Sep 16, 2019 - Economy & Business

More job losses are likely in brick-and-mortar retail

Reproduced from IIF report; Chart: Axios Visuals
Reproduced from IIF report; Chart: Axios Visuals

The strong U.S. labor market continues to add jobs, but the retail sector has been moving in the opposite direction.

Why it matters: Brick and mortar retail is likely to keep shedding jobs for the foreseeable future because of an "efficiency gap" between traditional stores and e-commerce, according to economists at the Institute of International Finance.

What it means: IIF's economists assert that it takes significantly fewer employees to deliver the same amount of product for e-commerce businesses, meaning they will continue to deliver better profits and push out old-school retailers in large stores.

  • "This efficiency gap has persisted because ongoing job losses in brick-and-mortar retail are only just keeping pace with falling market share, which unfortunately means that downsizing is likely to continue for some time," IIF managing director and chief economist Robin Brooks and economist Jonathan Fortun say in a report published Thursday.

Details: They highlight a few key trends in the labor market between traditional and online retail.

  • "Job losses in the retail sector have been a persistent feature of the US labor market."
  • "This downsizing has so far only offset falling market share of 'brick-and-mortar' retail, and therefore not helped close the persistent efficiency gap that exists versus e-commerce."
  • "Department stores need 8 employees to generate $1 million in sales per year, while electronic shopping & mail-order houses, the category that captures e-commerce in the establishment survey, need as few as 0.6."
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