One of the main purposes of the Engineering for Social Change curricula is to discuss and identify unintended consequences of technologies that engineers have developed. Every technology was created to solve a problem, but in solving the problem, have more problems been created? The purpose of this paper is to investigate the unintended consequence of one technology. Within this paper, the intended and unintended consequences of E-commerce will be explored. First, the history of E-commerce will be discussed and how its very rapid growth has created a new space within the retail market and what that means for customers and businesses.
Then the paper will look closer at the effects of E-commerce technology on society. The way that customers and businesses function within the retail market has changed dramatically since the introduction of E-commerce, and these new functions will be discussed in detail. Additionally, to understand the problem, the paper will take a deep look at how E-commerce leads to job loss in the economy. There are a few key aspects of the technology that lend itself to a decrease in jobs within a very competitive market space.
Next, the paper will discuss what possible solutions to job loss there are in society and who will be the main implementers. The paper will evaluate whether the main responsibility for a solution falls on engineers or other groups within society.
In 2015, more than 10% of all retail purchases within the United States were attributed to e-commerce (A History of E-commerce, 2016). Since then, e-commerce has continued to grow at a surprising rate. However, e-commerce did not begin overnight. E-commerce has been a technology that has been in development since 1994 (A History of E-commerce, 2016), and since then it has been influencing society with intended and unintended consequences.
Many of the early electronic technologies were developed first by the military to transfer information in the case of an attack (A History of E-commerce, 2016). This laid the framework for the development of the internet, and throughout the 1980s to early 1990s, innovation continued with respect to computer technology, but services were limited and very localized. However, in 1994, the first electronic purchase was made from a computer, and only a year later, both Amazon and E-bay were born (A History of E-commerce, 2016). Clearly, once the technology was developed enough to prove that e-commerce was a possibility, companies started to explore the possibility of developing e-commerce into a platform that would allow for a successful business model. This new technology would be seen as a disruptor in the market, and the investment in the technology relied on a more widespread use of computers in society. At the same time that e-commerce technology was developing, so were the capabilities of personal computers and their widespread use by the public.
E-commerce is now “the fastest-growing segment within retail” (A History of E-commerce, 2016). Within 20 years, E-commerce has completely changed the landscape of retail within the United States and across the world. Even within Amazon's first month of business, they received purchase orders from 45 different countries (A History of E-commerce, 2016). With the accessibility of e-commerce to people all around the world, there is a possibility of developing a business that has no geographical bounds. Additionally, E-commerce has become a lot more economically feasible to the public. The cost of developing online platforms has decreased drastically since the 1990s, which makes E-commerce an option that more entrepreneurs and new businesses can implement.
However, with all of E-commerce's positive disruptions in the retail market, E-commerce has still led to effects that weren't considered by early adopters back when the technology was first being developed. Within this report, the unintended job loss caused by E-commerce will be evaluated. There are two main modes of job loss that are seen due to E-commerce. The first are jobs that are lost due to a decrease in brick-and-mortar stores. With less brick-and-mortar stores, there is less of a need for employees within the service industry who would otherwise help maintain these locations and support business operations. This transition from brick-and-mortar stores to online retail has affected both large and small businesses, and their ability to adapt often defines a company's chances to remain profitable and competitive in today's market. It is when companies aren't able to adapt, for a variety of reasons that will be discussed in detail within this report, that jobs are at risk. The second are jobs that are lost due to automation. E-commerce relies on a lot more than just having a website. Automation of logistics within businesses to improve their E-commerce supply chain has eliminated many jobs, especially lower wage jobs.
With this understanding of E-commerce and its intended and unintended effects, the report will continue to develop ideas surrounding these effects and how society can respond to them as the technology continues to be developed and widely used.
E-commerce has effectively re-shaped the way an individual consumer interacts with retail, as well as how businesses have needed to structure themselves to succeed in this changing purchasing landscape. Both of these are clear and intended impacts on society and its functionality. If the actions of the individual are evaluated, a clear change in practices and activity can be seen since the introduction of technology. If evaluated using sales numbers to show customer acceptance, one can see that online sales revenues increased from around $14,000 a month in 1997 to $40,000 a month in 2002 (Gillenson and Sherrell 2002, 705-719). Clearly, consumers are receptive to online retail and helped e-commerce grow very rapidly in a very short amount of time. Consumers are accepting of such a change in purchasing pattern for a variety of reasons. As Gillenson discusses, online retail allows for more convenience, choice, and competitive pricing (Gillenson and Sherrell 2002, 705-719). Since the introduction of E-commerce, society values these factors more than they ever had been before and there is a higher expectation for them to be met before a customer makes a purchase. Businesses constantly have to improve their platforms and user-interfaces to make shopping online as appealing as possible to consumers. This is done using customer-insight studies and evaluating any innovations in the technology. Therefore, while E-commerce has changed how society shops, society also now influences how online retail continues to develop.
