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A Tale of Two Trends: Nonstore Retailers
by Damon Runberg
Published Oct-21-2013

Every November and December we hear about the increasing number of Americans buying their holiday gifts online using their smart phone, laptop, or tablet. Evidently there is something more attractive about purchasing that video game console online from the comfort of your couch or on your lunch break than waiting in line for hours the day after Thanksgiving. The new trendy day to shop is "Cyber Monday," instead of the dreaded "Black Friday."

Electronic shopping is one of the key components of the nonstore retail trade industry. Considering that more Americans are buying that pair of jeans, screwdriver set, or television online, one would expect employment to be rising in electronic shopping and the broader nonstore retail industry. Yes, electronic shopping is experiencing dramatic employment gains. However, this growth is not sufficient to sustain employment in nonstore retail, as the other major components of the industry are trending downward. On the other hand, national growth in electronic shopping sales is allowing the broader nonstore retail industry to expand its share of total retail sales.

What is Nonstore Retail Trade?
When discussing retail trade many picture a fixed store location that a consumer visits to purchase goods, such as an auto dealership, grocery store, shopping mall, or big-box store. Although the vast majority of retail activity still occurs in these physical store locations, a major subsector of retail trade is nonstore retail.

Nonstore retail can be broken up into two categories: direct selling and distance selling. Direct selling was once a popular form of retail sales. This sector of retail trade depends on the sales agents reaching out to customers directly, often in their home or place of business, as happens in traditional door-to-door sales. Today, distance selling is the more common form of nonstore retail operation. Distance selling is when the exchange of goods or services is not done in person; instead it is done over the phone, on the internet, through catalogues, or vending machines.

Within nonstore retail, there are four main industries including: mail order houses; electronic shopping; vending machine operators; and direct selling. Electronic shopping and vending machine operators are self-explanatory; however mail order houses warrant further explanation. According to the U.S. Census, mail order houses are "establishments primarily engaged in retailing all types of merchandise using mail catalogs or television to generate clients and display merchandise." Most notably these establishments include home shopping television networks (infomercials) and the old Sears, Roebuck & Company catalog.

Nonstore Retailers in Oregon
Retail trade is one of Oregon's largest industries, accounting for 190,800 jobs in July, nearly 11.5 percent of all nonfarm employment in the state. However, nonstore retailers only accounted for 6,100 jobs in July. Although the employment in the industry is relatively small, it is a fairly stable industry that managed to avoid large job losses or gains over the past two decades (Graph 1). This stability is likely due to the nature of the industry, which does not rely on labor as extensively as other retail operations due to the fact that there is no physical store location that needs to be staffed.

Oregon's nonstore retail employment peaked in November 2000 with 10,900 jobs. Since then, employment trended downward. There were approximately 25 percent fewer jobs in the industry by November 2012.

In 2012, nonstore retail employment in Oregon represented approximately 0.47 percent of total employment in the state. This is only slightly higher than the national average of 0.40 percent, but less than our neighbors to the north. Washington's concentration of nonstore retail employment (0.73%) is much higher than Oregon's due to their larger concentration of electronic shopping employment.

Oregon's nonstore retail employment is concentrated in just a handful of counties. The highest employment concentration is in the Medford MSA (Jackson County) where employment is nearly seven times more concentrated than at the state level.

Graph 1
Nonstore retail employment in Oregon is trending down
Components of Nonstore Retail
As stated earlier, direct selling and distance selling are the two main components of nonstore retail. In 2012, direct selling accounted for just 808 of Oregon's 6,438 nonstore retail jobs (12.5%). The much larger component, distance selling, is dominated by electronic shopping and mail order houses.

Nonstore retail's share of total retail employment in Oregon is on the decline. This decline is due to employment losses in mail order houses, vending machine operators, and direct selling. However, electronic shopping experienced an average annual growth rate of 14 percent between 2007 and 2013. The growth occurring in electronic shopping is masked by the losses in other components of nonstore retail. For instance, the combined average annual employment in mail order houses, vending machine operators, and direct selling shrank by 351 jobs between 2011 and 2012. During that same period annual average employment in electronic shopping increased by 300 jobs (Graph 2).

The growth in electronic shopping is quite impressive when considering the time frame during which much of this growth occurred. Unlike almost every other industry in Oregon, electronic shopping experienced rapid expansion during the Great Recession in 2008, and that growth continues to the present day. In January 2008, there were 1,141 Oregonians employed in electronic shopping. That number jumped to 2,201 by January 2013, growth of 93 percent in just five years.

Graph 2
Electronic shopping is the only component of non-store retail trending up in Ore
Nonstore Retail's Share of Retail Sales on the Rise
For the past two decades, nationwide nonstore retailers accounted for about 3 percent of total retail trade employment. During that same time period the industry experienced a dramatic increase in its share of total retail sales. In January 1993, nonstore retail accounted for about 5 percent of all retail sales. By January 2013 nonstore retail accounted for nearly 10 percent of nationwide retail sales (Graph 3).

This surge in sales share is due to the increasing popularity of electronic shopping. Since the early 1990s the internet revolutionized the way people purchase goods and services. In fact, electronic shopping and mail order houses accounted for $325 million of the $413 million nonstore retail sales in 2012. The reason why nonstore retail's share of total sales increased while the share of employment remained flat is likely due to the fact that electronic shopping is less labor intensive than traditional retailing. An electronic shopping company can handle much greater customer traffic with fewer employees than a traditional retail store. In addition, prospective customers are not limited to a specific geographic area; instead electronic shopping companies can reach customers across the country or world, resulting in much higher sales potential.

Graph 3
Non-store retail's share of total retail sales rising
Although not widely talked about, nonstore retail is an important industry. Once dominated by door-to-door sales and mail-order catalogs, nonstore retail is now controlled by electronic shopping and auctions. Electronic shopping sales are likely to continue to grow and absorb an increasing share of total retail sales. However, since electronic shopping is not very labor intensive and the other components of nonstore retail employment are trending downward, the industry is likely to see its share of total retail employment continue to shrink.