Post 68: The Demographic Cliff That Isn't

I suspect that relatively few people share my interest in demographic trends. While there have been some interesting developments in the field over the past decade or two, demographic trends take so long to play out that it is a bit like watching a glacier melt. Most people rapidly decide to move on to a more dynamic topic.

Occasionally however, a demographic trend intersects with a human interest story such that the mainstream press takes notice and writes a few stories, leading people to wring their hands and commiserate on the “going-to-hell-in-a-handbasket” nature of our society.  The most recent example has been a variety of articles describing the financial struggles of small colleges and universities due primarily to falling enrollment.  Who wouldn’t be a little saddened by the thought of a bucolic campus in a picturesque town having to close its doors after years of imparting knowledge to eager young minds?  

The blame for falling enrollments is routinely placed on the demographics of 18-year-olds eligible to enroll in college – which, it turns out, have recently started to drop in number after decades of increases, or at least stability.  This decline is almost inevitably described as a “demographic cliff” that will have a catastrophic impact on higher education.

A recent story in the Wall Street Journal focused on the shaky future of St. Michael’s College in Colchester, Vermont, where enrollment is down by more than 40 percent over the past 10 years.

“These days, St. Michael’s and other campuses face the so-called demographic cliff, a drop-off in the number of prospective students that is forecast to last years.  The largest number of Americans born in a single year entered colleges this past fall.  After those students had been born, the 2008-09 financial crisis hit and birth rates plummeted.” [1]

The article goes on to describe falling budgets, departmental reorganizations, and staff cuts that have been undertaken in recent years to realign the budget with the reality of lower enrollment. Despite these steps, the article makes it sound as if it is a 50/50 proposition whether the college closes or perhaps merges with another institution (such as the nearby University of Vermont).  In fact, St. Michael’s is probably better off than a hundred or more other colleges that are even smaller and closer to insolvency.  St. Michael’s future might be shaky but at least has a solid academic reputation, a location in the Burlington metropolitan area of 225,000 people, and proximity to major cities such as Montreal and Boston.

Over the past five years, nearly 100 colleges (both public and private non-profit) have closed or merged, along with dozens of for-profit institutions.  Forecasts call for 40 to 50 more closures per year for the next several years (out of roughly 2,700 4-year colleges and universities in the U.S.).  This trend can indeed feel catastrophic for the students who have to find another place to finish their education, the faculty who suddenly are unemployed, and for the surrounding communities which lose a major economic engine.

The impact is not limited to small colleges.  Just a few weeks ago, the Chancellor of Syracuse University (with a student enrollment over 20,000) sent a message to faculty and staff warning that the school would miss enrollment targets for the 2026-27 school year.  And yes, the declining number of 18-year-olds was highlighted in the second paragraph.  According to Chancellor Haynie, “competition for students is now more intense than at any time in modern U.S. history.”  [2]  Of course, Syracuse University, with an endowment of over $2 billion, is not in danger of closing its doors any time soon, but the message warned of potential budget deficits.

Another recent Journal article explored the difficulty in repurposing the campus of Green Mountain College which closed in 2019 after enrollment had dwindled to less than 500 students.  There simply aren’t that many economically viable uses for a 115-acre campus located in a small town (Poultney, VT, population 3,000) in an isolated part of the country. [3]  Everyone has ideas, but financial reality crushes most of those dreams.

While the closing of a small college can be devastating at a very localized level, it doesn’t have much of an impact at the national level or even the state level.  The fact of the matter is that businesses and organizations of all types periodically close.  The closure of a small college now is not much different from the closure of factories in the 1970s and 80s when manufacturing was being shifted to low wage countries in Asia.  The loss of a major employer is a substantial blow to any small town regardless of the type of enterprise, but people adapt and life goes on.  The future of higher education is not going to be imperiled – if you want a college degree, there are lots of options available that are financially stable.

An Inflection Point, Not a Cliff

Birth rates have been falling in developed countries for the past several decades, so no one should be surprised that the number of people in any particular age category will eventually start to drop.  Over the next 15 years, the number of 18-year-olds in this country will decline by about 15 percent.  For a slightly broader perspective, see the accompanying chart which shows the latest projections for the 15-1o-19 age cohort over the next 40 years.  The pattern is a gradual decline, then a period of stability, and then another gradual decline.  In skiing terms, this is more of a bunny slope than a black diamond.  Unless you graph this with a wildly truncated vertical axis, there is nothing “cliff-like” to see here. 

