The Online Shopping Boom Is Over
Paris Marx is joined by Amanda Mull to discuss the history of consumerism and where ecommerce goes in the next few years as interest rates rise and its market share stalls.
Amanda Mull is a staff writer at The Atlantic, where she writes the Material World column. She’s also a shop steward at The Atlantic Union. Follow Amanda on Twitter at @amandamull.
Support the show
Venture capitalists aren’t funding critical analysis of the tech industry — that’s why the show relies on listener support.
Become a supporter on Patreon to ensure the show can keep promoting critical tech perspectives. That will also get you access to the Discord chat, a shoutout on the show, some stickers, and more!
Paris Marx: Amanda, welcome to Tech Won’t Save Us.
Amanda Mull: Thank you so much for having me.
PM: I’m very excited to chat with you. I read your column in The Atlantic very frequently because I think that you write about so many issues that — even if they’re not tech focused, as we’ll be talking a lot about today — I think are fascinating, personally, and so I love reading your work. I’m very happy to have you on the show.
AM: Thank you, thank you. I’m so excited to be here.
PM: [laughs] Thank you! I want to start with a big question. and then we’ll dig in and go through all this history and all this fun stuff that we want to chat about. What do you make of the state of consumerism in America in 2023?
AM: I think consumerism is like the overarching system by which a lot of our day-to-day activities and interactions are governed, and that has only become more true in the past 20 years since the beginning of the 2000s. Really, with the advent of online shopping and all of these new types of services that exist in order to help us shop better, faster, more efficiently, and more constantly. If you look at some of these cultural conversations that are happening and some of the battles over things like identity politics, and basically all other types of politics, a lot of that ends up getting fought in the arena of consumerism — over advertisements, over product targeting, things like that. Consumers sort of undergirds everything. In the United States, at least.
PM: One of the symbols that comes to mind is of course the MAGA hat and needing to buy that as a symbol of representing who you are. But of course, also, we see pride merchandise. There was a story just the other day about how Target is now taking a lot of pride merchandise out of its stores because of protests by a small number of very vocal, right wing-groups. So obviously, we see this a lot more in the United States right now, but it shows how consumption and how the products that you buy — or even the products that are available to be purchased — become really tied up in these broader political conversations. As we are all considered to be, and think of ourselves as, because of how all these things are talked about, as consumers, even more than citizens or whatever.
AM: Right. So much of these arguments in the United States, and so much of sort of identity creation in the United States comes down to who has the right to be the target of marketing. To be marketed to in this conception in this system is to be a valid, valuable person. Who is allowed to have their needs catered to and who is not allowed to have their needs catered to? This is a really powerful thing in the United States, in American culture, because that is a primary sort of ground of personal agency, for so many people. There are a lot of systems cultural, political in the United States that don’t really work anymore. So there’s, I think, fewer and fewer places for people to feel a sense of community, a sense of agency, a sense of their ability to act on the world and have the world give something back to them. More and more of that over time, I think gets funneled into consumer decisions.
PM: Absolutely. What you’re talking about makes me think discussions around representation in ads. Are there enough people of color or gay people or whatever being represented? And do we see them on the screen? Of course those things are important, but it’s not the only thing. If there’s still a lot of inequity in society, and people still don’t have access to the same opportunities and income and all these kinds of things that other people do, then that is not going to actually fix serious problems, just because they’re appearing in ads. I think it also picks up on a bigger issue that exists when we think about how do we address problems in society? When so often that is positioned as like: Are you buying the right things in order to address a problem? Climate change is happening; it’s really bad. Are you buying an electric car and the good light bulbs and all this kind of stuff? When these are often much larger structural conversations, but we can reduce it to an individual level by talking about consumption?
AM: I think that this entire process of identity via marketing is, in a larger sense, sort of indicative of how much ground we’ve ceded to corporations, and to corporate power in the West, in the United States. Because it is the favor of those companies, those power structures, that ultimately convey a sense of validity on people, that convey a sense of agency, and a sense of identity on people. I think a lot of these arguments end up being on their ground. It would perhaps be more fulfilling for all involved to find new ground to have them on, or at least be be conscious that these are arguments tha a lot of times these corporations want us to be having, in the way that we’re having them. Because it’s ultimately whoever wins, it’s helpful to them, in that you see the ways structures of society and structures of culture have receded. This happens in lots of other institutions: religious institutions, community institutions, things that are not profit focused, things that exist because of a level of community care and mutual community interest outside of a profit structure. The more those recede and the more those are privatized, and given over to the interests of capital, the more branding and consumer experiences are where people feel like they can act on the world.
PM: Totally. It’s not just looking for the brands that you identify with. But of course, as we’ve had this neoliberalization of society, as we’ve had the platforms rise, we’re all expected to create our own brands as well. We’re expected to be brands and represent ourselves for work purposes, and all these others sorts of things. I want to pivot our conversation a little bit. We’ve been talking about what consumerism is like today and the many ways that we interact with it, and that affects us, and that we see ourselves through the lens of consumption. I want to talk a bit more about how this comes to be, because you had a fantastic piece where you talked about the origins of consumerism in American society and the links to the department store. Do you want to talk to us a little bit about that period, and how that emerges?
AM: This is always such an interesting topic to me because trade and commerce have existed for millennia. But consumerism, as we know, is an extremely modern system. In the United States it started to emerge towards the end of the 19th century. You get this 40 years from 1880 to 1920-ish, that are really, really consequential in determining how much of commerce is done today, and how much of culture is done today. We’ve gone through the Industrial Revolution — a lot of factories are up and running;, there is all this excess capacity to produce goods. There is not much inherent demand for many of the things that can be produced. So you have to induce demand. You have to explain to people — who are perhaps previously unaware of certain types of products that are now more widely available — why it is they would want to spend their money on these products.
