Retail Labor Force Has Been Redefined By Online Sales Productivity

By Christine Kern, contributing writer

New analysis says that Amazon’s success equates to 1.2 million missing retail workers.

Soaring online sales have reshaped the retail industry and reduced the need for labor by over one million retail workers, according to an analysis from J.P. Morgan analyst Michael Feroli highlighted by MarketWatch. However, Feroli notes, online shopping has not destroyed 1.2 million actual jobs; what it does mean is that the transition to internet sales has boosted productivity allowing companies to function with fewer overall employees.

Feroli says sales revenue per employee at an online seller is more than $1.2 million per year, four times higher than revenue per employee at traditional retailers, which is just under $280,000. Meanwhile, productivity among e-commerce companies grew about 6% in 2015, while overall U.S. productivity rose less than 1%.

Retail is not the only industry to see this productivity trend, either. Farming and manufacturing are also seeing higher production rates with far fewer workers. The trend is noted in data from the Bureau of Labor Statistics, which demonstrate that the percentage of Americans working in retail fell from 11.6 in 2000 to just 11 in 2016, the lowest level since 1975.

Retailers are clearly reducing their workforces as productivity rises and they face pressure to reduce costs to compete for bargain-savvy customers. As Innovative Retail Technologies reported, retailers were among the top five U.S. industries slashing jobs this summer, reporting stagnating sales growth as their enter their crucial back-to-school shopping season.

“The traditional retail industry in some respects is facing Armageddon,” Mark Cohen, professor and director of retail studies at Columbia Business School told CNN Money. “There were far too many stores built.” The biggest challenge facing retail is the shift in how and where consumers are shopping. "The retail business is not dead, but some legacy retailers are dying," Columbia's Cohen said.

And as more shoppers turn online for bargains and convenience, the pressure mounts on physical stores to keep up.