Digital Economy

Brick and mortar retailers spent $484 billion providing “free” shopping experiences in 2016. For example, vehicle dealerships provide “free” test drives, book stores provide “free” book signings and grocery stores provide “free” food samples. To capture the value of “free” shopping experiences, the paper models them as an implicit barter transaction of shopping experiences for sales attention. The paper then modifies previously created productivity accounts for the wholesale and retail sector (Jorgenson, Ho and Samuels 2016) to include shopping experiences as a new industry output and sales attention as a new industry input.

Despite the rise of e-commerce, “free” brick and mortar shopping experiences grew faster than overall retail margins after 2002. Furthermore, brick and mortar stores have dramatically increased service speed since 2002. Between 2002 and 2014, better shopping experiences contributed $110 billion to real industry output growth and faster service speed subtracted $78 billion from real industry input growth. Furthermore, slower service speed between 1947 and 2002 increases real industry input growth and decreases productivity growth for that time period. Combining all these modifications together, the post-2002 wholesale and retail productivity slowdown shrinks from 0.98 percentage points per year to only 0.08 percentage points per year.