At the same time, you also get the rise of major American cities in the way that we know them now. You get a population of office workers in those cities; you get the institutionalization of white collar work, and knowledge work, at the beginning of all of these industries, that have become much more robust now. So you’ve got these twin situations where you have a lot of product and a lot of capacity to make product. You have a new class of worker who is doing a new type of day-to-day activity, and who is living in new places and centralized. So what you end up with is the rise of department store, and department store barons, and those pop up in pretty much every major American city at the time. This is a model where you have these palaces of retail possibility — they house all of these new types of products that can suddenly be bought off the rack instead of being ordered or made at home or bought from a peddler. They are staffed with service workers, a new type of service worker who are there to explain to you wht all of the stuff is.
They are really lovely experiences. If you’ve ever been into the Bergdorf Goodman store in New York, there’s still some old department stores out there from this era, or close after it. These are beautiful structures. They’re huge; they’re impressiv;, they’re architecturally ornate. They are built for, essentially, this population of office workers to sort of come and be catered to and be served in such a way that, over time, helps them think of themselves as distinct from people who work in production, people who work in factories, people who work on farms. In that way, these department stores are really useful to the people who build them. Because at the time, this was an era of enormous labor strife in the United States. Workers in general, were not particularly sensitive to capital — they didn’t like the robber barons! They were called that because people were generally suspicious of them, and generally opposed to them.
So you have this rise of really brutal factory conditions, labor strife, and companies trying to put down strikes and things like that. Then you have this class of workers, suddenly, that is not working in those conditions, but who was still a worker, who still has that relationship to capital that factory workers do. And a lot of these consumer experiences were created to create an ideological rift between people who worked in production and people who did knowledge work and primarily consumed that was their relationship to physical goods. So these department stores really were the physical site of where this rift was created because it allowed people who worked for a living, to get a little taste of the good life. It was a little taste of what it’s like to be rich, what it’s like to have abundance, what it’s like to have everything you want, what it’s like to have someone fuss over you. It was an opportunity to fulfill a lot of desires that you might not have even had a generation before or didn’t know would be possible.
In that way, you start to create a population that identifies more closely with rich people than they identify with other types of workers. It was really explicit at the time that department store barons were intent on using the institutions that they built in order to become the civic heroes to the cities that they built them in. Over time, that is something that helped privatize a lot of basic services in cities, public spaces in cities. The argument they were making with these stores, and then explicitly also a lot of the time in their public comment, was that they were better stewards of municipal resources than governments or democratically elected officials. They curried so much favor with this new more moneyed class of workers, that effectively over time they basically form an ideological alliance with them. It was done in a lot of different arenas, but it was done in large part through the creation of these consumer experiences.
PM: I find this absolutely fascinating. I have so many thoughts on what you’ve said. But when you talk about the department store what comes to my mind is where I am, we don’t have them anymore, but across many cities in Canada, you still have the old Hudson Bay department stores. They were the big department stores in Canada back in the day. I remember as well, until fairly recently, actually, if you were outside of the center of the city, or if you are outside of the city, then instead of the department store, your experience was the catalog. You ordered from the catalog, and this was a big part of how you engaged in consumption, to get it to access more people.
But when you talk about the department store the image that comes to my mind — because I have so little experience with this — is the film “Carol” with Cate Blanchett and Rooney Mara. In the film she goes into this department store, that’s where Cate Blanchett character meets Rooney Mara’s character, and buys a train set for her daughter. I think in the depiction you can kind of see how this is something that a more well-off class goes to experience, and then you have workers who are there who are more lower on the socio-economic ladder, and serving these people. I found it really interesting when you said that because it brought to mind, to me, when these gig economy services were rolling out about a decade ago, there was discussion, and I remember, in particular, a piece that Lauren Smiley wrote about the shut-in economy and how all of a sudden you had this new class of servants.
But you also had more people who were served — more people who could access the types of services that were previously only available to a wealthier subsection of society. But now, they could have things delivered to them, could access services in this way, that wasn’t previously available to them. So when you talk about the department store starting to make this wealthy experience accessible to a broader subset of people, that was immediately what came to my mind as you’re seeing this extended. But also further dividing, creating more of these lines between people who can access these things, people who can be served in this way, but then the people who also do the serving.
AM: Right! The seminal book about this was written in 1994. It’s called, “Land of Desire,” and it’s about the rise of the department store barons in the United States. It’s fascinating; I really recommend that everybody who’s interested in this topic at all read that, it was written by a historian. Just reading through it — again, it was written in 1994 — you can see Amazon emerging from it. You can see DoorDash emerging from i. These systems that we have now, I think, take it to somewhat of a logical extreme. I don’t know how much further you really can go in a material sense than just getting everything delivered. You can see the ways that these dynamics were astroturfed into culture, by people with very explicit intentions in creating a system, in creating the ways that the people who interact with the system would then relate to each other. Consumer culture can seem a lot like something that just sprung up naturally. But it was pretty carefully planned, and the planning of that that was done 150 years ago is still foundational to the consumer systems that we interact with now. Like I said, Amazon and DoorDash are not so different than how these early American department stores thought about how to play different types of people, different classes, different socio-economic strata off of each other.
PM: Absolutely, it changes some aspects of it, but it’s still built on this foundation that has been established for a long period of time. We know it’s successful, and that it’s allowed a lot of companies to make a lot of money. It’s just kind of bringing it to a new level, amping it up, getting us to consume even more, getting more ads in front of us to encourage us to keep buying.
AM: It is sort of inherently anti-solidarity. Consumption is inherently an individualistic system, because it asks you to interact with your problems on a individual case-by-case basis. It encourages you to not look for more community-minded ways of thinking about the problems you have, or the problems that other people might have. It encourages you to think about this as a zero-sum game. If someone else is solving their problems, there are fewer resources available for you to solve yours. That is just inherent in the entire system. It is inherent in its creation, in creating a structure in which, if you’re one of the people who ostensibly benefits from consumerism, who experienced this material abundance because of it, who feels like they have a lot of options because of it, then you ultimately end up incentivized not to want better for the people who work in producing this abundance because it makes prices go up, and it makes things less available. There are non-consumerist ways that we can create abundance for everyone. But in the system that we have right now, the abundance is something that people have to compete for.
