas, where the company has five or more fulfillment centers, job growth has been 1.9% greater than the national average. Believe it or not, Amazon actually creates more job growth than the majority of states in the US.

Immigration is a divisive political issue that no one will ever agree on. The way our society perceives automation is flawed for the time being, but may help brick-and-mortar retailers hold on to the market just a little longer.

E-Commerce is more convenient than traditional retail. Consumers rarely have to worry about an online outlet having the merchandise you’re looking for in stock. There’s no waiting in lines, there’s no hassle.

Where are all of the blacksmiths and haberdashers upset about the industrial revolution? There are none. The people who would have been doing those jobs one hundred years ago are doing something else. Human beings are incredibly resilient.

Henry Ford took jobs away from the horse and buggy industry when he invented the automobile, but the automobile also helped employ thousands of people while making the world a better place.

Progress doesn’t care about your sentimentality.

Read more from Everett at Think Liberty here.


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