Online Retailing, Big Box Stores, and the Rise of Restaurants*
The Recent Evolution of Physical Retail Markets: Online Retailing, Big Box Stores, and the Rise of Restaurants* Francine Lafontaine and Jagadeesh Sivadasan Ross School of Business, University of Michigan This draft: December 16, 2019 Preliminary draft – Please do not circulate, comments welcome Abstract We examine changes in the retail sector in the US over the period 1999 to 2017, a period during which new technologies and forms of competition have been associated with what has been dubbed a “retail apocalypse” in the trade press and beyond. Consistent with this notion of “retail apocalypse,” we begin by confirming a sizable decline in the number of establishments in the retail sector defined per the currently used NAICS classification scheme. We further document a strong increase in e-commerce sales from nonstore retailers, and find suggestive evidence that sectors experiencing greater penetration of e-commerce exhibited larger relative decline in sales, number of physical stores, employment, and total payroll. However, the growth of Big Box stores (NAICS 45291), the second main factor often blamed for the reduction in number of retail establishments, flattened starkly after 2009, and we find that changes in other retail activity in a county is, on average, positively correlated with increases in the presence of Big Box stores. Moreover, despite the documented lower number of physical stores in 2017 compared to the start of the period, we find that both employment levels, real sales, real value added and real payroll of brick and mortar
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