The Price of Cheap: The Hidden Cost of E-Commerce

For years “energy independence” has been the catch-all solution promoted by politicians, talk radio hosts, newspaper columnists and others who point out that the U.S. is short on oil refining capacity. Nonetheless, petroleum production facilities are not only in the process of downsizing in response to a weak economy, but permanently so the Los Angeles Times reports in “Oil companies look at permanent refinery cutbacks” [March 11, 2010].

The oil industry, which as recently as 2007 broke so many profit records that allegations of collusion and price-gouging surfaced, is singing a different tune: Limiting supply to increase sagging profit margins is the solution, analysts say, for losses induced by everything from fuel efficient cars to retiring baby boomers who no longer commute to and from work.

And to think: Just a few years ago SUVs, with their paltry ~13 mpg, were the rage from Coast to Coast. Could it be that Cash for Clunkers, unintentionally so, was a little too effective — or are oil industry insiders selling Americans up the river when they can least afford it? Whatever the case may be, nothing says Green like fuel-efficient automobiles and the beginnings of an alternative energy infrastructure. Even so, the picture the LAT paints is far from complete. The Perfect Storm of tightening supply, increasing commodity prices, rising taxes and further job losses looms on the horizon.

Hang on to your hat! The price of life is going up.

Cutbacks and closures of community services nationwide are not cited as a reason for oil refinery cutbacks, but they are egging on these emergent economic norms: Sales tax revenues are down nationwide, and for an increasing number of locals that can only mean an unpalatable combination of higher taxes and limited services. The upshot? Even less incentive for our consumer-driven economy to spread the money around. Local and state governments from California to Michigan are banking on the hope that when the economy rebounds the Red Ink will stop flowing.

Will it?

Even if the demographic shifts associated with baby boomers retiring en masse were not inevitable, a grossly underestimated component to this trend looms larger by the day: e-commerce.

It’s no secret to Internet-savvy folks transversing state lines in search of tax-free online bargains that virtual shopping can be a real moneysaver — and a timesaver to boot. Amazon, for instance, is a leading go-to place for everything from books to home and garden products. Not only are purchases tax-free for many shoppers but free shipping offers often seal the deal.

Never before has the oft-repeated refrain “Shop locally!” encountered so many challengers.

Macintosh computers aren’t cheap now, but they were downright expensive when I purchased my first Apple computer nearly 20 years ago. Back then, it was not unusual to spend $4-10K on hardware alone (CPU, monitor, printer, scanner). The solution? Peruse ads in the back of nationally-distributed computer magazines. There I located a tax-free bargain on the opposite side of the country. Even with the cost of shipping factored in, I saved several hundred dollars foregoing traditional “brick & mortar” retailers. And it wasn’t for lack of local buying options, either: There were plenty of places vying for a slice of the personal computing revolution: Computer City, CompUSA, Circuit City, Fry’s Electronics and Best Buy, just to name a few. Notice what happened, however: All but the latter two succumbed to market forces. Is this because our collective appetite for new and improved technology has diminished? Absolutely not. Americans are more likely to own a personal computer hooked up to a high-speed Internet connection than ever before.

So what changed?

Competition amongst conventional retailers has diminished as more and more players drop out of the market. This makes comparison shopping on the Internet — where a greater number of competitors are in reach — more attractive by the day. Just as Big Box Retailers threatened mom & pop establishments, the Internet is the newest bull in the china shop. To cite just one example, antique stores in downtown areas nationwide have increasingly succumbed to online venues, and bars and restaurants — among the few types of businesses that rely on irreplaceable foot traffic — have sprung up in their wake.

Just how many bars and eateries can a local economy support?

The profound yet oddly imperceptible economic influences wrought by the Digital New Age are numerous: Even as more people embrace Internet shopping, surviving B&M retailers have responded by limiting their in-store selection in favor of just-in-time inventory, of which an increasing percentage is available exclusively online. Shopping at the click of a mouse is both novel and convenient, to be sure, but nonetheless a form of “special ordering” reminiscent of the old-time General Store method of awaiting out-of-town deliveries.

Except that most of us aren’t living in remote outposts.