This inflection point – changing from growth to contraction – marks an important demographic trend but it is not necessarily a catastrophic one.  Colleges and universities were able to adapt to sustained growth over the previous 70 years, so it seems likely that the best ones will be able to adapt to this steady contraction as well.  As is always the case, there will be winners and losers but the focus should be on adapting to the new reality rather than on “saving” organizations that are no longer competitive.

I suspect we are shaken by stories like this because we are accustomed to growing in this country, not shrinking.  Bigger is seemingly always better, which means that getting smaller must be a sign of impending disaster.  In fact, improvement has many different dimensions and quantity is just one of them.  The biggest problem with this demographic shift may be our inability to think about progress in ways that don’t include numeric growth.  The impact of low birth rates is not going to affect just higher education, it will ripple throughout our society.  We need to adjust our mental outlook before we adjust anything else.

Bigger Forces At Work

I don’t mean to suggest that the declining number of 18-year-olds is a trivial issue because it is not.  But I don’t think it is the primary issue determining the survival of small colleges and universities.  Portraying it as such means that college administrators may focus on the wrong solutions and miss opportunities that are likely to be more effective.  Administrators need to understand clearly what it is they are “selling” and how that fits in with the future of our society and economy.  In particular, strategies that lean on nostalgic visions of small college life are likely to fail.  Pragmatic and tech-centric students are likely to value assistance in navigating a world shaped by artificial intelligence, trillion dollar corporations and global power struggles in addition to the critical thinking skills and social networking that universities have traditionally provided.

To begin with, there are three numbers that I think are especially important when it comes to enrollment declines but they get much less attention than the “demographic cliff.”  First, the percentage of high school graduates that enroll directly into college has dropped from a high of roughly 70 percent 10 years ago to approximately 62 percent currently (although 2025 saw a bit of a rebound).  Second, the enrollment percentage represented by adult learners (students aged 25 and up) has dropped from roughly 35 percent in 2016 to 25 percent currently. [4]

In my opinion, both of these trends suggest a growing disillusionment with the perceived value of a college education.  If prospective students don’t see a compelling value proposition, then institutions with a shaky financial future shouldn’t blame declines in the number of 18-year-olds.  There may be a fundamental mismatch between what prospective students want and what small colleges provide. 

The third number is that foreign student enrollment at U.S. universities has dropped by 20 percent for the spring 2026 semester (based on a survey of 149 U.S. schools). [5]  This is likely a response to President Trump’s aggressive anti-immigration efforts which have included foreign-born students.  The administration has also slashed, or threatened to slash, funding to major universities which may have reduced their appeal to top foreign scholars.  

In addition, the value proposition of a college degree has undoubtedly been affected by the rising cost of a postsecondary education and the well documented financial stress that comes from taking out student loans.  Total student loan debt now sits at $1.78 trillion, up from $860 billion 15 years ago (up 106%).  For perspective, the Consumer Price Index has gone up by slightly less than 50 percent during that same time period.  Roughly one in every six U.S. adults has student loan debt (42.8 million borrowers) and the average debt balance is over $40,000.  Even at relatively affordable public institutions, the typical university student borrows nearly $32,000 to obtain a bachelor’s degree. [5]

Colleges and universities in general, and small colleges in particular, are caught in a bind by what is known as Baumol’s Cost Disease.  This oddly named economic theory, first described by William Baumol and William Bowen, points out the pattern of rising wages in industries that have experienced little productivity growth due to rising wages in industries that did experience productivity growth.  This happens because jobs without productivity growth still need to compete for workers with jobs that have productivity growth (cross elasticity of demand).  These sectors become more expensive over time because input costs increase while output does not.  Higher education is a prime example.  Aside from PowerPoint presentations replacing notes on a chalkboard or overhead slides, classes in many colleges are taught in much the same way as they were 50 years ago, and yet salaries have increased in line with more efficient industries.

On top of all of this, the white collar portion of the labor market is in turmoil.  Artificial Intelligence experts are predicting the demise of the entry-level job and tech companies are announcing major layoffs, ostensibly because of AI.  Twenty-five percent of the unemployed hold bachelor’s degrees, a record high.  

