E-Commerce Wreaks Havoc on Brick and Mortar Stores

E-Commerce Wreaks Havoc on Brick and Mortar Stores

S. E. Williams

America’s retail industry is in transition as the explosion of e-commerce has pulled more customers from traditional brick and mortar stores to online shopping. 

Across the country, retailers of all stripes, including Payless, K-Mart, J.C. Penny, Macy’s, Sears, Ralph Lauren, Polo, Bebe, Rue21, and others, are shuttering stores. Many residents of the inland region are concerned about the potential impact of these closures on employment opportunities in the area. 

Earlier this month, the brokerage firm Credit Suisse published a research report that concluded, it is very possible, “more than 8,600 brick and mortar stores will close their doors in 2017.” This will far out-pace closures in 2008, which was, until now, the worst year on record for the industry. By comparison, 2,056 stores closed in 2016; 5,077 closed in 2015. 

The Department of Labor reported a loss of nearly 30,000 retail positions in February and a similar loss of another 27,000 retail positions in March. The industry did, however, experience a slight gain of 6,000 jobs in April. 

Respected economist Dr. John Husing recently spoke with The Voice/ Black Voice News about the impact of so many store closures on employment opportunities in the inland region. 

Husing is a research economist who has specialized in studying the region’s economy since 1964. Over the years, he has produced city- and county-specific economic development strategies for local governments in the area.

Husing described the impact in the inland region as a trade-off between retail stores and the logistics and distribution centers in the area. “Because such a large percentage of sales are now occurring on the internet,” he explained, “you see the loss of sales in brick and mortar stores at the same time that online purchasing is going sky high.” 

“The good part of this is most of those e-commerce facilities are locating in the Inland Empire,” he said. “As a consequence of that, almost all the e-commerce sales for Southern California are handled by workers out here. That’s a good thing.” The resulting trade-off, he stressed, “Is the inland region ends up with more jobs—not less.” 

Regarding the loss of retail jobs, Husing added, “We are not seeing the number of retail store workers go down. It is just going up much slower than it normally would.” 

There is also a differential in pay between the two industries, Husing continued. “In the retail sector, people tend to make under $30,000 per year, if they work full time. In logistics and distribution operations—that includes everything from the truckers moving the goods to people who are working in the warehouses—the median pay is about $45,500 per year. So, you have both more jobs being created and at a higher pay scale.” This is in clear contrast to the slow-down in retail stores he explained. 

Even if you extrapolate out to the end of the year and consider projected retail store closures across the nation, expected to exceed the closures at the

peak of the Great Recession, Husing is confident it will be better news for the Inland Empire.

He did, however, acknowledge a down-side to the logistics and distribution industry related to sales taxes. “The sales taxes collected in e-commerce warehouses do not go to the local cities, unless the warehouse is one of a kind in California,” he said. “If the company has more than one warehouse in the state, the one percent of retail sales taxes that traditionally went to the local city no longer does. [In this case] it goes to the state.” 

As Husing explained, the state redistributes the money to all 58 counties, not just the places where warehouse facilities operate. “That is a real disadvantage for the cities in the Inland Empire.” 

According to Husing, the tax distribution was set up that way due a deal cut by Governor Brown when he initially permitted Amazon to come to California. 

“Amazon was not coming to California and retail sales taxes were not being collected on sales within the state that were e-commerce sales,” he explained. “The deal that was cut was the one I described. That is, the monies would go to the state and then be redistributed throughout all of the counties based on population or their overall sales.” 

Husing shared that the governor’s deal harms both the Inland Empire, and the area around Tracy in Northern California, because the majority of e-commerce facilities are located in these two areas. “This is where the trucks are. This is where the roads take the pressure. Yet, the funding is not coming to the local municipalities and counties,” he stressed. 

It is highly unlikely that the communities in the inland region and the municipality of Tracy would work together to change e-commerce tax revenues distribution. “The trouble is, there are more representatives from all the other counties. So, you are probably stuck with it the way it is,” Husing shared. “We get the employment and good paying jobs for blue collar workers, but we do lose out on the sales tax equation.” 

Although the region gets the benefit of employment and blue collar jobs, there is no additional compensation for the environmental impacts the logistics and distribution industry has on the region. 

“The California Air Resources Board (CARB) is trying to stop the growth of e-commerce in the Inland Empire,” Husing said. “It would hurt our job base because they [CARB] don’t like the pollution they allege comes off the trucks.” 

He continued, “So far, we have been able to battle back against that, but, ultimately, that’s probably something we are going to see in some way or another. We stopped it from occurring when the South Coast Air Quality Management District was going to put rules in [place]. They made the decision not to, and instead chose to use incentives to get people to clean up the trucks. Their plan went to the state and CARB threw a hand-grenade in the works.” 

According to Husing, CARB asked its staff to figure out how to force warehouses in the inland region to lower pollution generated by trucks coming to and from their facilities, even though, as Husing pointed out, “The warehouses don’t own the trucks or the trucking companies and they really have no power over them. It is an interesting dilemma.” He added, “We are going to have to see how that plays out. So far, it is sort of in the cards, but it hasn’t gotten here yet.” 

The Credit Suisse report also noted that the continued shuttering of brick and mortar stores could result in the need for nearly one billion square feet of retail property to be repurposed across the nation.

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