Is the internet killing our small local retailers?

Yes.  And no.  It isn’t just urban legend that the internet is killing our small local retailers.  Just as much as the big box stores, the residents of our fair cities are indeed exchanging their patronage at smaller locally owned stores for online buying, as well as the larger brick and mortar providers.

Economists at the University of Chicago studied buying trends for industries believed to be the most affected by the rise of online shopping:  bookstores, travel agencies, and new-car dealers.  The data show that in all three cases, the growth in the internet marketplace changed the structure of each industry or the prices – or both. 

In the ten years since internet purchasing became accepted practice, larger sellers survived in the community, for example, Barnes & Noble and travel  agencies with more than 100 employees.  As for these travel agencies, it’s a wonder there are any since they don’t have much of a visible presence.  Yet travel companies with more than 100 employees have grown 60% in the past ten years; the number of small firms fell by one-third.  The bookstore scenario is clear.  Haven’t all of our neighborhoods lost a beloved small or one-off bookstore?  Even mid-size chains closed or  dramatically retreated from markets (think B. Dalton everywhere and the wonderful used book store on Broadway, now gone so long I can’t recall its name). 

The study indicated the overall employment in books selling and travel fell, though some of the decline may have been mitigated by the continued growth of the large providers and the online companies.  Often, however, those jobs are not going to our neighbors who used to ring up our purchases.  I suppose those people are now at the coffee outlets, which honestly still seem to be everywhere.  Not quite the same quality of work (meaning no offense to the people making our change there…just the nature of the opportunity). 

As for car dealers, online retailing hasn’t hit them them volume, though other forces have.  Online shopping appears to have lowered prices, because intelligence is readily available to the new car buyer.  Also, online retailing-only new car sales are prohibited by law, which sheilds dealers from the online effect.  (Those auto dealers have an effective lobby.   Car financing through dealers is also excluded from the new consumer finance regulation,  even though the dollar amount involved is greater than the amount of credit card debt.)

The good news?  The study showed that finely targeted booksellers continue to serve the community.  The very smallest shops, with one to four employees, survived.  As an example, visit the exceptional William Stout Architectural Books on Montgomery, and its annex in the Mission, if you have an interest in architecture, design, and decorative arts.  (Btw, William Stout has a robust online buying functionality, as well.)

The take-away?  Expect efficient market forces to continue to change the lives of small local retailers and our own purchasing habits.  Continue supporting the buy-local movement, but know that in an era of reduced circumstances, we can’t be fiscally foolish.  As the doors close, hope the people affected find satisfying and rewarding new jobs or things to do with their lives.  Note, too, that the fact that we purchase differently doesn’t mean we purchase different things.  Don’t let the big box craze make your thinking homogenous.  It’s all still out there.  LLII.

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