I'm sure we're all in the process of ramping up our Christmas shopping, so what better time to look at one of the many e-commerce trends I started: online shopping. Given my lengthy friendship with
Jeff Bezos, and my brief tryst with
Meg Whitman, it should come as no surprise that I was one of the first to fully embrace online shopping. It all started in the fall of 1995, when after hearing about a series of Black Friday-instigated tramplings at various Wal-Marts, I said "enough." Even at the tender age of 11 I realized there was an easier, safer way. I proceeded to boot up my computer, check over my parents' and friends' wish lists, and crank out a year's worth of holiday shopping without ever leaving the comfort of my home office. The rest is history.
Over the last dozen years, websites like Amazon, Buy, eBay and Zappos have come to dominate the retail market, and it only seems to be increasing. Circuit City recently declared bankruptcy, and I have a feeling others aren't far behind. Who wants to drive to a store, fight for parking, pay more than you would otherwise pay at Amazon, and deal with a bunch of mouthbreathers when we could just take it easy at home? This year I continued the trend I started, and did all my Christmas shopping via Amazon, Craigslist, and two smaller online retailers. It's December 4th and I've purchased all my gifts, had them delivered to my front door, and am sitting pretty.
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6 comments:
Let me preface this by stating that I am a fan of online shopping. I think that Amazon.com is one of the greatest companies out there (customer service wise) and I would never want to see that company slip.
The fact is, however, that in our current economic system, we need brick and mortar stores to survive. Think about it: we are a service based economy. According to Wolfram research, 130.8 million people work in the retail industry and each of these people, in turn, contribute to their local economies. These contributions are made by these people range from payment of property taxes, sales taxes, and their dollars frequently are spent at other retail stores. If this were to decline, how would local municipalities be funded? Where would these people work?
A local independent retailer in San Luis Obispo recently estimated that 83% of its gross income went back into the local economy compared to 25% for a local establishment of a national retailer and 0% of an online retailer.
What do we do about this? Right not, a fraction of shopping is done online, but as it continues to grow, local revenues will decline. I would bet that the tax revenues in Bentonville, AK (the home of Wal Mart) surpass those of Santa Monica. That doesn't make a whole lot of sense. The only real option is to tax people based on shipping zip code and then remit those collected taxes to those municipalities where the products are shipped, thus eliminating one of my favorite on-line shopping advantages (no sales tax)
The next question has to do with what we do with the people who work in retail stores as they decline? Do they all become UPS drivers? What about the environmental concerns as people stop stopping at the store on the way home from work and transition to allowing competing delivery services to criss-cross their town?
Ryan, I think that stating "we need brick and mortar stores" and "we are a service based economy" are semi-contradictory statements. When I think of the service sector I think of thinks like insurance companies, banks, "massage parlors," etc. I would argue that online shopping is turning us into a service-based economy. I guess I just don't need assistance (or service) when purchasing a book, mp3 player, or pair of shoes.
It's undeniable that online shopping is crushing a lot of Mom and Pop stores, but I would argue it's only finishing the job Wal-Mart, Target, Best Buy and Blockbuster long ago started. What's interesting about online shopping today is that I feel like I'm taking money away from chains, not independent retailers. Amazon has replaced Barnes and Noble, Borders, Sam Goody, and Best Buy, Netflix has replaced Blockbuster, and Shoes.com has replaced Champs Sports and Big-5.
Some jobs are clearly being lost, but as the 20,700 people Amazon.com employs proves, some jobs are being created. The people who work for Amazon (or Google, or Ebay, or Adobe) still eat at restaurants, use local dry cleaners, and buy homeowner's insurance locally. I think a question we should be asking is how do more cities attract these types of high level companies/jobs to their municipalities, rather than letting them all collect in the Silicon Valley, Seattle, Boston, etc. Google and Yahoo have Santa Monica offices, and I'm guessing the city couldn't be happier, even if both companies have essentially killed off the Yellow Pages.
I'm sure their have been hundreds of books and term papers dedicated to how e-commerce and the internet boom has effected our economy, so it's silly to say whether it's good, bad, or neutral. It's clearly bad in some ways, and good in others.
I also think it's impossible to instinctively label the environmental impact of online shopping as either bad or good. UPS drivers "trip chain" better than mom's in mini-vans could ever hope to. Take me for example--rather than make four separate trips to buy gifts for my family and GF I stayed at home, and let UPS deliver it to me. My car's engine stayed off, and UPS delivered straight to me rather than a random store. If everyone did what you said and did all their shopping on their way home from work, you'd probably have a stronger argument, but that's clearly not the case. Think about every time our parents have driven to Paso Robles or Monterey--that's clearly not environmentally preferable to ordering something on Amazon. And finally, if we really want to get into environmental cost/benefit analysis, perhaps these e-jobs are allowing more people to work from home, saving them the need to ever fire up their engine (a minimum of two "cold starts" a day), while still allowing them the freedom to walk down the street for a latte or a session at their gym.