Furthermore, the Internet offers “unique commercial opportunities” over traditional means of retail, and businesses have completely redeveloped their strategies to better utilize E-commerce (Zemnick 2000, 1965). The first step for many businesses as they begin to think of structuring their business around e-commerce is to consider having an online presence. Julie Fisher states that if any business, even small business, considers online strategy in their business plan, they will be more likely to utilize e-commerce (Fisher et al 2007, 253-262). However, there is a difference between having a website that is only used for marketing, and a website that is designed to connect consumers to the products or services that are being sold via e-commerce. Increasingly more businesses have to consider e-commerce from the conception of the business in order to best utilize the new technology that allows for online sales.
There are two main methods for businesses to currently integrate e-commerce into their business strategy. First, they could facilitate and build their e-commerce capabilities independently of any other business. This requires the businesses to put an investment into their online presence and the e-commerce tools that would allow their website to become capable of completing online sales and transactions. This method would require a strong understanding of the requirements of a business to support the e-commerce, as well as a large initial investment to personalize and build out their e-commerce infrastructure.
The second method for businesses to integrate e-commerce into their business strategy is to utilize the services of a large e-commerce company. For example, many small businesses sell their goods through Amazon. Gene Marks, from Entrepreneur.com, believes Amazon is good for small business. Businesses can utilize Fulfillment by Amazon, a service in which other businesses house their products at Amazon warehouses and pay Amazon to handle all of the shipping and paperwork (Marks 2017). Third party resellers make up a significant amount of Amazon's sales, and in the third quarter of 2017, they generated 23 billion in revenues on Amazon (Marks 2017). This services provided by Amazon allows businesses who don't have their own e-commerce capabilities to sell their products across the globe in hundreds of countries.
Figure 1- Percentage of paid units sold by third-party sellers on Amazon platform as of 3rd quarter 2018
The graph in Figure 1 shows that since 2007, the share of items sold by third party resellers has increased, and now in 2018 sits just over 50 percent of units. This is a good trend for businesses whose e-commerce relies on Amazon services. For Amazon, this equates to the segment of their revenue that brings in the second-largest amount of sales, so there is an incentive for them to keep this segment growing.
The above impacts of e-commerce have generally affected society in its intended way. Customers shop differently and businesses now must consider how to best utilize this new technology in their own revenue strategy.
However, job loss is an unintended consequence of e-commerce that must be considered. E-commerce can be skewed against the success of small, independent businesses, which can lead to ultimate failure, and a loss of jobs for the businesses owners. Additionally, the increased need for automation is causing a decrease for the need of people to do the jobs machines can now do.
First, let us consider the negative effects e-commerce can have on small businesses. E-commerce requires a large amount of assets in order to implement it successfully. Even though the cost of developing online platforms for E-commerce has decreased since the technology's inception, E-commerce still requires businesses to have a robust supply chain to fulfill orders, and that requires a lot of financial capital. Many businesses don't have the money or resources to do this for themselves. In a study conducted by Van Akkeren, one of the main factors preventing the adoption of an Internet presence in small businesses is an inability for the business to see the final return on investment at their current scale (Van Akkeren 1999). Therefore, they are forced to either not be able to compete with the businesses that have huge e-commerce presence, or they are forced to utilize the e-commerce services of an E-commerce giant such as Amazon. The benefits of using Amazon services have been discussed, but now the disadvantages to small businesses will be discussed. Amazon Fulfillment is not always beneficial to third-party sellers. As Marks acknowledges, Amazon's services don't come free to these businesses, and Amazon takes a large cut of their profits (Marks 2017). Additionally, these businesses are at the will of Amazon, and can be suspended from selling for a few bad reviews or passed up for promotional listings because Amazon prefers to highlight businesses who have higher sales. Therefore, while this method of e-commerce may be easier for businesses to integrate into their business plan, they face high costs of implementation and little control of their future with Amazon. This could ultimately lead to the failure of these businesses that depended too heavily on Amazon in order to even compete in the e-commerce market. When these businesses fail, jobs are lost.
