The Entry of Online Retailers and Productivity Dynamics in the Retail Trade Sector

We examine the labor productivity dynamics of online retailers using census business data combined with mail-order business licenses. Online retailers mainly contribute to retail sector productivity through post-entry productivity growth, whereas brick-and-mortar stores contribute by replacing less productive stores with more productive entrants. The low productivity of online entrants due to minimal entry costs negatively affects the industry’s productivity. Our findings suggest that the large-scale entry of online retailers could change productivity dynamics in the retail trade sector