Wow, you really got me going. Thoughts?
I feel like the online shopping is going beyond the crushing of mom and pop stores and extending to hamper the sales of big-box stores. Your example that "Amazon has replaced Barnes and Noble, Borders, Sam Goody, and Best Buy, Netflix has replaced Blockbuster, and Shoes.com has replaced Champs Sports and Big-5" is something that I agree with whole heartedly. Why would I even bother stopping at one of these places on the way home from work if I can just order it online and have the convenience of free super-saver shipping? The only times that I find myself at a store these days is when I need to buy groceries that Amazon doesn't sell, or if I just want to browse. No matter how good the recommendation engines are on websites, browsing is still important because it allows people to stumble upon products that the would not have otherwise found.
My point is that with the decline of both independent and national retailers, we have an issue of a declining tax base. Once the retailers start to sell more online, where will the tax revenue come from? You may be correct that Google and Yahoo have Santa Monica offices, however your friend that is going to work for Google isn't working out of Santa Monica, and I would bet that there isn't a whole lot of sales tax coming out of these offices. Cities do need to attract businesses like these, but there are only so many of them to go around and they generally like to be near each other.
The environmental thing may sound like a stretch, but when I was in San Diego, commuting to and from work it was common practice for me to get stop at a store during my journey, as did many of my coworkers. People who live in King City, or Santa Monica for that matter may have to make a drive to somewhere like Frys to pick up an item that was on sale, but the efficiency is dependent upon the nature of the journey. When I worked at Circuit City we did a study that determined that it was more "environmentally responsible" for someone to shop in our store than on our website.
When you examine the travel that an item must take to get somewhere, you can see why. If you were a retailer with a warehouse in Santa Monica (unlikely) and had a website and retail stores, considering the following scenarios: When you overnight something to a customer using FedEx from Santa Monica to Salinas, it will be taken by truck to a sorting facility, then transferred by truck to another sorting facility at Burbank airport. From here it goes on a place to yet another sorting facility in Memphis, TN where it will be loaded onto another airplane that will take it to San Jose. In San Jose, the package would be sorted onto a truck that would take it to a sorting facility in Salinas, then loaded onto a delivery truck where it will be taken to a home or office. Compare that to simply a bunch of products onto a truck and shipping them to retail stores on the 101 corridor up the state. One third of a truck twice per week kept a $13 million/yr Circuit City store in San Luis Obispo stocked.
Logistics may be a good career path that I never considered.
I'm still not convinced about the environmental impact comparison. Both are obviously carbon intensive, but I'd love to see the results of a published study. And no offense, but I'm not willing to count the one your Circuit City "commissioned."
When you see malls like Westfield Century City, The Beverly Center, or the Gilroy Factory Outlets with massive parking lots (we're talking in the high hundreds) filled to capacity, and vehicles circling looking for vacated spaces, there is obviously a tremendous amount of carbon being emitted.
This blog post (and comments section) raises some interesting points without necessarily giving concrete answers.
Same here, although I did find this quote interesting:
According to the non-profit Center for Energy and Climate Solutions, "Shipping 10 pounds of packages by overnight air -- the most energy-intensive delivery mode -- uses 40 percent less fuel than driving roundtrip to the mall. Ground shipping by truck uses just one-tenth of the energy of driving yourself."
As for the tax revenue/economic impact--it's obviously too complex to fully discuss in this forum (for instance, perhaps people are able to use the price savings from online shopping--and their higher paying jobs--to go out to dinner more, thus paying sales tax on expensive restaurant tabs), but once again, if you could find any reputable studies that have been published I'd love to see them.
No studies I'm afraid, only speculation. It would be really interesting to find out. I also wonder what the volume of items purchased at a retail outlet is? Do people shop for one item and go home? If they were purchase the equivilant of 10 items from 10 different stores (like a back to school shopping trip) then that would equate to the ground shipping that uses 10 percent of the fuel used for a mall trip. If they are like me and cashed in on the free overnight shipping for life at Zappos (by registering for free on their website) the advantage, according to your data, is reduced even more. I, along with hundreds of thousands of other people, are members of amazon Prime which gives you free 2 day shipping on everything. I think that the human desire for instant gratification wil result in even more demand for overnight shipping. This may also result in greater efficiency. I clearly am more interested in the convenience of online shopping than the negative environmental impact that we are exploring, but it definately makes for an interesting discussion.
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