A recent study by Price Waterhouse Coopers covering millions of job listings identified a trend they referred to as the “seniorization” of entry-level jobs.  PwC found that entry level jobs in AI-focused industries were not necessarily disappearing, but that they required job skills that most workers don’t master until they have 8 to 10 years of experience – skills such as strategic decision-making, leadership experience, and stakeholder management.  In the most AI exposed occupations, 52 percent of skills requested in entry-level job postings were skills traditionally associated with experienced workers.  In the least AI-exposed occupations, that figure was 7 percent. [6]  Thus many entry level jobs exist in theory, but new graduates can’t get them.

The result is that the knowledge that students want to have when they graduate is changing, but no one is exactly sure what that new knowledge should look like.  Colleges and universities need to become more efficient in translating professorial labor into learning, but no one is exactly sure how that should be done.  Finally, colleges need to effectively communicate these changes to prospective students so they can rebuild the perceived value of their product, but no one is exactly sure how that message should be crafted.  This trifecta of doom is why small colleges and universities are struggling to stay open.  And yes, the declining demographics of 18-year-olds certainly doesn’t help, but that is an ancillary problem not the primary one.

Impact on Cities

Falling birth rates leading to falling population numbers for age cohort after age cohort are a reality that our society needs to learn to deal with – 18-year-olds and small colleges are just an early example.  The change will be relatively slow and gradual, which gives us time to adapt.  Calling it a “cliff” might grab people’s attention but I don’t think it helps solve any of the resulting problems.  What is needed is the ability to creatively think about a future where numeric decline is commonplace.

Cities that have historically been home to a small college or university have led a mostly charmed life.  Small colleges bring in students that spend money and demand relatively few municipal services in return.  They employ a lot of people and pay relatively good wages.  They enhance the cultural and educational opportunities of local citizens.  And finally, they have done all of that while having a long-term commitment to the community.

Those glory days may be coming to an end.  Cities need to have frank discussions with decision makers to understand their true financial situation and to brainstorm ways the community can support local colleges into the future.  That future may look dire, but closure is not inevitable.  Cities, and institutions of all kinds, need to plan for a world in which a decline in the quantity of people is superseded by growing productivity, technological advancements, and a focus on the quality of life.

Notes:

1. Douglas Belkin; “The Small Private Colleges Dying in a Winner-Take-All University Marketplace”; April 2026; The Wall Street Journal; https://www.wsj.com/us-news/education/college-tuition-loans-budget-cuts-7d0ea05f?mod=Searchresults&pos=20&page=1

2. J. Michael Haynie; “An Update On Our Enrollment Outlook”; June 2026; Syracuse University; https://news.syr.edu/an-update-on-our-enrollment-outlook/

Owen Tucker-Smith; “Vermont’s Most Bizarre Real-Estate Listing Is A Free College Campus”; June 2026; The Wall Street Journal; https://www.wsj.com/us-news/vermonts-most-bizarre-real-estate-listing-is-a-free-college-campus-a499277a?mod=Searchresults&pos=1&page=1

3. Robert Kelchen, et al; “Predicting College Closures and Financial Distress”; December 2024; The Philadelphia Federal Reserve; https://www.philadelphiafed.org/-/media/FRBP/Assets/working-papers/2024/wp24-20.pdf

4. Miranda Jeyaretnam; “As U.S. Enrolls Fewer International Students, Universities in Asia Are Going the Other Direction”; May 2026; Time Magazine; https://time.com/article/2026/05/12/us-university-higher-education-international-students-asia-trump-immigration-visa/

5. Melanie Hanson; “Student Loan Debt Statistics”; February 2026; Education Data Initiative; https://educationdata.org/student-loan-debt-statistics

6. Nick Lichtenberg; “Entry level work didn’t disappear, PwC finds with ‘seniorization.’  It just morphed into something young workers can’t get”;  June 2026; Fortune; https://fortune.com/2026/06/18/entry-level-work-ai-pwc-seniorization-report/

Post 67: The EV Revolution is Coming

 

The “next big thing” typically arrives with a great deal of fanfare, along with proclamations about how our lives will suddenly change for the better.  What follows, however, is often disappointment as reality fails to live up to the hype.  

