The ability of e-commerce retailers to get higher productivity using fewer employees means there are 1.2 million fewer workers on the overall retail industry than there otherwise would be, according to an analysis from J.P. Morgan analyst Michael Feroli highlighted by MarketWatch.
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.
Productivity among e-commerce companies grew about 6% in 2015, while overall U.S. productivity rose less than 1%.
Another notable stat from the MarketWatch story: About 11% of the American workforce works in retail, which is down from 11.6% in 2000, a difference than sounds small, but apparently is the lowest it's been since 1975. It's clear, in any case, that retailers are cutting jobs, according to data from last month.
Some people may look at this analysis in full, and say that e-commerce is killing jobs. Others may look at it and say the traditional retail industry employs too many people. Both perspectives are kind of true, but more complicated than they sound.
E-commerce providers don’t need as many sales people, checkout clerks and customer service folks, among other job functions, that traditional brick-and-mortar retailers do. They use a lot of automation and customer-driven functions, so tasks are completed more quickly to yield higher productivity, and they simply don’t need more people supporting their efforts. However, according to Feroli's analysis, they do pay better on average than their brick-and-mortar counterparts.
Traditional retailers, meanwhile, employ as many people as they do because they need them to fill the many jobs that are required to keep each location up and running. They also have been at times overly ambitious in their store buildouts as they sought, almost like e-commerce companies, to be everywhere at once. That's not a productivity problem, though.
The difference in job count Feroli brings up is fantasy vs reality. There's not a scenario in which those jobs are added back to the retail industry. More productivity means a healthier business, higher profit margin, probably more revenue, and lower overall staffing costs. Highlighting the productivity/workforce size balance between the two worlds is more confirmation of why e-commerce is gradually taking a bigger piece of the retail pie, and why it represents the future of much of the retail industry (even though it still may represent less than 10% of the overall market).