PM: Absolutely. As you talk about that individualist framework, it also ensures that because you’re buying things, you’re making your money through your job — or inheritance, or however you get your money — and then you’re going out to buy things, you don’t need to think about where that comes from. You don’t need to think about the broader relationships that goes into production in a way that, if you were relying on the farmer down the road, or, the various other people in your community to do things for you, and trade with them, or barter or whatever. There isn’t that same degree of connection and community awareness, maybe, of what’s going on because you are just earning your money, you’re spending it to get your thing. That service is going to be available to you — you don’t care how it’s delivered. That’s it.
AM: That is another really integral aspect of the consumer system — this is another thing that was explicitly baked into it from the beginning — is that perceptually, it severs consumption from production, totally. You first become aware of a product when you see it in a store. Department stores have gone downhill, but back when this system was created, the first time you encountered something, oftentimes, the first time that you understood that it was possible to have this thing was on a beautiful shelf, in a beautifully lit, very ornate, fancy room with someone asking you how they can serve you. Your ability to see anything else that happened before that moment with that product is severed by consumerism.
There’s marketing materials at the time, people talking about advertising at the time, where you can see people writing for their professional peers in these emerging industries of advertising and marketing, about how important it is that under no circumstances should people know how clothes are made. Under no circumstances should people buying clothes think about a garment factory. Under no circumstances should they think about the realities of production. These facades of consumer excess go a long way toward masking what things actually are, and what human and material inputs go into creating them and how that happens. That has only become easier over time with offshoring, moving so much of production to other countries, where the brands that market these products may not even really know how they’re made — let alone people by.
PM: No, it’s such a fascinating development and fascinating history. It’s so fascinating to look at how they’re all these connections, how this system, as you say, ensures that we don’t understand what is actually going on here, and that is actually core to it. I think in part we saw aspects of that during the pandemic, where all of a sudden the supply-chain was fucked up. And we were like: Wait, all this stuff comes from over there, and we can’t get it here as easily. How does this actually work? And no one understands how this system actually works because it’s so complex and messy. In a sense, it was a bit of a learning experience for the public, again, to remember how all of this works, to remember that all of our goods come from way over there because that’s how we’ve set it up for a number of decades, and that we’re actually very globally reliant and interconnected.
It’s not only the system of consumerism that has been set up over a long time to dispel, hide and abstract that for us, but as we become more reliant on these tech companies, and these e-commerce platforms, and these gig services, they are also, not only getting us to consume more, but they also want to further kind of abstract the whole relationship that happens there. They don’t want you to think about the warehouse workers packaging all that stuff. They don’t want you to think about the Chinese factory workers. They don’t even want you to think about the delivery workers who get it to you. It arrives on your doorstep or whatever, and you press the button on your app, and that’s it!
AM: The e-commerce sort of structure exists as, like you said, just extra layers of abstraction between the end consumer and however the thing that they’re receiving came into being. Because then with online shopping you remove even the understanding of the physical reality of an object that you’re buying before you pay for it. And then you’re removing the fact that in a store, you have to go to checkout and have an interaction with somebody or you have to see the people stocking shelves. There’s just further and further layers of abstraction that that sort of work toward that goal that was really created 150 years ago, that the less the end consumer thinks about where anything they’re buying came from, the better it is for the people selling things, the easier it becomes to sell.
PM: Maybe it’s worth talking about how that develops as well, because we’re talking about the department store and the late 1800s, early 1900s, but obviously this progresses through the 20th century to ensure that consumption becomes something that’s not just done by more of a middle class, and an upper middle class, that’s gaining access to these department stores and to this experience. But something that is expected of the much wider public and the middle class expands over that time, and the post-war period, where we’re having people leave cities. So the department store is mainly an urban concept, as far as I understand. People are leaving cities; people are going out to the suburbs. All of a sudden there are shopping malls that are springing up that are dependent on the outsourcing that you’re talking about. Can you talk to us a bit about that transition, as consumption becomes something that becomes much more of a mass practice that is expected of the wider public, as there are these developments that occur in society through the 20th century?
AM: Shopping follows population. The department stores were a response to the concentration of people in urban cores. When you get white flight — when you get this sort of migration to the suburbs, especially because it is wealthier people in this era, migrating to the suburbs — people realize that: Oh, we need to follow them. If we’re closer to these population centers of affluent people, it’s easier to get them to shop regularly than if they have to make a trip into the city, and they may be afraid of the city. This was a common theme during the the latter part of the 20th century in the United States. You get the shopping malls, and they contain department stores and some of those department stores are nice, but they also contain this larger structure of retail that develops over time to meet the geographic capabilities of the suburbs. You’ve just got more space, and you’ve got a lot of open land that can be developed into shopping areas, you have a lot more space for smaller stores, smaller more specialty retailers, to fill in around department stores.
That’s basically what you get with malls, you have anchor tenants, which are the Macy’s, the Bloomingdale’s. You get all of these sorts of places. These are stores that used to have one location, there was a Bloomingdale’s, there was a Macy’s, there was a Rich’s. In the 20th century things become chains; things become more spread out because you have this atomization of the population. Then in the 80s, especially, we deregulated trucking, so it became a lot easier to move goods very cheaply around the country. You could have one company that owned stores in California, New York, and Florida, and there were cost effective ways to move inventory among those stores through distribution centers. Before we deregulated trucking, it was much more difficult to do that in a cost effective way.
So you’ve got trucking that cost like basically nothing, relative to what it costs in the 70s. You’ve got a sort of spread out population, you’ve got sprawl. You get the rise of these more complicated shopping structures, malls or strip malls. And then you get, as you said, the expansion of the consumer mindset to people who make less money. Shopping and consumer culture is a demand inducement machine, so that requires growth at all costs for the people who manage these companies to be happy. This means that not only do you have to make people shop more, who are already shopping, but you have to find ways to induct new people into the system. You find ways to build other types of stores. You get Walmarts, you get Targets, you get a discount retailers, Dollar Generals, etc. And they really benefit from the deregulation of trucking too, even more so than other types of change stores because that allows more and more price pressure downward.
