Last week we sent around an article from Citylab about the property valuation of big box stores. Some courts have been upholding use of “dark stores” as comparables to living, vibrant ones. This trend is not good for communities that rely on commercial property taxes to pay for basic services at the local level and a “double whammy” for communities suffering the loss of jobs. (What happened to the “discounted revenue stream” approach to real estate valuation?) Successful assessment appeals may help keep down costs for consumers and may help big box retailers maintain profitability especially if Chinese tariffs continue to raise costs. But the court actions create fiscal challenges for some communities.
One potential offset could be newly minted sales taxes following the “Wayfair” Supreme Court decision last year which may boost state and local revenues and fill some budgetary potholes. This would apply to those state, local governments and authorities (we are thinking transit districts here) that levy sales taxes and have set up laws and procedures for collecting on-line sales taxes. But what about all those little boxes that are criss-crossing the nation this time of year?
Consumer confidence — a key to shopping trends — was robust in October, declined somewhat in November, but remains at “historically strong levels” according to Lynn Franco of the Conference Board. This year’s “Black Friday” and “Cyber Monday” far exceeded last year: a 19% increase from last year according to Adobe Analytics as reported by CNN . In this context, the forward march of e-commerce is accelerating, affecting the job market, changing the shape of commercial real estate and transportation industries.
For one thing, unlike the classic business model where retail shopping is located in proximity to buyers, e-commerce logistics have a very different geographic footprint. Instead of shoppers traveling to a brick and mortar store, e-commerce needs locations with strong transportation: air, rail, truck; high speed internet and an affordable pool of workers to pack boxes and bring goods to consumers. In July, Governing Magazine published a detailed review of job growth covering the ten years from 2007-2017 in US counties in the “non-store” retailing categories. It is no surprise that King County, Washington, home of Amazon HQ1 had the highest growth, adding 36,549 jobs over the ten year period. But less well-off counties attracted warehousing and distribution centers. For example, next on the list were San Bernardino and Riverside Counties in California, which added nearly 27,000 and 20,500 jobs respectively over the decade. The two counties were known as a “ground zero” for the subprime mortgage meltdown and San Bernardino made a slow and expensive walk through municipal bankruptcy.
While hosting an Amazon packing and distribution center will bring jobs and activity to a community, packers’ wages are typically low, jobs are physically demanding and stressful, often part-time and lacking benefits. Alana Semuels wrote a detailed article for Atlantic on her experience working for Amazon in California. In Memphis, XPO Logistics is under fire for rough working conditions with extended shifts and physical labor that led to several women to have miscarriages. Michael Barbaro detailed this story about XPO for “The Daily”. The XPO experience has led to aggrieved employees to reach out to the Teamsters to consider unionization. Ironically, this nascent transformation of retail is reminiscent of early days of low paid, industrial manufacturing before it transformed into a unionized pathway to middle income lifestyle.
We compiled data from the Bureau of Labor Statistics to show growth in selected occupations. along with lower paid packing jobs, e-commerce requires sophisticated mathematical and statistical knowledge; art, design and social media experts as well as office and administrative personnel to handle and fulfill on-line orders. While it is not a major portion of the labor force, it is a rapidly growing and productive segment. The BLS website includes rich geographic mapping of this segment (and other segments) of the economy.
Further, e-commerce is making other changes in consumer purchasing habits and expectations. “Free, fast shipping during the holidays can pressure small businesses”, a podcast from Marketplace, which highlights the consequences of our dependence on free and super fast shipping. This dependency is making it very difficult for small businesses to compete. Add to this the extra burden of figuring out collection of sales taxes for those communities now requiring the remittance. Where the internet once enabled small companies in more remote locations to access global markets, the great Venus fly trap of Amazon and Walmart may soon put some smaller upstarts out of business. Finally, as robotics technology advances, many of the packing and shipping jobs may become obsolete in the near future.
Communities that are trying to lure (or have lured) packing and distribution operations should take a long view and plan now to build in a mechanism to re-train their residents– whether in partnership with companies or community colleges or both. For now, BLS projects an overall 23.8% growth rate between 2016 and 2026 for the e-commerce and mail-order categories. Many higher paid management, marketing and technical positions lead the pack. For example, statisticians are expected to grow 54.4% in number over the period; operations research 48.4%; lets not forget lawyers, judges and related jobs, which are projected to grow 45.4%; market researchers 41.6% and software application developers 30.4%. These figures compare with BLS’ projection of overall job growth during the ten-year period of 7.4%.
Shopping has transformed into an anonymous experience — no sales clerk or cashier to see in person. At best, you may get help through a “chat” on-line. In this holiday season, as you order and open the boxes that arrive at your door (or the Amazon locker), take a moment to think of the folks that packed, shipped and distributed the goods.
Thoughtful and thought provoking.