The charticle in the New York TImes from a few weeks ago about the impact of e-commerce on retail employment is another concerning signal about the impact of information technology on the economy. As has happened to travel agents, demand for retail workers has begun to shrivel as their industry uses digital tools for information processing and communication that they used to need humans for.
You should read the charticle, but I’ll summarize the main facts. Department store employment is down 25% since 2002, a loss of 448,000 jobs. E-commerce employment has increased by 334%, adding only 178,000 jobs. Since the overall US population has grown 12.5% since 2002, you’d expect retail employment to have grown at least a little bit. But even with warehouse clubs adding over 800,000 jobs, an 80% increase, overall retail employment has been flat. While e-commerce drives a little over 9% of retail output, it employs barely 2% of all retail workers (see chart from NYT above).
In the 1980s, if you wanted to make sure that a large number of consumers knew about your products and felt comfortable buying them, you needed to build a network of retail locations and staff them with people to answer basic questions. You also needed a physical presence to even let consumers know your product existed and to draw them in; that’s why stores have sidewalk-facing windows to display their products. Today, we have the internet to convey basic product information, answer FAQs, and draw you into the buying area with enticing graphics and animations.
Pre-internet, you didn’t just go to the store to acquire goods themselves; you went to the store to find out what goods you wanted to buy. Separating these may seem like splitting hairs – the way we use English to say, “I’m going to the store,” we make it seem like gathering information about the products that are available and actually bringing the physical product into your possession are all part of one smooth motion.
But the distinction of those two aspects of going shopping has allowed e-commerce to thrive. The first aspect, where a consumer learns about available products, is simply an exchange of information. You don’t need stores to do that anymore. So as new businesses sell more of their products online and take market share from department stores, malls, and other retailers dependant on physical locations, the industry is going to need fewer and fewer people.
According to the charticle, e-commerce still makes up only 8.4% of all retail sales. That seemed remarkably low to me given how much me and my friends rely on Amazon for basic purchases, and that number is sure to rise as consumer behaviors continue their slow transformation. As this happens, I’m betting that retail employment will begin to see an overall drop, rather than holding flat as it has since 2002.
Brick-and-mortar won’t go away completely; there are a lot of products that sell better offline. And traditional retail’s struggle against Amazon is not news. But I wanted to describe how what’s happening in retail is similar to what’s happening to travel agents and other industries. We tend to consider challenges specific industries face in isolation, when we should be talking about the holistic challenge that the internet presents to labor markets, and plan for a time when humans won’t get paid for routine information processing.
I frequently see people conflate potential long term risks of human-level machine intelligence with reports about large-scale automation of jobs into a single generalized fear about AI. On the one hand, I want to help people calm down a little bit; despite advances like AlphaGo, artificial general intelligence is probably many years away.
On the other hand, retail shows that computers can disrupt labor even before any reinforcement learning solutions come to market.