Being able to bring more and more people into a consumer mindset is great for people who are trying to manage these companies and manage privatization of public goods and things like that. Because it is, as we said, consumerism is an anti-solidarity machine. If you can get people who do work in production, who do work in these industries, to buy into the mindset that you spent decades indoctrinating wealthier people into, then you can sow division within lower classes themselves. You can see this baked into American culture with the idea that if you hustle hard enough, if you look out for number one, if you do everything you can for yourself, then you can rise. And that idea is very baked into consumerism, and it’s very anti-solidarity.
PM: It’s the hustle bros that you see on Twitter today and LinkedIn that are the extension of this thing that’s just going on forever. As you get the pushing of this mindset and: You need to be fighting for yourself, and you need to try to be advancing yourself, and all this kind of stuff. But when you talk about the development of this model, I think one of the things that I find most fascinating is how it’s not something that just organically happens. It’s something where there’s a lot of effort put behind in order to ensure happens, and there’s a lot of developments that encourage it. You’re talking about the particular framework that’s put in place about 150 years ago. We talk about the rise of the advertising industry, and all this kind of stuff. But then you talk about the creation of the suburbs, the pushing of automobility, especially in the post-war period in the United States and Canada, and places like that. This is happening as you’re getting people to move out to suburbs and that requires a changing in the way that this all works.
In order to enable that, as you’re saying, you have the deregulation of trucking, you also have containerization, which makes it possible to more easily ship goods across the ocean, basically, across long distances. Then, of course, the creation of these kinds of markets in other parts of the world that are creating these goods more cheaply, the deindustrialization that occurs particularly after the 70s in the West, in North America, so that all these things are moving abroad. So, we’re losing those jobs, but we’re getting cheap goods as a result. And we’re using a ton of credit to buy a ton of things. There are all these developments that lead us to where we are today that, obviously, it’s worth assessing the conditions of what’s going on. But I think it’s also always important to understand how we get to this point, and all of the decisions and policy choices and stuff that go into it. Because if we ever want to try to address it or to think critically about how we change this structure, or think about doing something different, you ultimately need to know how it was created in the first place.
AM: Absolutely. I think it’s important to think about the systems that we have as a series of policy decisions. Consumerism didn’t happen organically; it didn’t happen naturally; it was not an accident. The world that we have today was created by people who had the capability of doing so, and they chose the systems that we have for reasons that are identifiable. If you go back and look at some of the historical record from this time, this was all like, very explicit, it was not a secret. It was not something that that people were shy about. If we created this world, we can create a different one.
PM: Absolutely. I wrote about this in the context of automobiles in my book, where I was like: It looks like the automobile is this natural progression, but you can see these interests that are pushing a particular model of communities and transportation because they are going to benefit from it if we move in this direction. This was both in the sense of selling products that is going to make profit, but also by some other actors by gaining control over people by creating this kind of a system. So I completely agree with what you’re saying. One of the threads that I found really interesting, as you were talking about these department store magnets ensuring that they are creating these public goods. and y are drawing people in and saying: It’s not just that we’re offering you this place that you can shop, but there’s this whole experience that is going on with it, and we’re doing things that are good for the community as well.
I feel like you see that extended through shopping malls as well, where there’s no public spaces, so we’re creating this public space in the suburban area. And it’s just surrounded by all these stores that you can just so happen to visit as well. Then, as I was thinking about that I was even thinking about the Apple Stores, and particularly under the leadership of Angela Ahrendts — I think her name was, she came from Burberry to Apple. Her whole thing was the Apple Store as the town square, and it was going to have all these educational opportunities and hang out areas in these new store designs and stuff like that. You can just see this continuing to inspire designs for retail, so it’s not just buy things, but also we’re that they are doing these other positive things for the community. It’s not just purchasing, it’s that we are having these positive impacts on society beyond selling you an expensive product.
AM: Right, and you can see the continuation of that in Jeff Bezo’s climate pledge and things like that. It’s a big thing in philanthropy, and it was a big thing in philanthropy at the time. The robber barons were big philanthropists. They wanted to be seen as privatized statesmen. With department stores, you got this just really explicitly. You got department stores that were holding free concerts during the summer. You got giving away free turkeys at Thanksgiving to the poor. A lot of department stores had medical services, you could see a doctor, you could mail a package, you could do all of these things that under a different type of system would be handled collectively by the state, by another apparatus that’s more democratically chosen.
The department stores and all of these ancillary services and do-goodery were really just the pitch by capital to let them handle this stuff. It worked really well for the robber barons, I should stipulate. But you can see this sort of ideological tendency in a lot of people, in liberalism, to let these people handle it, because they are successful. They have all the resources; they’re good stewards; they’re civically minded. Let them handle it! They’ve got it under control. And that pitch was made in large part in the creation of consumption, in the arenas in which we do it, and when you look at some of the historical record, you can see Amazon in it. This is one of those places that I think it’s really clear.
PM: As you talk about Amazon there, it’s probably worth fast forwarding a bit and talking about how that actually comes to be. You’re talking about how there was the creation of these department stores, strip malls, we have shopping malls as well. This is a model that took out a lot of more independent retail, and we think about the loss of the downtown and the Main Street, as those types of more independent stores are declining. Because you have the big Walmart department stores coming in, because you have the chain bookstores, and other things coming in to replace those particular versions of retail. Adapting to this new model as it’s more suburban and all this kind of stuff. You don’t have the foot traffic walking down the Main Street as much as in the past. So how does that then shift to e-commerce — I imagine this begins in the 90s, as we started to have the dot-com boom, and stuff like that — what drives people to start shopping online? It must be a bit of a jump for people, or a change to think about: I’m not going to go to the store, I’m just going to buy this thing I can’t see on the internet.
AM: This is another one of those situations where I think it’s useful to look back at what was actually happening at the time and how people thought about things at the time. Because the delivery regime that we have is convenient in a lot of ways for people that can afford to interface with it. It’s really easy to get used to it, especially since other options for more traditional types of commerce, in a lot of places have dwindled, especially in places with poorer populations. In the late 90s when Amazon was founded and you get a lot of other dot-com startups that were trying to figure out what this model would be to sell things online. It was met by a population that was largely pretty skeptical of having to buy something on the internet. It was a novel technology; it seemed like the Wild West. It seemed like buying something online was probably a great way to get your credit card stolen. There wasn’t a lot of trust.
