Friday, February 26, 2016

Why Online Retail Sales are Much Larger than US Census Data Report

David S. Evans, Global Economics Group; University of Chicago Law School; University College London, Scott R. Murray, Market Platform Dynamics, and Richard Schmalensee, Massachusetts Institute of Technology (MIT) - Sloan School of Management discuss Why Online Retail Sales are Much Larger than US Census Data Report.

ABSTRACT: US Census data are widely used to show the level and growth rate of online retail sales. However, based on a detailed review of the data reported by Census, Census’s technical documentation for collecting those data, the survey instrument used by the Census to collect the data, and e-mail correspondence with a senior Census official, it appears likely that those data significantly understate online retail sales for two reasons. First, it appears that the online sales of large retailers are not included in the three-digit NAICS code figures reported by the Census Bureau. Second, it appears that the Census Bureau does not count the substantial online retail sales of firms not classified as retailers. It is possible to derive conservative estimates of the amount of online sales not included by the Census Bureau under the assumption that the Census Bureau follows its published methodology. Conservative estimates based on available data indicate that online retail sales were $83 billion higher in 2013 than those reported by the Census Bureau; that is, actual online retail sales were 32 percent higher than those reported by the Census. The percentage undercount is similar for earlier years, so that Census-reported growth rates seem roughly correct. The undercount it is likely to persist as a consequence of the methods used by Census to collect and report online retail sales data. It is not possible to present these estimates as definitive, however, because the Census Bureau has made inconsistent statements concerning its methodology for estimating online retail sales, which Census has declined to help us reconcile, and because it is not possible for the Census Bureau to share details on the inclusion of data for large retailers with online sales.

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