The End is Nigh for Some Retailers – But Not the World

The End is Nigh for Some Retailers – But Not the World

The disruptive changes that are hitting the retail industry also are creating new opportunities.

Traditional “brick and mortar” retailers are disappearing in record numbers and many are close to drawing their last commercial breath.

The demise of well-known brands may be regrettable to some – but it’s not the end of the world.

While this period of disruption is traumatic for many people, it’s important to keep in mind that there is plenty of good news too. The structural changes that are redefining retailing as we know it also are creating new opportunities for entrepreneurs and job seekers.

One of the changes involves a long overdue rationalization of retail capacity in the United States. As The Atlantic magazine reported earlier this year, America built way too many malls — The number of US malls grew twice as fast as the country’s population between 1970 and 2015. Measured by gross leasable area, the US has 40% more shopping space per capita than Canada, five times more than the United Kingdom, and a whopping 10 times more than Germany.

Shifting consumer buying decisions is another driver of disruption. According to The Atlantic, “clothing stores have declined as consumers shifted their spending away from clothes toward traveling and dining out.” As I describe in my Influencer post Not Your Father’s High Street, leisure-related and “experience” outlets such as restaurants, gyms, and hair salons are increasing in number in response consumer demand.

But the structural change that attracts the most attention is the rise of e-commerce. The exponential growth in online sales is widely blamed for killing off traditional retailing and destroying jobs.

Undoubtedly, the e-commerce boom has taken a heavy toll on brick-and-mortar businesses. However, the impact of this trend on employment is not always negative. As established retailers continue to shed jobs, their upcoming online rivals are creating new ones.

In an April 2017 article in Forbes, the economist Michael Mandel argued that in the last decade, e-commerce created 355,000 jobs while “only” 51,000 jobs have been lost in the “general retail” sector.

In addition, as omnichannel business models – which offer consumers multiple channels for purchasing goods – continue to evolve, new roles are emerging for employees. Store personnel are being trained to meet the needs of online customers who visit physical outlets to pick up their purchases. Others are being trained to pick items in the store for customers who want to “click and pick.” Stores are being redesigned to cater for this new breed of customer.

This process of creative destruction is well established. The introduction of electronic spreadsheets in the early 1980s appeared to signal the extinction of bookkeepers. But the spreadsheets also created huge growth potential for financial analysts who could use the tools to analyze financial data. A retailing example is the impact of the ATM on bank teller employment. The first ATM was installed by Chemical Bank in 1969. As the machines proliferated there was less need for bank branches and tellers to dispense cash and receive payments. However, the number of bank tellers did not go down over the years. Instead, many of these individuals were re-deployed as customer service representatives to interact with customers and sell services. In other words, these workers were able to take on more complex tasks that the ATMs could not perform.

That is not to say that such upheavals are trivial. The transformation of businesses by ground-breaking innovations such as e-commerce is a shock to the system that can cause considerable dislocation and hardship. It is incumbent on societies and industries to help people navigate these periods of extreme change, and to create employment models that distribute wealth fairly.

Education is a key mechanism for achieving these goals. Companies must provide opportunities for acquiring new skills – but individuals also need to take responsibility for updating their skill sets as the employment landscape changes.

The rapid growth in online education programs will help immensely in this regard.

An example is the MIT MicroMasters Credential in supply chain management, an online program created by the MIT Center for Transportation & Logistics. MicroMasters requires no educational prequalification and uses the online medium to reach vast numbers of learners. Around 250,000 individuals worldwide have enrolled in at least one course in the program. The program is mostly free. Learners who want to get a MicroMasters credential pay a small fee per course and take a comprehensive exam at the end of the five on-line courses. Companies such as General Electric are making MicroMasters available to their employees.

Innovative educational programs such as MicroMasters and countless others in all fields will help workers to stay ahead of the curve as the demand for talent changes.

As the peak holiday season approaches, the plight of traditional retailers will no doubt attract more headlines. But we should also pay attention to the new jobs that are being created today, as well as the ones that have yet to be invented.

This article was written by Yossi Sheffi, Elisha Gray II Professor of Engineering Systems at MIT, and Director of the MIT Center for Transportation & Logistics.



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