People, I think rightly, were especially suspicious of buying very taste-dependent goods online: clothes, furniture, things that you have to physically interact with, or that have to meet some sort of secret sauce of personal happiness in your mind before you’ll decide to keep them. People didn’t want to buy shoes on the internet, people did not want to buy jeans on the internet, inherently. There was no great unmet demand for these services when they were created. So they had to be sold. One way that is very effective at getting people to take the leap and buy something is to do everything you can to remove, what is often called, any kind of friction from that buying process. Basically, you take away the reasons that somebody might logically say no. Online, shipping costs something. You cannot remove the cost of moving something from place-to-place. It has to be done by a human; it requires gasoline; it requires capital investment in warehouses and trucks. It is a cost-intensive process.
PM: As much as you try to beat down the wages and working conditions of truckers and stuff, there is stilll a cost there.
AM: They can only go so low. There’s a floor to how much you can pay them, and some truckers essentially get paid negative, depending on the lease agreements they get sort of conned into going into.
PM: It’s ridiculous. One of Amazon’s “innovations” is basically creating, not only its non-union warehouse workforce, but also its non-union delivery workforce that it can ensure it pays less than if it was using other providers.
AM: It’s essentially the model of piecework, which is a big problem in the garment industry that helps keep wages down, but piecework in logistics, at the the last mile consumer end. This is terrible for everybody’s pay. But in the late 90s this system had not quite been created yet. So internet retailers were looking and saying: Okay, there’s a lot of stuff that people just don’t want to buy online because it is on its face ridiculous to buy a lot of this stuff online. And they especially don’t want to buy it online if there is some sort of monetary risk involved. So the price of shipping, the price of returns becomes a big problem because a lot of this stuff was just the same stuff that you could walk into the Gap at your local mall and buy it. So why would you take the extra monetary risk of buying it online and not having any idea whether you’re going to like it?
So what they did is they found ways to eliminate the price of shipping and the price of return shipping from what the consumers see. Some of that gets baked into the purchase price, for goods that don’t have an in store equivalent. So an Amazon or something like that might bake a little bit of it into the purchase price, because you can’t go into the store and go: This is cheaper here. But in reality, because a lot of these were startups, they just lost money. They had enough capital investment and they used it to buy market share, which was essentially just getting people used to buying things online, etting people acclimated to the risk and the process and not liking things. Having paid for something you don’t like at all being a normal part of the shopping process.
They did that for years, not just Amazon. A lot of companies lost money on this. Over time, they got more and more people inured to the realities of doing a lot of their shopping that way. They got people into the idea that it was convenient, and for some things, it is convenient. For other things, having to order something online and wait two days for it is actually pretty inconvenient, as opposed to the way that you might have received that thing in the past, which is spending a half an hour doing an errand out in the world near your home. But they were effective. They ate enough of the cost of this process to get enough people on board with it that they started to affect the financial realities of brick and mortar retailers. As brick and mortar retailers suffer and become less pleasant places to interact with, become fewer in most places, you get more and more people who just end up online.
PM: Absolutely. It’s such an important development, because as you’re saying, these companies are able to lose all this money because they have all this venture funding. You’re assuming, because it’s a “tech company,” that it’s going to make these multiples of revenue. So they have much easier access to capital than a traditional retailer who has a bunch of stores all around the United States, or the world or whatever. And so they can lose all this money to subsidize the shipping costs and other costs associated with the business. Then, these retailers have to try to match it. I remember the conversations around Amazon offering free shipping.
Of course, people don’t want to pay for shipping, so now all these other retailers have to match it and figure out how they’re going to eat that cost, essentially. That makes it a lot more difficult for companies that can’t as easily do that. I think it is part of the reason that you see the brick and mortar retailers struggling, part of the reason that you see a lot of other kinds of businesses and even e-commerce companies struggling as well, because Amazon becomes this kind of juggernaut that is difficult to challenge. That has a lot more money so we can subsidize this business model, and all these other companies have to follow on with that. It’s not as easy to do because it’s expensive. As you’re saying, shipping is not cheap.
AM: A lot of what Amazon does follows in the Walmart model, which was so disruptive to th eretail sector in the United States. Walmart really prospered on the twin developments of deregulation and containerization, and moving things overseas. So scale allowed them to apply price pressures to their suppliers that other retailers, smaller retailers, even regional, decently sized regional retailers, just could not. So Walmart could get things at prices that were just not available on the open market. That allowed them to kill off competition because people want things that are low-priced. A lot of people need things that are as low-priced as they can get them. Even people who don’t — who can afford lots of discretionary goods — don’t want to pay more than they have to for something. Especially, for the types of things you would buy at Walmart. To sell a luxury good you have to make an entirely different pitch. And the pitch is where the extra price comes in, and the effectiveness of that pitch.
Even people who make a lot of money often do not want to buy everything that is nice, they want a lot of cheap stuff too, because it’s available and because it gets normalized. So you have these price pressures that other retailers cannot compete with and that helps further centralize sales and then jobs at these mega-retailers. Then Amazon, by putting all of that online, I think, managed to beat Walmart at its own game in that way. Walmart is doing a pretty good job of trying to catch up. They have taken a lot of the tactics that Amazon pioneered, including having lots of things listed by third party sellers on their site and run with that and done a pretty good job of aping the Amazon model. It just makes it really, really hard for smaller brick and mortar, smaller e-commerce, anybody else to compete unless they’re selling a luxury product that has a luxury pitch with it.
