Consumer spending makes up around 68 percent of the nation’s
gross domestic product. Consumer spending is individuals and families
purchasing groceries, clothing, recreation, stocks, insurance, education and
much more. The transactions cover a broad swath of economic activity.
Much of the nation’s consumer spending is captured via
retail trade. A useful retail trade definition is “the re-sale (sale without transformation) of new and used goods to the general public, for personal or household consumption or utilization.” Not all consumer spending is captured through retail trade transactions,
but a large share is.
Broad-category examples of retail trade sectors are motor
vehicle sales, furniture stores, electronic stores, building material stores,
grocery stores, pharmacies, gas stations, clothing stores and department
stores, among others.
Then there is the relatively new and emerging part of the
retail trade sphere — non-store retailers. These are establishments that sell
products on the Internet. Examples include Amazon, Zappos, Overstock.com, or
eBay. These types of retailers have grown rapidly in the past 15 years and
their presence is reshaping the retail trade landscape.
Whereas in the past nearly all retail transactions were done
through traditional brick-and-mortar stores, now a significant and growing
segment is diverted to internet sales. The consumer shops online and FedEx (or
like) delivers the product. One can see that the number of brick-and-mortar
stores and the level of local sales across the country are being endangered by
this economic evolution.
The brick-and-mortar reduction is beginning to show its
economic presence in the United States employment numbers. While the U.S.
economy is finally expanding at a healthy pace this side of the Great
Recession, one of the few industries not rising with this tide is retail trade.
While overall retail sales are increasing, employment is not.
Traditionally, as a population increases, retail trade
employment grows simultaneously, since population growth and consumer spending
volume is an integrated dynamic. If studied deeply, a certain ratio of retail trade
employment growth spawned from population growth would emerge. Before the
internet, the vast majority of all consumer sales occurred in the immediate
community or region. But now, the internet is diverting these sales away from
the local community — and with internet sales growing, its market share will
increase.
We do not yet know how much brick-and-mortar erosion will
eventually occur. And will such a phenomenon hit some areas more than others
(e.g., urban vs. rural, or local vs. tourist spending)? These are touch points
that economists will be watching as this internet sales phenomenon continues to
grow within the national and Utah economies.
In light of this change, in this quarter’s Local Insights we
are profiling retail trade employment throughout Utah’s local regions. This can
offer a profile of where retail trade is now in a local economy, and possibly
how much of the sector could become vulnerable to the internet-sales
phenomenon.
All regions can be viewed through the Local Insights
web
portal. The following is a retail trade profile for the Bear River region:
Retail Matters in the Bear River Region
The retail trade industry is an important economic driver in
Bear River. It employs more than 8,000 people in the region —almost 11 percent
of total nonfarm employment. In Box Elder County, retail trade is the third
largest industry, behind only manufacturing and health care. In Cache County,
it is the fourth largest. Retail sales account for about 51 percent of total
taxable sales in the region — very similar to the 52 percent statewide average.
The Rise of Online Retail
Due to consumers making more and more purchases online, the
demand for brick-and-mortar retail workers in the region has been softening.
Overall, employment in Bear River has been growing at a rate of about 2.4
percent on average since the recovery noticeably began in 2012; but in
traditional retail, employment growth has been averaging just 1.4 percent. In
the five years prior to the recession (and before online retail really took off),
traditional retail employment was clipping along at a much quicker average
growth rate of 2.6 percent growth.
Non-store retail, on the other hand, has been booming in the
region. With the growth of online retailers, like Malouf Linens and Jensen
Online Books in Cache County, employment in non-store retail has grown an
average of 16 percent annually since 2012. The share of total employment
represented by non-store retail has increased 105 percent over that time. The
next highest employment share expansion in retail was in the motor vehicles
category, which increased its share by a paltry 19 percent in comparison. Most
other retail categories saw a decline in their share of total employment.
Non-store Taxable Sales Are Also Gaining, But Not as Fast as
Employment. Why?