Additionally, jobs within the retail space are threatened. As Amazon's sales continue to increase through e-commerce, sales at traditional brick-and-mortar stores selling similar products are declining. The downside of the change in the way people shop is that there is no longer a demand for many of the stores you would generally find at a shopping mall. Employment at department stores has plummeted by 14 percent since 2012 (Nutting 2017). Many established companies like Macy's and Best Buy are at risk, given that their primary sales come directly from in-store purchases. If customers are keener to shop at home, and Amazon continues to increase their scope of products and services, there will soon be no need for the brick-and-mortar shops and 16.5 million retail store workers. Thousands of retail chain stores closed their doors in 2017 alone (Mandelbaum 2018). “Amazon needs about half as many workers to sell $100 of merchandise as Macy's does” (Nutting 2017). This proves that even as e-commerce is growing, there won't be enough jobs available to replace the jobs lost when other retail companies shut their doors.
In this case, the benefit of scale is clearly seen. Amazon maintains its hold on e-commerce sales and it is very hard for smaller businesses or even well established business to obtain the capital and resources necessary to develop their own e-commerce technology. They are forced to not compete by either not entering into e-commerce market or by utilizing Amazon and sacrificing a lot of their own profit in the process. Small businesses often make up 90 percent of a country's businesses (Poon 1999, 9-18) and retail jobs make up over 10% of all jobs in the United States (Nutting 2017). It is important to a worldwide economy that both of these business categories at risk don't face failure due to the fact that they can't easily implement e-commerce, especially as e-commerce becomes an increasingly larger portion of all retail sales.
Furthermore, job loss is not just limited to small and retail businesses. Job loss will also be seen within companies that increasingly implement more automation in manufacturing plants or warehouses. In Figure 2, statistics from the Office of National Statistics shows that the United States leads in the number of jobs that are at risk because of an increase in automation technology. By 2030, only eleven years away, 38% of American jobs may be at risk. This would have a huge effect on our economy and leave many people without an alternative job.
Figure 2- The percent of jobs in four different countries at risk because of automation
Within the realm of E-commerce technology, automation plays a huge role and E-commerce will be a large influencer in the risk to jobs caused by automation. E-commerce is not just reliant on computer programs and integrations. E-commerce relies heavily on the supply chain that supports its successful operation. Often, this includes distribution facilities and transportation that help to complete the path from online purchase to delivery. It's within the distribution and transportation functions of E-commerce that job-loss due to automation will be seen. There is the risk that Amazon will replace the human “pickers” within their distribution facilities with robots that can do the same job autonomously (Nutting 2017). Figure 3 shows robots that are already being used by Amazon to gather products and take them to and from workers in designated locations within the facility to be packed or stored. Amazon has already shown an increase in use of robots to develop their very smart and efficient packing and handling systems. Additionally, transportation may not look the same in the future. Right now, truck drivers and mailmen are needed to deliver packages to customers. With the possible development of self-driving trucks, as well as the use of drones, these transportation jobs may be at risk as well. There are currently at least 2.6 million jobs that are accounted for within warehouses and postal services (Nutting 2017), and 38% of these jobs, or about 1 million jobs could be lost in the next 10 years.
Figure 3- Amazon robots already in use to fill orders at warehouse
Now let us consider if the unintended consequence of job loss could have been prevented. When it comes to the access to e-commerce, job loss could have been prevented if more businesses had access to the technology before a few large companies monopolized the market. If more engineers were working on software development at the time that E-commerce was in its infancy, access would have been more widespread and understood by more than a select few who could develop it for their company alone. The technology became available too sparingly and only to those who had the resources to acquire it and optimize it. If the technology could have been used more widely across small and large companies earlier in the lifetime of E-commerce, the wealth and success of E-commerce may be more equally distributed, which would have helped save jobs. Access to the technology would have lowered barriers to entry seen within the two methods discussed above, allowing for businesses of all sizes to more efficiently develop an online presence and more jobs to be retained.
The unintended consequences of automating the E-commerce industry are harder to avoid, because the intended consequences of automation are to eliminate human error and time associated with human interaction within manufacturing. Job loss has been a consequence of automation ever since the Industrial Revolution. It has been seen that jobs in one sector were lost, while other were created due to the Industrial Revolution. However, E-commerce related automation is developing at a much faster and widespread pace than automation during the Industrial Revolution (Turban et al 2017, 573-612), and therefore there is still a concern for whether or not the loss of the jobs should be considered and prevented during the implementation of automation. It seems that at the pace E-commerce is currently growing that it would have been hard for engineers to utilize the benefits of automation while still maintaining the same amount of jobs.