PM: Absolutely, the Apples of the world, basically, who are charging that extra margin because it’s Apple, and you just have to have it. I wonder, obviously, we’ve been talking about how this emerged and how it affected the broader landscape. As we were heading into the pandemic, and then as the pandemic hits, what does that mean for e-commerce? Because I feel like ahead of that we’re talking a lot about how it is affecting brick and mortar stores and what the future of that is going to be. Then as the pandemic hits, obviously, people are buying a lot more online, but what was that whole experience? How was it shaken out, as things have started to “gone back to normal,” as people have gone out in the world and aren’t doing as much online shopping, or at least exclusively? What was that whole process like?
AM: The retail and e-commerce had a fantastically strange time during the pandemic. And since things have started to normalize a little bit after the initial, very acute emergency. At the beginning of the pandemic a lot of sales shifted online because they had to, depending on where different shutdown measures were in place, there were types of stores that couldn’t be open. There were just not as many products available in real life, as there would be otherwise if you were just going to the grocery store, or whatever. So people started looking online, they started looking beyond the retailers online that they might usually use. So they went beyond the Amazon and Walmart and Target website. I bought KN-95 masks at some point from Staples, because they had them. No place else did!
Everything just sort of got mixed up. People started shopping for things they had never shopped for in the past — they started shopping at places they had never shopped in the past. That created sort of a mess. It meant that nothing was predictable, so the people in charge of doing retail buying and retail planning, never had the things that people suddenly decided they wanted, and they never had anything in the quantities that people wanted. They either had too much of it or none of it and it never matched demand. So you had this huge demand mismatch. Then you have people buying stuff that they weren’t really sure if they wanted it or not, or they weren’t sure if they could trust the website that they were buying it from.
It was a great environment for people to make not great decisions about buying stuff or not buying it and about where. So you get this huge spike in online shopping, but also a huge spike in the return rate of people sending stuff back because everything was chaos, including what was going on in the heads of individual consumers. So you see this real spike in the return rate, along with the spike in sales. I think that sales have somewhat normalized online, since this initial chaos. What has not normalized is the return rate. And that has created, I think, some issues for a lot of people.
I mean, returns first and foremost are not pleasant, as a person who buys stuff. It means that the system that you’re working with is not providing you with what you need, if you’re just constantly returning things. I mean, there are people who do this compulsively. That is a small proportion of the population. But there are far more people who are just trying to figure out what it is that they’re supposed to be getting, and where it’s supposed to come from, and just not having the information they need to make good decisions. So you get people sending a lot of stuff back, and then they get used to this behavior. So they are sort of like: Alright, whatever, it’s free to send it back. I have no idea what size I wear in this anymore. Let me order three sizes and I’m going to try them on. Something that in the past have done in the dressing room.
PM: I’m absolutely guilty of doing that.
AM: So many people do it! I do it. I write about this for a living and I do it because in a lot of situations, there’s just not a great alternate way to go about it. You end up doing that; you end up sending stuff back and you get used to this behavior. So even when more of your purchases are going back to the brick and mortar stores where you live, when you order online, you’re still used to being like: I’ll just order a bunch of stuff and see what works and send the rest back. It’s free. Returns are just a nightmare on a logistical sense. Forward shipping is labor intensive and cost intensive. Backward logistics, reverse logistics, is way worse. Because getting all of that stuff back into an inventory system and making sure that it is what it says it is, on the packing slip that you get back, that it is in the condition that was promised, that it can be resold, etc. It just requires so much labor, it requires time. It just leeches money out of the bottom line.
The bigger the retailer is, the easier it is for them to absorb this. This is why the really big retailers tend to be the ones with the most laissez-faire return policies. But for smaller retailers, I have heard estimates that a single return — before you even factor in the cost of shipping — costs a retailer $10 to $20 which is an enormous amount of money. Reverse logistics are a real nightmare. I reported a story on this in 2021, and two different people I interviewed who work in the reverse logistics field, used the term nasty to describe what it is they’re trying to do like. It is just nasty on an environmental level, nasty on a literal level, because you’re getting back all this weird stuff that’s been in people’s homes and on their bodies sometimes, and you can’t do anything with it, and it’s nasty on an environmental level. A lot of that stuff gets thrown out, a lot of it gets sold in big discounted batches, container batches, to developing countries where it is then picked over by local distributors and to supply shops there.
Then what isn’t wanted is just dumped. There are just huge merchandise dumps. There’s one in the desert in Chile and I believe there’s one in Ghana, that you see pictures of every now and then from the AP, or from some international news organization that occasionally covers this stuff. So you just get this huge material waste that is created by the fact that these systems just don’t meet the needs that they’re supposed to meet very well. That’s what inefficiency is when the system you have and the needs it’s trying to meet just don’t work. So that requires, of course, prices have to be pushed even lower then because the system has to accommodate this inefficiency in e-commerce because VCs basically decided that we were going to buy a certain amount of stuff online, whether we liked it or not.
PM: It’s so fascinating to hear you describe that because it’s aspects of this we wouldn’t often think about. I would say, as an individual, maybe you don’t need to be thinking about it as much. But on a structural level, there are people making decisions that shape the way that we act, the way that we purchase things, that does affect this bigger picture. I would just say on the broader point about e-commerce and its stabilization, I remember during the pandemic, Amazon was saying that it was doing this massive warehouse build-out because it was seeing unprecedented demand. And then a year or two later, I believe it was Andy Jassy, the current CEO was saying: Yeah, we’ve actually pulled back on that because we overestimated how much things were actually going to continue growing after the pandemic.
So you can certainly see that. And I would say on the returns, I’ve noticed that as well in Canada, where more retailers are adding a price for return shipping. I wonder if you’ve seen that with Amazon, as well, because I feel like one of the things I remember is back in the day — like I’m thinking like 10 or 15 years ago now — even if you didn’t have a receipt you could still return stuff to Walmart and they would at least give you store credit. They didn’t care. And I know Costco also has a really lenient return policy. Is Amazon still doing free returns? Or are they starting to change that too?
AM: Well, before we get into that, something really interesting, on the growth front: it was fascinating to me how many large companies decided that whatever happened during the first year of the pandemic was a trend that would continue and not something that might be reversed, at least in part.
PM: They were like: Everyone’s going to stay in lockdown forever [laughs].