Inventor Dean Kamen on a Segway Scooter

The two-wheeled Segway scooter, for example, was introduced in 2001 on Good Morning America and hailed as a device that would revolutionize transportation.  Its inventor, Dean Kamen, said that the Segway would be to the car what the car was to the horse and buggy.  Venture capitalist John Doerr said it would be bigger than the internet.  Kamen expected that within a year, the company would be producing 10,000 units per week. [1]

While it was an amazing piece of engineering, it was also expensive to buy, unwieldy to use on crowded sidewalks, and more dangerous than its promoters anticipated.  President George W. Bush famously tried a Segway scooter and fell awkwardly (and very publicly).  Ironically, the one-time owner of the company, Jimi Heselden died in a Segway accident when his scooter apparently veered off the path into a lake.  By the time production ended in 2020, only 140,000 units had been sold.  That is a rate just over one percent of what was initially projected.

More commonly, the initial hype of new technology is followed by a lackluster period in which only a small group of pioneers become enthusiastic users.  Eventually the bugs are worked out, a mass market develops and the technology does indeed end up changing our lives.  I can remember early cellphone users carrying a device the size of a brick with a two-foot collapsible antenna, and thinking it was stupid looking and completely impractical.  Now, of course, I rarely leave home without my cellphone in my pocket – not so much because I’m constantly calling people but because of the computing power and data access that cellular phone technology eventually enabled.

If we think of technological impact as a continuum of Segway-like failure to cellphone-like success, I suspect many people in the U.S. would put electric vehicles toward the Segway end of the spectrum.  After all, EVs in this country got off to a start that was far more hype than substance.  General Motors is generally credited with building the first electric vehicle available for the public to drive.  The EV1 was released in 1996 to mostly positive reviews but total production barely broke 1,000 units before being cancelled in 1999.  Tesla started selling cars in 2008 with the Tesla Roadster which had what was regarded as cutting edge technology.  Initial volume, however, was low and the lack of a widespread charging network held back growth.

The Roadster was followed by the Model S in 2012 and the Model X in 2015, both of which sold in much greater numbers.  The Model S was the top selling electric vehicle globally in 2015 and 2016.  In 2017, Tesla started selling the Model 3 and in 2019 the closely related Model Y.  In the first quarter of 2023, the Model Y was briefly the world’s best selling car – the first electric vehicle to claim that title.

Tesla Model Y

Despite this apparent success, there continues to be a perception in the U.S. that electric vehicles are more feathers than chicken.  To begin with, Tesla owes a significant part of its success to a $465-million loan from the Department of Energy and to generous government incentives, such as the $7,500 tax credit in the U.S (now no longer available).  Second, the U.S. share of new car sales that were electric vehicles rose to nearly 10 percent in 2024, but has since fallen to roughly 7.5 percent.  Third, many electric vehicles have been discontinued over the past few years such as the Tesla Models S and X, the Ford F-150 Lightning, the Nissan Ariya, and the Acura ZDX to name just a few.  Fourth, only one-third of Americans think switching to an EV would save them money (in fact, a typical switch would save between $500 and $1,500 per year). [2]  Finally, the company that sells the most electric vehicles in this country by far – Tesla – seems to have lost its mojo.  The Cybertruck was a flop, total vehicle sales are down, profits are falling and Elon Musk seems more focused on robots and AI than cars.  No wonder some people are willing to write off EVs as a fad that has passed.

A Warped View of Reality

A more accurate assessment is that, while there are some challenges, the global electric vehicle industry is actually thriving.  It is largely just U.S. citizens that are skeptical of EVs – perhaps due to misleading narratives tied to the oil and gas industry and the current federal administration.  The global share of total new car sales represented by battery-powered EVs and plug-in hybrids has climbed rapidly and continuously over the past 10 years and the ratio has nearly tripled in the past three years. [3]  The global EV share of new vehicle sales now exceeds 20 percent.

While much of this growth has been driven by China, which is by far the largest producer of electric vehicles, they are certainly not alone.  In Norway, for example, the EV share of new car purchases is over 90 percent.  In Great Britain, the share is over 30 percent and the rest of the EU is over 25 percent.  Even less developed countries are jumping on board, with the EV share in Vietnam approaching 40 percent and Uruguay’s share approaching 30 percent.  Third-world governments are realizing that EVs not only save money for their residents, but reduce the need for imported oil.  In addition, the relative simplicity of electric vehicles means that there are opportunities for local vehicle manufacturing even in countries that aren’t heavily industrialized.

