While layoffs are happening in one area of retail, the rise in e-commerce means that more jobs are being created than bricks and mortar retail, and these jobs are paying much higher wages than traditional retail jobs.
We’ve heard the story over and over: Retailers by the bucket loads closing downs stores and doors, and sales assistants losing their jobs by the thousands.
In the last 12 months, Australian retail has had its downs. Retailers like Pumpkin Patch, Kit & Ace, David Lawrence, Marcs, Herringbone, Rhodes and Beckett and most recently Topshop, closing stores down has seen thousands of job losses across the industry. And this, coupled with Amazon as a potential major disruptor in Australian retail, dubbed the “country killer” with its promises of lower prices and faster delivery, the analyst echo chamber keeps repeating: retail is heading for doom and gloom.
But one economist, Michael Mandel, says it’s all wrong, and that we actually have it backwards. Mandel is a growing voice within e-commerce, turning heads from Silicon Valley to Washington, with his views applicable to Australia as well.
The chief economic strategist at Washington-based firm, Progressive Policy Institute, says the move towards e-commerce is creating more jobs than are being lost in traditional retail, and these jobs are paying much higher wages as well.
He contends that most economists are using the wrong numbers to measure the e-commerce industry. Mandel says that governments and conventional industry classifications don’t properly tally all the jobs associated with e-commerce, in particular, they miss the numbers that make up very large parts of the retail industry today as a result of e-commerce; these include fulfilment centres, distribution warehouses and parcel packaging services as well.
Haven’t they noticed the rapid expansion of big brown boxes, tied to e-commerce, making their way all around Australia?
Mandel uses the US as a case study, combing through the numbers, which by his count, shows the US e-commerce industry over the last decade has created 397,000 jobs, compared with the 76,000 job losses in traditional retail. And, what he also found were that those jobs related to e-commerce, paid around 30 percent higher than bricks and mortar retail jobs.
And it’s these numbers which has helped Mandel shape his optimistic views around e-commerce and what is really happening in the economy of the retail job market – worth considering.
Viewing e-commerce as an engine of jobs, and not just any jobs, but good higher-paying ones, that spreads across a country, has merit, but will no doubt receive a healthy dose of scepticism.
If Australia Post’s parcels business is any indicator, which now generates over 70% of its total revenue; ten years ago parcels contributed less than 25% of its revenue – it’s time to take a shinier outlook when it comes to retail jobs.
It’s interesting though, that the Australian government doesn’t invest more in Australia’s e-commerce sector of retail.
Phil Leahy, chief executive of Retail Global Australia says that a lot of government funding actually ends up with tech start-ups rather than helping existing retailers step over to e-commerce. “Both State and Federal governments are obsessed in providing funding for start-ups rather than helping existing businesses transform for e-commerce opportunities that exist today.”
“Start-ups provide positive optics for populist governments that want to “be seen” to support businesses. Everybody knows that start-ups have the highest failure rate. Shiny objects and trying to pick winners is the domain of our political class,” says Leahy.
There is an inevitable transition of lesser skilled back office retail functions to offshore locations, according to Paul Greenberg, founder and executive director of NORA.
“Whilst we don’t want to see people losing work, we are the ‘clever country’ and our best opportunity is to upskill to the new retail opportunity. We must accept the inevitable transition of lesser skilled back office retail functions to offshore locations.”
But, much like the rise and rise of luxury retail, Greenberg sees this upskilling is providing significant benefit to the e-commerce landscape and Australia’s retail economy. “Invention, innovation and IP is the new retail currency, and we have lots of it to sell.”