AM: This was sort of fascinating to me about Peloton, specifically. I’ve written some stuff about Peloton — fascinating company! I was like: Peloton should be fine after the pandemic because surely they don’t think that the sales they did in the first year when nobody could go to a gym, when nobody was traveling, when nobody was spending money in any other way. Surely, they don’t think that those sales trends will continue when people can do all this other stuff again. And apparently they did [laughs]. I have read articles about reporting on what the planning was like. Apparently their CEO at the time just thought that this was a permanent sea change, which is one of the reasons they’re in the trouble they’re in now.
I think the same was true with a lot of retailers. There was the assumption that people buying more and more things, doing more and more of their overall purchasing for life online, was something that was only going to go up. They thought that the percentage of things you buy online versus in person was only going to grow over time, and that the acceleration was going to stick. I don’t know why they thought that I haven’t seen like a good explanation for why that assumption was made. But it was made pretty widely. There’s a lot of ways that the tech industry is a little bit disconnected from what it is that normal peopl, consider a good life and a good use of their time. But it’s very clear to me that a lot of people who are moving money around in the tech industry think that everybody wants to get as much as possible delivered and does not want to interact with the general public does not want to go out into the physical world. In spaces with other people that they don’t choose to interact with, and that this is a baseline human want. If you can give them that it will be infinitely profitable, you will gain infinite new business. You will gain market share — the growth will continue forever.
I think that what we’ve seen since the pandemic ended is just a repudiation of that. People like interacting with the physical world; people like leaving their homes. Normal people like being able to run out to the grocery store and get a couple of things for dinner, instead of having to choose some things on a website and schedule delivery and wait and see if it all comes and see if it was right. I think that one of the more interesting retail dynamics right now is just the people who run the industry trying to figure out where they went wrong in that. I don’t know how much introspection exactly there is.
One of the ways that they’re starting to address the financial results of that mismatch in consumer behavior and corporate prediction, is through trying to shape behavior in ways that are less financially difficult for them. Part of that is just charging for returns. The return rate at brick and mortar retail, across categories, generally does not exceed 8% or 9%. That is normal for a brick and mortar store. That 8% or 9% of their sales will come back in returns. Online, for certain categories, it can be 30% average and for some categories, and some retailers, it can get up to 50%. So you’ve just got a really, really huge volume of stuff that comes back because internet shopping is just poorly suited to a lot of things. It’s poorly suited to a lot of human material needs.
So you’ve got to find ways, as a retailer, to sort of temper that behavior. That involves moving some of the burden of retail shortcomings, or e-commerce’s shortcomings, onto the consumer. Which is to say, if you want the convenience of ordering three pairs of pants in three different sizes and seeing which ones fit, at home, then you’re going to pay us $7 for that, because to return the other two, you’ll have to pay it. Or the alternative is trying to guide people into behaviors that are a little bit more efficient for retailers, which is returning things in person to one of their stores. If there’s a store available, if they’re a retailer that also has brick and mortar. Returning it to a retailer that is unrelated, but has a returns kiosk or something like that. There’s all these reverse logistics companies that aggregate the logistics in moving things, backward to retailers.
There’s some company that I buy stuff from regularly, I think it’s Madewell, that every time I want to return something it asks me to take it to Staples. And Staples is not convenient to me; I live in Brooklyn. So big chain stores are not as convenient as they are if you live in a suburb near a mall. But every time before I say: No, I would like to send this back in the mail. They’re like: Are you sure you don’t want to take it to Staples? [laughs] So you’ve got this reverse engineered system of trying to clean up some of the inefficiencies of reverse logistics, or you’ve just got straight up that you’re going to pay $7 if you return stuff, and we’ll use that to subsidize the cost of the ways that our system is inefficient.
PM: They almost sound like Elon Musk — pay me $8 [laughs].
AM: If you want this, you gotta pay me $8! [both laugh].
PM: I wonder, as we start to wind down this conversation, where do you see this going? Because in recent months, and even years, I guess, there’s been a lot of discussion around the issues of Amazon and how their platform and their interface has just been kind of filled with crap, basically. And people don’t trust it as much anymore. There’s talk of the kind of Chinese retailers that are moving in, Shein and Temu, and these kinds of retailers who are getting more attention in the American and Western markets. Also, the talk of TikTok being a new vector for commerce and the possibility of live shopping, moving the shopping channel onto Amazon and these other platforms. What do you make of all of the things that are happening?
AM: The TikTok phenomenon is really interesting to me in general, because I think it sort of grows out of this phenomenon that you mentioned of you getting these massive retail platforms. Amazon, Walmart, and Target are all this at this point, basically, which is that they allow third-party sellers to create listings on their website to sell products that Target does not own. Sometimes they do the fulfillment, but it is a way to have more options on their website and to create more of a one-stop-shop to capture more business. Then they take a cut of the sales. But with that you give up a degree of control about what is being sold through your website because you’re having to take people’s word for it, that the product looks like it does in the picture and that you’re putting the right measurements in and stuff like that.
The lack of control over these types of marketplace listings, which is what they’re usually called, that also affects your return rate. Things come back when you can’t verify that the listings are accurate at a corporate level. And I think that consumers don’t love this in a lot of ways, which I think is why you see TikTok as a huge vector for recommendation. Because what people are looking for is somebody who has tried something and can tell you that it’s good or bad because there’s very little way to evaluate that yourself in a lot of these situations unless you go ahead and pay for something upfront and receive it.
PM: You can’t really trust a Google search anymore because it’s just filled with like SEO garbage, reviews and stuff, by searching the web.
AM: It’s very hard to surface anything useful. Google, especially for shopping, a lot of it is full of a) ads in and b) these very junky retailers that you’ve never heard of, that have these names that don’t make any sense, that are selling stuff that is implausibly cheap. A lot of it is just bought on AliExpress and you set up a quick storefront and you get it SEOed. For a little while, until it gets taken down because people realize it scammy, you’re showing up in these shopping results. Google is sort of bizarre in that way right now because a lot of times their ads are more reliable than their regular results, if you’re looking to buy something.
PM: Which is wild.
