Power of e-conomy
Power of economy
- Key content economy
For consumers, shopping online differs in important ways from visiting a brick-and-mortar store. Because online retailers are less constrained by physical space, they can offer a wider variety of products. E-commerce also enables consumers to access stores that do not have a physical location near them. And people can purchase a product online that they may have previously purchased at a brick-and-mortar store without making a shopping trip. I refer to the first two as variety gains and the last as a convenience gain.
In research with Paul Dolfen, Liran Einav, Ben Klopack, and Jon Levin of Stanford, plus Larry Levin and Wayne Best of Visa, Inc., we attempt to quantify these benefits for consumers from the rise of online shopping.[2] We leverage a large and detailed dataset of consumer purchases: the universe of Visa credit and debit card transactions between 2007 and 2017. In an average year, the Visa data cover 380 million cards, 36 billion transactions, and almost $2 trillion in sales.
Our research has several policy implications, which are outlined later in this policy brief. But one important consideration is that online sales are not being fully captured by current measures of the U.S. economy. To the extent consumers benefit from e-commerce by more than what they spend online, growth in national income is understated. This matters because such growth is a yardstick used to evaluate the success of government policies.
In 2017, roughly 22 percent of all consumption in the U.S. flowed through Visa. The Visa data include detailed information on each transaction, including whether the transaction was conducted in person at a brick-and-mortar store, by phone or mail, as a recurring payment, or through the internet. We consider the latter as e-commerce.