The Green side of the coin is that fewer and fewer products for which there is inadequate demand are oversupplied to the market, thereby limiting the so-called carbon footprint associated with building and transporting more widgets than there are consumers willing to purchase them. But the environment is not the sole beneficiary. By limiting supply, prices and profit margins are maintained throughout the supply chains. What this means for the rest of us is that the “red tag sales” retailers offer to move an oversupply of product are likely to become increasingly few and far between. Prices between the remaining chain stores are generally pennies apart, and sales leaflets that would appear to advertise discounted deals are increasingly listing regular prices.

This trend presents both an irony and a threat to bargain hunters: B&M retailers that have grown in popularity as consequence of recession-induced thrift include Ross, TJ Maxx and Marshalls — retailers that specialize in discontinued, overstock and out-of-season merchandise offloaded by department stores and boutiques. As mainstream retailers par down inventory, the number and quality of inventory available to discount retailers and Internet shopping sites alike are likely to diminish for the foreseeable future. Consequently, just as demand for bargain bin deals heats up, supplies may be harder to come by. Similarly, as consumers become conditioned to shop for “everything else” online, the convenience, expediency and tax revenue benefits of shopping locally are lost. Eventually, the advantages of web-based commerce — what with United States Postal Service cutbacks, shipping cost increases and the inevitable legislative move to tax online shopping — suggests that this bargain hunters’ paradise may amount to little more than a tool of necessity in the years to come.

Even the Internet cannot overcome a fundamentally flawed economy.

So how do our novel new shopping habits dovetail with the news that oil refiners may permanently shutter facilities? For one, less incentive to drive to the mall. Or to go antiquing in a nearby community. And if you do? Fewer places to shop, fewer products and brands in stock, and fewer still mom & pop establishments. The list of nationally-recognized retailers to meet their demise in the Globalized Era is staggering: Broadway, Fedco, May Company, Woolworth’s, Best, Service Merchandise and Marshall Fields; Circuit City, Linens ‘N Things, The Sharper Image and The Good Guys — to name but a few.

To be clear, traditional retail in some shape or form will never be eliminated. But the trend of online shopping at the expense of local sustainability seems likely to accelerate as retailers respond by narrowing their shelf offerings to match lessening in-store demands. In the even longer term, conventional shopping may again become a destination — traveling long distances to reach large, diverse retail centers that are fewer and further between. The town-by-town, city-by-city retail landscape of today may become a thing of the past, not unlike the drive-in movie theater whose heyday has come and gone. Movie rental stores seem to be the next in the obsolescence line, edged out by inexpensive DVDs sold in discount stores, video-on-demand services and novel new competitors such as Netflix. How much more “local color” will fade from our towns, cities and communities until there are few signs of life outside the ‘net — but for the cookie-cutter ubiquity of fast food joints, liquor stores and dry cleaners?

Be careful what you wish for.

The shift in the way we shop not only impacts our gasoline consumption but just about everything we take for granted close to home: from schools, parks and public safety to the ability to find a suitable last-minute gift in a mass market environment increasingly lacking in diversity. This trend, in turn, suggests an increasing number of commercial real estate vacancies and even fewer sales tax revenues for local municipalities. As retail and warehouse job opportunities erode in much the same way manufacturing jobs did in the 1980s and 1990s, even low-skill service sector jobs are likely to dwindle — all of which adds up to a torrent of Red Ink.

Is it possible to become too good of a bargain hunter? Victims, if you will, of our own success?

As a “starving student” I never would have given it any thought, yet we do, indeed, have the power to harm our communities simply by making a habit of shopping online. It’s not that making a few online purchases here or there will topple the economy, but it is fundamentally shifting the game just as surely as the trend of paperless electronic bill paying has sent the USPS into a tailspin. More ironic still, online shopping — to the extent that it is powered by coal — isn’t much Greener than the conventional sort. According to a CNN report, the more energy efficient consumers perceive their electronics, products, services and transportation sources to be the more resources we consume.

Our entire landscape, physical and economic, is in the midst of gargantuan change. Whether such change represents the evolution of a new, Green economy remains to be seen. It could just as easily represent another largely unanticipated wrinkle in the lockstep march of globalization: Economic “desertification” wherein those who live adjacent to an oasis of innovative upstarts, manufacturing plants and retailers will thrive, whereas the vast majority of Americans, even those who live in highly populated areas, will find it increasingly necessary to shop online because it is no longer profitable for retailers to maintain local operations and/or no longer feasible — as gasoline supplies contract and crude prices increase — to transport durable goods great distances from port to shelf.

Perhaps we’ll save the planet. But will we save ourselves?