AM: Because the ads are bought by actual companies with actual products that they have developed, or at least selected, from a supplier. Instead of just scammy drop shipping stuff.
PM: It’s certainly one way to get people to click more ads, if you make the actual results untrustworthy.
AM: It’s a really bizarre turn that things have taken recently because at least if an ad has been bought, then somebody is there doing business, at least. Google, probably, I don’t know this for a fact, but I’m guessing that Google does like a little bit more vetting on things that show up in in that ad carousel than it does in its general results. So, the ads end up being more useful. Which is why you get the rise of things like TikTok, as a shopping powerhouse because TikTok is particularly good at showing you a person who is identifiably a real person who was sitting in their bedroom that looks like yours, probably. They’re telling you they bought this thing and they liked it, and they think it’s a good deal. That is the level of guidance that people are looking for, basically, because those are decisions that they have sort of had their ability to make those stripped out of the shopping process.
Being an informed consumer has always been like sort of a lie because the person selling you something is always going to be better informed about it than the person buying it. There’s just an informational mismatch. But that informational mismatch has expanded a lot. So you go to places where you can reliably find people who are actual people talking about whether or not something is good. You see this a lot on Reddit, too. I, increasingly over time, when I have a question about something — whether it’s a shopping thing or not — I will put in a search inquiry in Reddit, because I want to see actual people just talking about it.
PM: I do the exact same thing.
AM: Because otherwise what you find is just garbage. It’s unusable. It’s content farms. It’s things written by very low-wage workers that were contracted on Fiverr or whatever, to write some blogs about SEO keywords, or to endorse products or whatever. It’s all unusable. So I think that if these sort of structures that we have on the internet to buy things remain as bad as they are, more and more people will go to these third parties to access some level of human discernment and human taste. Because otherwise, making these decisions feels impossible. You get existential paralysis reading Amazon reviews of a bookshelf.
PM: I definitely get that. I do think it’s really interesting to see how that all develops and to see how people become more reliant on it, like you were talking about, and we have been talking about through this conversation, things become more abstract, things are moved online, you can’t actually figure out if this is something good or not. Now it’s not even just being sold by Walmart or Amazon, so you know that they’re checking it over and making sure it’s a good product. Now, it’s a marketplace thing that anyone has just put on there. It has some weird name; is that actually trustworthy? Is it going to be okay? Of course, people are looking for people who they can trust to give them advice on purchasing decisions because we all have to buy so much in the course of our lives and often buy much more than we actually need.
I think my final question for you is, obviously we’ve been talking about how this is a system that has been built over a couple centuries, or 150 years or whatever, designed to ensure that we buy more things consistently because that is what is necessary for the economy and for it to consider, keep growing and all this sort of stuff. This is a structure that’s been created. What do you think is the chance that we can push back against this consumerism, not be expected or not feel like we need to buy so many things all the time? Obviously, this feels like a bit of an individualist framing, but how do you think about that?
AM: I think that we’re at sort of a unique spot in this system because I do get the sense that there’s a level of exhaustion, on an individual level with what is being asked to people by the system, and the results that it is giving them, which are not often great. There is a period of time in any marketing cycle where things are novel, and people are interested in trying them. That period looks like growth — it looks like real demand for whatever it is you’re selling. Often that is misleading. It’s more accurate to say it’s curiosity. And this happens with a lot of individual companies, once you max out your curiosity — unless you are providing something that people actually find delightful or useful or worth having in some way, unless you have something that you can really sell them, low prices, whatever — those companies tend to fail, they tend to go back down. You saw this with Blue Apron, and a lot of the meal kit companies. People were sort of interested in the idea; this sounded novel; they were curious. Then a lot of people tried it out and decided that: Oh, this is interesting, but I’ll just go to the grocery store.
PM: I feel like it’s similar with the monthly subscription companies too where it was like: Subscribe, and we’ll send you a box of shit every month related to this thing that our company is based off of. I feel like that had a moment as well and then really dropped off.
AM: I think these are great examples of the power of curiosity to look like meteoric growth, and the power of venture capital subsidization to make a good value proposition look like genuine consumer interests. I think that what you saw in the short cycles with those companies is people eventually just get sick of it. It ends up not being a value proposition for them. I do not know if that will happen with online shopping as a whole, but I get a sense that it is going to be much harder for companies to grow from here because I think the technology that exists now with the costs that exist now, that don’t seem like they can be pushed lower in meaningful ways. I think that we’re sort of at a logical extreme of how much people actually want to buy things online.
I have not talked to any analysts, seen any reports, any estimates, any projections, that show online shopping growing meteorically, in the next several decades. Nobody thinks that there is a predictable future in which online purchases make up more than 50% of our overall purchases, or even anywhere near 50%. I think we’re starting to butt up against this sort of extreme of what it is that people can be made to do as far as buying things online. I’m very interested to see what happens when it stalls because all of these companies are predicated on the idea of growth at all costs. What happens when there’s not a great opportunity to grow at the rate that your investors or your shareholders have come to expect?
In brick and mortar retail that looks like cutting labor costs, shoestring staffing stores, which means that the stores get worse, they get more disheveled, they get less pleasant to go into. This pushes people online, and then ultimately, the short-term thinking around quarterly results, or whatever, ends up killing a lot of these brick and mortar retailers, probably more so than even online pressures do. What does it look like when that happens to online retail? Where do you press down the costs? Because so many of them are already shoestring costs in the first place. So I don’t have a lot of predictions, but I do think it will be very interesting.
PM: I think we’re entering an interesting moment where we have higher interest rates, so the money is not as easy to access.
AM: Money is real again [laughs].
PM: Exactly. Then as you say, the cost of shipping and stuff or even return shipping is going up, so you’re disincentivizing a kind of easy consumption that was happening before. Now, the model itself is potentially under pressure, so where does that all go when labor costs are already pushed down a lot. It’s going to be interesting to see where it goes. Amanda we’ll be reading your column to figure out what is happening in the consumerism industry more broadly. Thank you so much for taking the time. It’s been fantastic to chat!
AM: Thank you so much for having me.