Taxable sales in non-store retail have not gained as a share
of total taxable sales as quickly as the employment share. This is primarily
because sales taxes are collected by the state of the purchaser, and then, only
if the seller has a physical presence in that state. This means that when
Malouf sells a pillow to someone outside of Utah, there is money coming into
Utah (in terms of the jobs that the sale supports) but there is no sales tax
coming in to Utah. The only non-store sales taxes captured in Utah are Utah
consumers purchasing goods from retailers with a presence in Utah. Since a
large share of sales by local online retailers are to customers in other
states, it means that sales tax revenue lags compared to employment growth in
the industry.
An Aging Retail Workforce
Interestingly, the jobs in retail are not primarily younger
workers as one might expect. In fact, about 70 percent of the region’s retail
jobs are people 25 and older, and approximately 45 percent are at least 35.
There used to be more young workers in the industry. Prior to the recession in
2007, the share of 35 and older retail workers in the Bear River Region was
only 38 percent.
During the Great Recession, the share of teenagers working
in retail plummeted from 9 percent to 4.5 percent and has remained low ever
since. The reduced youth base means there are fewer workers who stay on and age
into the older categories.
A Less Educated Retail Workforce
At the same time, the share of retail workers with less than
a high school education has increased significantly. This has been primarily at
the expense of individuals for whom educational attainment data are not
available (i.e., workers under the age of 24 — mostly students). Since 2007,
the share of workers with less than a high school education in Utah retail has
increased by more than 25 percent.
This does not appear to be an actual increase in less
educated workers. Rather, the drop in workers under 24-years-old is causing a
share increase for the existing less educated workers. As a result, the retail
workforce in Bear River (and in Utah in general) is trending toward an older
and less educated demographic.
What is Driving This Trend?
This is likely the result of young people choosing to take
jobs in other industries with better pay, as wages in retail have lagged. Or
they may be opting to finance their education rather than work while attending
school. But some portion of this shift is also being driven by the structural
changes taking place in retail due to increasing online sales.
The Occupational Shift
The transition to non-store retail translates to shifting
demand for a different set of occupations required by non-store retail
operations. Traditional brick-and-mortar retail stores primarily need people to
work on the sales floor, such as retail sales workers and cashiers. Those two
occupations alone represent about 45 percent of all employees in traditional
retail. In non-store retail, on the other hand, the top two occupations are
customer service reps and shipping/receiving clerks. Freight and inventory
movers, order clerks/fillers, and truck drivers all play a much more prominent
role in non-store retail as well.
Generally speaking, these kinds of jobs tend to require more
time commitment than the most demanded traditional retail jobs. According to the
Conference Board’s Help Wanted Online® product (analyzes online job postings),
about 40 percent of job openings for cashiers and retail sales workers (the top
jobs for traditional retail) posted in Utah in the second quarter of 2017 were
part-time jobs. Only 20 percent of job postings for customer service reps and
shipping/receiving clerks (the top jobs for non-store retail) were part-time.
Positions that require more time commitment and more fixed schedules are likely
to be less attractive to young people — especially students — who may be
looking for opportunities that are less time consuming.
The Geographic Shift
In addition, there is a geographic component to this
transition. Traditional retailers tend to have many more locations spread out
geographically, making them more likely to have that cover a broader footprint
within the labor force. Online retailers, however, are generally centralized in
large warehouses, distribution centers, and office buildings that runs counter
to the disperse spread of traditional brick-and-mortar. As a result, it may be
harder for workers — especially younger workers — to get to and from these
jobs.
What It All Means
These structural changes are having a profound effect on the
retail workforce, and we can reasonably expect the resulting trends to continue
for some time. As new technologies and retail processes emerge, there will
doubtless be more shifts in this rapidly evolving sector. But for now, in the
Bear River region, we can expect fewer traditional brick-and-mortar retail
jobs, more non-store retail jobs, and an increasing share of retail employment
opportunities that may be challenging for our young population to access.
Check Out the Viz
If you are interested in the details, the data visualization
below breaks out the various retail categories and allows you to compare sales
(as a share of total taxable sales) and employment (as a share of total nonfarm
employment) in each category (by county) over time. The relative changes in
taxable sales compared to employment are telling in relation to some of these
structural changes, although direct links are difficult to establish as there
are many other confounding factors. The tables at the bottom give the actual
sales and employment levels, summed-up for whatever you have selected in the
county and retail category filters.