Economic experts would likely argue that this is the free market at its finest — and to point out, rightfully so, that such shakeups have occurred with every major technological advance. But such observations do not get at the crux of the question: Are we entering a time in this Globalized Era at which the rate and scope of change may exceed our ability to fully appreciate the ramifications? Will a collective deer-in-the-headlights reaction render legislatures unable or unwilling to craft economic policy conducive to a successful transition?

Put another way, we can’t predict where we are headed because we have never before been there. Consequently, our best attempts to plan for the future are likely to come up short — and all the more so when motivated by the desire not to shake fragile consumer confidence. Conventional wisdom, after all, views the phenomena known as market concentration — a diminishing number of viable businesses competing for our dollar under increasingly deregulated conditions — as the hallmark of “efficiency“. Prices are lower and demands are met so no harm, no foul the argument goes. But the more apt question, the one too few of us appear to be asking — not unlike the way in which financial firms and economists alike underestimated the phenomena of “irrational exuberance” prior to the Great Recession — is whether we’ll fumble the transition because we have failed to appreciate that it is possible to take a “good idea” too far.

Call it wrong and we not only risk a double-dip recession but a generational lifestyle realignment in which a college education, white picket fence, an automobile in the garage, a chicken in the pot, and 2.5 children in the home move increasingly out of reach.

By some counts, the time to have invested in an alternative economy is some 30+ years overdue. By a more conservative measure, we’re nearly 15 years behind the 8-ball both in terms of minimizing harm to human welfare and the climactic shifts associated with the over-use of fossil-fuels. By other accounts, the solutions proposed thus far are recklessly unworthy of widespread adoption.

And that’s why a benign practice so seemingly unrelated to the permanent loss of petroleum refining capacity — shopping online — may evolve into the straw that breaks the camel’s back. The desertification of our consumer-driven economy in the absence of a fully viable way to fill the economic vacuum may very well be a phenomena we do not come to appreciate until the list of “usual suspects” no longer explains a still-lagging outlook years from now.

Of course, there will be oases in this Brave New economic landscape. But the increasing concentration of those jobs in fewer areas of the country nonetheless portends harm to communities that rely upon traditional manufacturing and retail access. And that’s not the only casualty of our worship of all things economically efficient. The otherwise worthy aim of Greening the planet may lose its luster if it comes to mean the absence of opportunity: Restricted access to goods and services. Restricted markets. Restricted tax revenues. Restricted growth. Quite possibly even the best and most innovative entrepreneurial ventures will be forced to settle for a mediocre definition of success in the event that consumers, lacking in discretionary incomespurn new products and services in reaction to lost or stagnating wages.

Will we realize the “price of cheap” before the solution to state and local tax revenue losses shows up in the form of massive tax hikes? That is the question. None of this, of course, even begins to account for the tax hike incentives that exist as a result of a decade-plus worth of war-driven Federal deficits, TARP bailouts, unsustainable trade deficits, and the empty coffers long-predicted of Social Security, among other entitlements — just as baby boomers begin to draw them down.

Even as the storm clouds gather over a still-ailing economy, a recent TIME magazine article echos a common refrain: American innovation, writes Barbara Kiviat in “The Workforce: Where Will the New Jobs Come From?” [March 19, 2010], will offset job losses in time. Let’s hope the Green 21st Century jobs we’ve been told to bank on aren’t a case of too little, too late.

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Resources

All About: ‘Green’ Shopping | CNN

The Fight Over Who Sets Prices at the Online Mall | StarNewsOnline

The Death of Retail | The Entrepreneur Network

New Tack for Taxing Online Sales | Durango Herald News

Killing America’s Jobs Machine | Roanoke Times

The Recession could Reshape State Governments in Lasting Ways | Stateline.org

Comparing Online to “Brick and Mortar” Shopping | Buzzle.com

The Broken Society | New York Times

Customers Want it Cheap, Workers Pay Heavy Price | China Daily

The Price of Cheap Imports: What does America Make besides Policies? | WaterWorld

The Slippery Slope of Price Fixing | E-Commerce News

Sales Tax on the Internet: Who Pays, Who Doesn’t | Yahoo!

To Own or be Owned: A Virtual Reality Check

Amazon’s electronic reading device known as Kindle is not exactly as “Green” as it is cracked up to be, but now we have another reason to reconsider the merits of paper-based reading: Censorship.

