The city of Danville, California has experienced a remarkable transformation in its economy due to the rise of e-commerce. A survey conducted by Economic Development Analysis revealed that quality of life was a major factor in nearly 70 percent of business location decisions. This shift has had a profound effect on the way consumers shop, as well as the economic growth of the city. E-commerce has enabled customers to access stores that don't have a physical presence in their area, and to purchase products online that they would have previously bought in a physical store without having to go shopping. This has resulted in two main advantages for consumers: variety gains and convenience gains.
Variety gains refer to the wider selection of products available online, while convenience gains refer to the ability to buy products without having to travel to a physical store. However, current U. S. measures don't accurately reflect online sales. To the extent that consumers benefit more from e-commerce than they spend online, national income growth is underestimated.
This is significant because this growth is a criterion used to evaluate the success of government policies. To estimate the share of online spending across the U. S., we increased Visa's e-commerce spending in reverse of Visa's share of domestic credit and debit card spending. We then divided this by the total U. consumption of goods and services (including the flow of services from the home).
We divided categories into retail and non-retail categories, with non-retailers being all travel-related (online reservations for air travel, car rentals, hotels and ground transportation).The availability of e-commerce is especially important for customers who live in more rural areas and smaller cities, where there are fewer offline merchants. E-commerce is accessible to everyone everywhere, making many more merchants available to consumers. According to Visa data, 88 percent of online spending is made at stores where the card never transacts offline. To estimate how much consumers benefit from e-commerce, we need to know how products sold offline can be replaced compared to those sold online. The closer they get to replacing them, the less consumers will benefit from a given shift in spending from the real world to the online one.
To estimate replaceability, we analyzed online and offline purchases made within 20 miles of each cardholder's location. Our results have several potential policy implications. First, the gains from consumer e-commerce that we calculate based on convenience (0.4 percent of consumption) and variety (another 0.6 percent of consumption) exceed those reflected directly in official statistics on consumption and income. Accurately measuring economic growth is essential for assessing the welfare consequences of government policies. Finally, it is important to note that due to the COVID-19 outbreak (caused by the coronavirus), sales tax filing deadlines in Danville may have been affected.
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