Online stores displace workers

Step aside, people, and make way for technology.

As Egghead.com (EGGS) shuttered its 80-store retail network and its distribution center over the weekend, nearly 80 percent of its workforce--about 800 workers total--was left behind so that the company could take its business to the Internet.

The network of stores had about 1,000 full-time employees, but now that Egghead's nationwide stores and Sacramento, California, distribution center are closed, only 200 remain, according to company spokesman John Hough.

The cutbacks are a reminder of technology's downside, at least to those laid off. While the high-tech boom has bolstered the nation's economy, creating many new jobs and start-up successes such as Amazon.com and Preview Travel, its automation and lower distribution costs have cleared the way for significant job cuts.






Egghead stores are closing, but the retail software chain is refocusing its efforts on the Web.




Indeed, the shift to selling products online is raising concerns among retail workers. Faced with the runaway success of online ticket sales, for example, the American Society of
Travel Agents repeatedly has reinforced the benefits of buying tickets from a neighborhood travel agent.

Some retail workers, however, are taking the changes in stride.

"There's not a lot of money in retail, and there is in technology," said one Egghead clerk. The worker said he now plans to get out of the retail business altogether so that he can go back to school and gain the necessary skills for a job in the high-tech industry.

In Egghead's case, the company has been losing market share as customers have gravitated to larger superstores, such as Computer City and
CompUSA, analysts said. Egghead tried to go head to head with those chains by opening larger versions of its retail outlets--dubbed "super-Egghead stores"--but it wasn't enough. While the software retailer had some initial success with the larger-store format, it decided ultimately that the best moneymaking opportunity was online, said Hough.

Egghead's 800 displaced employees are not likely to make the cut for the new job pool from which the company hopes to hire employees for its online business, Hough said. Location will be an issue, as the company's business now will be focused around its Portland, Oregon, headquarters, but the skills of employees will play a larger role in determining who makes up Egghead's new workforce.

"The store staff is made up of very good retail employees, and each would have experience that would be helpful," Hough said. "But [the job openings will be for people with skills to work with] technical systems and information systems."

The economy is changing, and the skills of many employees simply no longer match its needs, said Hal Varian, dean of the school of information management and systems at University of California at Berkeley. As a result, people will have to be retrained.

"Business processes are changing, and the emphasis has focused on the knowledge side of things," Varian said. "Egghead is the latest manifestation of the fact that business processes are changing."

The large number of vacant jobs demanding high-tech skills is another key indicator.

For example, a study released last month estimated that 346,000 computer programmer and systems analyst jobs are vacant in U.S. companies with more than 100 employees. The shortage of qualified labor has spread beyond the high-tech industry, to banks, hospitals, and retailers--all firms that depended on programmers to design and operate large systems. (See related
story)

Educational institutions, as well as high-tech companies themselves, are trying to help close the gap with training programs tailored to the information technology industry. UC Berkeley is one example. The School of Information Management and Systems, which accepted its first class of students last fall, has worked in tandem with employers at high-tech companies to help train students in the skills that are most in demand.

Aside from workers, though, a retail company's shift to a totally online business also could displace customers. Some will miss the interaction between customers and clerks that is possible in person but becomes more difficult online or over the phone.

"A lot of people find support in talking face-to-face, and in the hand-holding, which is a valuable service," Varian said.

Egghead, however, says it has taken steps to ensure that such personalized interaction will continue online.

Among those businesses growing by way of their online efforts are retailers of books, music, and airline tickets. Although online sales presently account for a fraction of total sales, they soon could displace some sales--and jobs--in their brick-and-mortar counterparts.

Steven Horen, an analyst at NationsBanc Montgomery Securities, said employees of street-based retailers that are less skillful in maintaining or controlling expenses will be the ones that get hurt by increasing numbers of consumers making their purchases online.

"Over time, there will probably be some erosion of some street-based volume," Horen said, but online competition in general does not yet threaten the big players, such as Barnes & Noble (BKS), Borders, or even the
mom-and-pop stores.

Eventually, though, "the less effective [brick-and-mortar] participants will suffer," he said.

Dawn Yoshitake contributed to this report.