Kindle users may not have anticipated it, but Amazon can recall an e-book purchase at the push of a virtual button. Need those annotations for a book report? If your digital reading material is recalled, Amazon removes those too.

Tough luck.

Amazon claims they are working to amend a hasty retraction process that resulted when an allegedly unauthorized source made available a number of e-books to which the lawful copyright holder objected, reports the New York Times in “Amazon Erases Orwell Books From Kindle Devices“. Refunds for the illicitly encoded material are on the way, but the questions have only begun. And well they should.

In an ongoing series on the transformative impact of high tech, the Social Critic aims to explore the lesser known consequences of the virtual world. In this instance, we find a stark reminder that in the digital universe the price of “virtual” amounts to easy come, easy go. You can’t share an e-book. You can’t recycle an e-book reader — at least not in the Green manner one might have hoped [see “GreenSmart vs. GreenDumb”]. And you can’t take for granted that you “own” anything in the virtual realm in the same physical manner it is possible to own DVDs, books, magazines, newspapers and the like.

What this article doesn’t touch upon is disturbing in its own right: The questionable health effects, particularly on the eyes and brain, of exchanging the tangible for an imperceptibly flickering digital view screen. Over time, exposure may blunt brain development in children, promote sleep and attention disorders, lead to career-limiting repetitive strain injuries to the spine, elbowswrists or fingers — or more commonly still, eyestrain and headaches — all while aiming electromagnetic radiation at our craniums (of which cell phones and CRT monitors are among the worst EMF offenders). None of this, however, takes into account the fastest growing concern of all: the controversial notion of Internet addiction. Until recently, in fact, China took a very heavy-handed approach to digital addicts: electroshock therapy.

Library systems, in a sign of the times, are taxed, meanwhile, not by people who wish to check out books but by the number of people who wish to access the Internet. As discussed in the aforementioned post, the billions of computer users plugged into electric grids around the world, connected, in turn, by scores of Internet data centers, come at a profound environmental cost that most of us fail to appreciate. In the US, these electrical requirements translate into burning more coal, a process that for all the talk of “clean“, is anything but.

In the irony of all ironies, this Digital New Age appears to have brought us full circle: From transnational trains at the turn of the last Century belching out billowing clouds of coal-black ash to power plant smokestacks “sequestering“, at best, billions of short tons of the same in the opening decades of the 21st Century. Much of this progress arrives under the trendy guise of going Green — paying our bills online, killing time on Facebook and surfing for free media content on the web even as news and content providers go broke for their efforts. Talk about unsustainable — in more ways than one!

In exchange for the privilege of conducting increasing amounts of our business and personal lives virtually, we pursue nifty new interfaces — costly electronic devices, cell phones and seemingly essential hardware and software packages, which we have been conditioned to frequently upgrade as a result of wear, tear and obsolescence. All of this lends itself quietly but effectively to privacy-intruding remote processes most of us fail to comprehend. Ours is an inverse relationship with technology: As the devices of our supposed need or pleasure become exponentially complex, our appreciation for how little we control, own and regard as personal and private diminishes.

Are our ownership claims even worth the virtual paper they are printed on?

Probably not.

Have you read any virtual fine print, for that matter, lately?

Who does?

Arguably, it causes more eyestrain — a greater headache literally and figuratively — to read a large body of typewritten material on a bright, brazen, backlit surface largely devoid of eye-resting “white space”, much of it jam-packed instead with ad-based imagery begging for attention. So what’s a person without an entire day to spend sifting through this chaotic “information soup” to do? Answer: Go in search of the news, information, social contact and entertainment we want — not necessarily that which we need.

In spite of our collective fascination, electronic interfaces are simply too fatiguing for many users to devote a great deal of voluntary attention to any single task. Real-world books, newspapers, magazines, DVDs and music albums are carefully crafted, edited, designed and packaged, whereas in the virtual world we are often gatekeepers and content generators — empowering, to be sure, but demanding nonetheless. For instance, few of us went to the time and expense to crop, retouch and “develop” our own photos years ago, but nowadays the time, expense and effort of digital photography — the self-service we euphemistically refer to as “creative control” — is a common undertaking by many a digital camera owner. But what happens when time, attention spans and the digital format itself are limiting factors?

