Automobiles, the Mass Market, and the Retail Revolution

by Neumann, Todd.

Retailing is the third largest segment of the American economy. It is unique among many sectors of the economy because virtually every American is a daily customer. Despite this important role, few economists have studied the fascinating changes that have occurred in this industry. This dissertation explores what, when, and why changes occurred in the industry during the 20th Century. The period between 1900—1930 is identified as a key point when two new demand-side consumer technologies, the automobile and radio, fueled the beginnings of a retail revolution. The most important of these innovations was the automobile. Unlike typical supply-side technological innovations that are implemented by the firm, the car was a technology that the consumer was left to adopt. Yet, by lowering local travel costs, it changed access to stores in a variety of ways and like supply side innovations the car profoundly affected the way stores produced the retail service. In the process the size of retail stores increased dramatically. The reduction in the number of stores and the increase in population meant stores were not locating as close to the average consumer as in the past. Stores began to offer a selection of products unheard of at the turn of the century. Not only did they offer more brands of each product, but they also broadened the selection of different products. Corporate-owned chain stores started to supplant the independent retailer. Finally, retail workers became more specialized, and a smaller share of the workforce directly interacted with the customer. This dissertation characterizes these changes and quantifies the impact that new consumer technologies had on the size, number, and labor intensity of retail stores. 13