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Don Cunningham: Lehigh Valley at the Center of E-commerce Explosion

By Colin McEvoy on December 21, 2016

This column, written by LVEDC President and CEO Don Cunningham, originally appeared on The Morning Call website on December 20, 2016. (Click here to read Cunningham’s previous columns.)

Don Cunningham

Don Cunningham

It all begins with the tap of a keyboard or the touch of a screen.

That simple action, repeated tens of millions times a day by online buyers, sets in motion an economy racing to get a package to a door. The Lehigh Valley is at the center of that economy.

And that economy is exploding.

Consumers this year spent $5 billion online during the post-Thanksgiving Black Friday/Cyber Monday shopping spectacular, according to Adobe Digital Insights. That was 12 percent more than last year.

More striking, an estimated 109 million Americans shopped online that weekend, while only 99 million visited actual stores. Black Friday store visits were down nearly 11 percent from last year.

We have crossed the Rubicon.

Online retail began in 1995 with the Internet. Amazon was the first. It started with books. Today, it’s nearly everything. Store clerks have quickly given way to FedEx and UPS delivery workers.

We are a country of consumers. America is the largest consumer economy in the world. We are also a country of couch potatoes seeking comfort and convenience.

Poof! Those two factors make a potion, and the e-commerce genie is not going back in the bottle.

Amazon is adding 120,000 temporary workers in the U.S. for this holiday season, expanding its workforce by about 40 percent to meet the needs of the American year-end holiday purchasing explosion. E-commerce delivers convenience and, for the most part, cheaper products, since stores don’t need to stock and staff brick and mortar showrooms.

So, what does all this mean for the Lehigh Valley? Jobs, industrial development and economic growth. It also means more trucks on the road and less farmland.

Why here? The short answer is market forces. Available land, available workers, and a location with good infrastructure smack dab in the middle of the East Coast metropolis where one-third of America’s consumers live, all of whom can be reached in a six-hour truck drive.

Just as steel mills sprung up along rivers and railroads close to the needed raw materials, e-commerce, logistics and related distribution industries develop where there is land, access to market and workers. And, like most industries, there is an impact. With steel, it was a rotten stink in the air and a much dirtier river. With e-commerce, it’s trucks. And just as the Clean Air Act and Clean Water Act mitigated the environmental downsides of steelmaking, infrastructure spending on more freight rail and widened and improved roadways will mitigate the effects of e-commerce and today’s manufacturing.

There are two significant factors often overlooked in the e-commerce development. First, the emergence of the Lehigh Valley as an industrial hub is a big reason why manufacturing is returning. Last year, manufacturing was the largest part of the region’s economic output with $5.6 billion in GDP coming from 680 manufacturers. More than 36,000 people still work in manufacturing. Companies have come to see that a good place to move product from is also a good place to make products.

Second, e-commerce creates job, lots of jobs, particularly for workers with only high school diplomas or less. And, that’s a good thing for us here because 38 percent of the Lehigh Valley workforce has only a high school diploma or less. There are about 26,000 jobs today – and quickly growing – in this sector, more than existed at Bethlehem Steel for most of its existence. The average wage has reached about $15 per hour, which is often criticized. Ironically, however, most of the store-based retail jobs that have been replaced or, for that matter most of the non-skilled employment in the region, pays less, much less, averaging about $12 per hour.

E-commerce is not slowing down and neither is the development of its back economy in the Lehigh Valley. There is 5 million square feet of new industrial space under construction right now. In 2018, FedEx Ground will complete a $300 million construction project of its largest facility in the U.S. with the ability to process 30,000 parcels per hour.

There are many hard at work on freight studies and road improvement strategies to better accommodate the growth taking place. In the meantime, however, remember that each time you curl up with your iPad and click a few buttons it’s you setting that economy in motion.

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