In his paper, Turban states very clearly, “ The solutions depend on organizational, political, social, economic, training ability, and other factors”(Turban et al 2017, 573-612). This statement with respect to job loss due to E-commerce could not be truer. Solutions are not often straightforward and deployable by one group of individuals alone. Often times, solutions are complex and require many different components to be successful. Just based on the fact that E-commerce is a technology that spans business markets, as well as every aspect of a supply chain, it is wise to say that a solution would have to come together from many of the involved parties. Below are only a couple of the ways the problem of job loss could be addressed.
First, putting an emphasis on including small businesses in E-commerce can mitigate this unintended consequence. If there are more players in the industry than just a few controlling companies, competition will create more opportunity for a wide range of companies. This is the idea of technology diffusion. E-commerce must diffuse more evenly across the businesses within an economy in order to allow more lateral success instead of pinpointed success. As seen in Figure 4, there are currently many barriers to entry for small and medium sized businesses. Some of these barriers have been discussed within the scope of this paper as they relate to the technology itself, such as the costs of implementation and potential return on investment, as well as lacking the E-commerce infrastructure to enter into the online retail market. If small businesses have the access to knowledge about costs and maintenance concerns, there will be a wider acceptance of e-commerce strategy by small and medium businesses (Fisher et al 2007, 253-262). Not only do these technical and economic barriers need solutions that make it easier for small businesses to partake in E-commerce, but there are also social and legal barriers that can be solved by other groups within society.
One main influencer in creating a solution to job loss caused by E-commerce will be the government. The government can play a large role in a solution because they are the group within our society that can pass laws and regulations that shape our society and economy. Right now and throughout E-commerce's history, the technology is still widely unregulated. This makes it hard to set national, or even global standards on how E-commerce technology should be used within society. Government agencies could create incentives for small businesses that decide to invest in developing an E-commerce infrastructure within their company. This would increase the adoption of E-commerce by businesses that may not currently have the resources to expand their E-commerce presence in the market. Additionally, along with incentives, the government could also set regulations for companies like Amazon that are currently monopolizing the E-commerce technology. Outside of the scope of this paper, additional research would have to be conducted to determine what regulations would be most beneficial to companies trying to enter into the online retail market while still being fair to the companies that are already successful and established within E-commerce. With more regulations and laws that set the standards of E-commerce, all businesses would at least have an equal understanding of the rights of an individual business and how each business should conduct itself while using the E-commerce technology. Overall, the increase in accessibility to the technology as well as regulations to follow will help make E-commerce more widely accessible to all businesses and decrease job loss.
Figure 4- Obstacles to E-commerce Adoption by small and medium businesses
Additionally, I think retraining former warehouse workers could help to place them into other productive jobs within the industry. With increased automation, there will be more of a need for people who have the knowledge to service these robots and machines, and retraining and education could provide an opening to transition people from their prior roles into more relevant roles as E-commerce continues to dominate. There will also be jobs requiring similar skills within industries where automation is less applicable due to a true need for human interaction in the production process. Individuals could be transitioned into these jobs when robots and other automations technology replace their position within their current role. There is a lot of value to both businesses and their employees in retaining current workers in some capacity. This value incentivizes businesses to promote training opportunities for different positions and employees to participate in ongoing education in order to keep their jobs.
Overall, the two different causes of job loss due to E-commerce require different approaches to a solution and these solutions require the involvement of different methods and people. If the unintended consequence of job loss is acknowledged by society, action should be taken by all parties involved to help lessen some of the negative impacts that are felt by E-commerce.
Within this paper, many aspects of the effects of E-commerce technology have been discussed. There are undoubtedly many positive outcomes of E-commerce, and the online retail market is seeing great growth. E-commerce has disrupted the retail industry and changed the way consumers shop. Additionally, businesses now have to consider E-commerce in their business strategies in order to stay competitive. Currently, there are two main methods for businesses to enter into the online retail market, and there are pros and cons of each. Additionally, while unintended, there is job loss caused by E-commerce and the automation that is demanded by this method of retail. The engineers that created E-commerce could have prevented job loss to an extent when the technology was being developed, and now there are solutions that must be pursued in order to limit the scale of job loss caused by E-commerce in the future.
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