It stands to reason that as the novelty of this digital medium wears off, we will increasingly reserve our limited energies for learning a whole lot more about a whole lot less, particularly in comparison to our analog-based predecessors. The information at our fingertips may be limitless but our patience is not. More disturbing, the digital landscape may not be as boundless as we would like to believe. Not only does the virtual printing press make it a lot easier to remove unflattering stories from the electronic record, it’s also a lot easier to let the news we can use fade into a backdrop of dizzying digital distractions, the search result that never appears, the umpteenth page we never click.

For all his technological high hopes, would the late, great newsman, Walter Cronkite, be impressed?

When a resource is rare, even something so amorphous as “the news”, it is perceived as valuable and desirable. When it’s easy, cheap and pervasive, we take for granted that it will always be there, and that nothing will escape us even if we opt out entirely. If an asteroid were headed our way, many of us would learn of it from a coworker or a friend on MySpace — the proverbial grapevine now stronger than ever, the “herd immunity” theory, if you will, applied to social awareness.

Witness the phenomena of college-educated individuals passing along hoaxes, chain letters and urban legends via email without so much as a 30-second effort to verify the claim. Technology may make it easier to avoid making fools of ourselves, but that doesn’t mean we’re making the best use of it. The Digital Age, in this respect, presents a curious duality: People who are inclined to believe almost anything they see and read in an email or on YouTube, and those who become so wary of sloppy citizen journalism and anonymous email assertions that eventually mainstream media sources are lumped in the same suspect category. Such is life in the disposable e-universe: The democratization of information on the one hand, the responsibilities of liberty diminished on the other.

As much as technology connects us, a prevailing counterforce threatens our capacity for common experience, shared culture and community values. In the virtual world we lose, most notably, what art, literature and history buffs refer to as a “sense of place“. As our digital future progresses, we are certain to experience less and less of the hallowed, snapshot-in-time sensation of looking back on an old photo, magazine, newspaper, yearbook or, for that matter, the tactile experience of turning the pages of a letter or book sans mouse and keyboard.

There’s something we’re sacrificing in this brave new world, and it’s more than the paper it is written on.

Welcome to the here and now. It’s great for contract attorneys and high-tech moneymakers — a deceptive deal for the environment, news providers, and consumers alike. Still, we’re eating it up, one “IT” gadget off the production line at a time. Pay off that home or car loan early? Save money for the kids’ college tuition or your retirement fund? Embark on a once-in-a-lifetime road trip from coast to coast? Naw. We have more pressing pastimes to spend our digital dinero on. And they’re lovin’ it.

Psst! I hear Sony makes a pretty cool e-book reader, too. Circuit City, anyone? Their virtual doors are open for business!

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Resources:

Printed Copies of Orwell Books Pulled from Kindle | Yahoo News

Some E-Books Are More Equal Than Others | David Pogue/NYT

Internet Use Burns Coal, Report Says

Better Technology Needed if Carbon Sequestration is to be Viable | TSAugust

The Internet Begins with Coal

The Internet is Big and has a Carbon Footprint to Match

Data Center Overload | NYT Magazine

User Demand for the Internet Could Outpace Network Capacity by 2010

The Sustainability Challenge: Can the Internet Help?

The Illusion of Being Well Informed | The New Ledger

When Computers Attack: Protect Yourself from Computer-Related Health Problems

Ergonomists: Kids too are at Risk from Repetitive Strain Injuries | Science Daily

Nighttime Computer Users May Lose Sleep

Look What They’ve Done to My Brain, Ma

Brain & Behavior: Blame it on the Box

Mind Control by Cell Phone | Scientific American

Is Google Making Us Stupid? | The Atlantic

Is Google Making Us Smarter? | Seed Magazine

Men as Internet Victims

Do Social Networks Bring the End of Privacy?

Pittsburgh Cancer Institute Issues Warning on Cell Phone Risks

Teens Risk Health with Night Texting, Talking

Social Networks: Primates on Facebook | The Economist

Who Really Owns Your Phone?

Did You Hear About Censorship?

Internet Censorship in the US? Or Just Law Enforcement?

Top 25 Censored Stories for 2009 | Project Censored

Is Professional Blogging a Sustainable Business Model?

The Economy of Free is Stupid | Social Media Explorer

Free is Not a Business Model

Are the Days of Free Internet News Coming to an End?

Internet Companies: The End of the Free Lunch — Again

Advertising Is Not a Sustainable Business Model for the Web

Thoughts on the Costs of Digital vs. Paper

The Future of Reading — Digital vs. Print | Seattle Times