Does the growth of online shopping pose a threat to traditional "bricks-and-mortar" retailers?

The most pertinent answer to that question is yet another question: Do catalog sales pose a threat to "bricks-and-mortar" retailers?

Like Internet sales, catalog sales involve greater convenience for the shopper: No trip to the store or the mall. And they have been a reality in America for decades. Yet, catalog sales have not devastated traditional retailers. Why? Because both catalog sales and e-commerce have—and always will have—a decisive disadvantage in relation to traditional retail sales: the inability of the consumer to examine hands-on the goods to be bought.

The latest figures available bear out this counsel of common sense. E-commerce, while thriving, still only constitutes a tiny fraction—about three-tenths of one percent—of all retail sales. E-commerce poses no danger of large income losses for traditional retailers and indeed, the Web offers new sales opportunities for every business. Because of the relatively low cost of setting up and maintaining a Web page, this is especially true for small firms.

Moreover, in the words of Cato's Aaron Lukas,

Because they cater to a customer's desire for a hands-on experience, local stores don't charge for shipping and offer immediate gratification and so will probably always dominate retailing. What's more, shopping is for many people a pleasurable social experience that cannot be duplicated online. Thus, Internet sales won't destroy 'real' retailers, just as catalog sales haven't.19

Besides, if e-commerce really posed a threat to traditional retailers, as proponents of taxing the Internet believe, this would simply provide the strongest sort of economic incentive for those retailers—who always are looking for ways to keep up and surpass their competition—to get their own Web sites up and running.

Already, the very existence of Web commerce, opening as it does a new venue for sales, with the potential for reaching a wider circle of customers, has inspired the more competition-minded retailers to set up their own Web sites. If competition from e-commerce were to intensify, this would merely increase the economic incentive for retailers to get on the Internet. A more intensified level of competition would ensue, with benefits going to customers who buy more and retailers who sell more and better products.

As Citizens Against Government Waste wrote in a recent report:

. . . traditional retailers and Internet sellers are not mutually exclusive. Many traditional retailers have established an Internet presence, which allows them to avoid the burden of high taxation when they sell to customers outside their state. To claim that taxing the Internet will protect traditional retailers is reminiscent of the claim that the Berlin Wall protected East Berliners.20

Conclusion: No one has anything to fear—and we have everything to praise—about the effect e-commerce is having and will have on retail commerce in America.