Even in the U.S. the situation isn’t as bad as the general perception would have you believe.  Yes, the elimination of the $7,500 tax credit caused EV sales to dip and several EV models to be discontinued, but other aspects of the U.S. market are doing just fine.  While Tesla sales were down, they still sold nearly 600,000 vehicles in the U.S. and 1.6 million vehicles worldwide, good enough for 10th place among all vehicle manufacturers.

Other companies have quietly built a lucrative niche in the U.S. with electric vehicles despite the challenging environment.  Cadillac, for example, has five electric vehicles in its lineup and sold nearly 10,000 units in the first quarter of 2026 (up 20 percent year-over-year).  EV sales represent roughly 25 to 30 percent of total volume for Cadillac in the U.S. [4]  Perhaps more importantly, nearly 75 percent of Cadillac EV buyers are coming from different brands – a statistic any vehicle manufacturer would covet.  

Not only is the industry in good shape currently, but I believe that technological trends are pointing toward electric vehicles capturing more than 50 percent of global sales within the next five years.  Even in the U.S. I think that the EV sales share will be nearing 40 percent  during that same time span.  The industry is nearing a tipping point driven by dramatic improvements in battery technology such that only diehard internal combustion fans (or people who struggle with change) will be able to overlook the advantages that electric vehicles offer.

What Is Coming

Skeptics of electric vehicles have a long list of perceived performance flaws which they use to dismiss any thought of switching from their internal combustion engine (ICE) vehicle:

• Limited range;

• Slow recharging time;

• Poor performance in cold weather;

• High cost;

• Safety concerns (primarily fire hazards); 

• Environmental concerns over mining battery chemicals; and 

• Limited availability of charging stations.

All of these issues, except the limited charging network, are really battery issues and most of the people citing these issues haven’t kept up with the steady improvement in all of these factors over the past couple of years.

For example, the latest generation of lithium batteries, known as LFP (lithium-iron-phosphate), has already addressed several of the perceived flaws.  LFP batteries are far less likely to catch fire even if punctured or crushed, and their cycle life is three to six times longer.  In addition, the use of lead and phosphate instead of less available cobalt or nickel means that costs are lower.  Finally, LFP batteries can be discharged down to zero without harming their lifespan while traditional lithium batteries often limited their depth of discharge to 20 percent.

The first of the next generation of battery technologies that seems likely to make a significant impact is known as sodium ion.  Sodium is chemically similar to lithium which means battery design and manufacturing can piggyback off of current lithium ion processes.  Sodium, however, is about 1,000 times more abundant than lithium which means it is generally less expensive and less prone to political disruption by the countries where lithium is currently produced. [5] 

Compared with traditional lithium batteries, sodium ion batteries are much less fire prone, can be discharged to zero, and operate efficiently even in sub-zero temperatures.  In addition, sodium ion batteries can be recharged much faster.  A sodium ion powered vehicle could potentially be recharged from 10 percent to 80 percent in 10 to 15 minutes with a DC fast charger.

The primary downside is that sodium ion batteries are traditionally less energy dense than lithium ion meaning that a larger battery would be required to reach the same vehicle range.  That disadvantage is shrinking, however, as new designs are moving from the lab into production.  In two or three years, the energy density of sodium ion batteries may match lithium ion designs.  What I think is likely to happen is that sodium ion technology will usher in a spectrum of new electric vehicle designs (both 2-wheel and 4-wheel)  focused on lower cost and short- to moderate-range needs.  This would be a good fit for many smaller and less affluent countries, or for users in urban settings where long range isn’t typically required and recharging options are plentiful.

The second battery technology that is likely to appear in the next few years is known as a solid-state battery.  All batteries have an electrolyte through which the ions pass between the anode and cathode.  As the name suggests, solid-state batteries replace the liquid electrolyte of traditional lithium ion batteries with a solid material – typically some type of ceramic or polymer.  Liquid electrolytes are the source of the fire hazards that EVs with lithium ion batteries currently contend with, but that hazard goes away with solid-state materials.

Solid-state batteries are both smaller and more energy dense than other types of batteries which means that future EVs could have ranges between 500 and 800 miles. [6]  In addition, this technology can handle much higher charging voltages which means potential recharging times could be reduced to just 5 to 10 minutes.

The downside is that solid state batteries are difficult to mass produce in a form that can handle the rigors of a vehicular environment and which can last for thousands of charging cycles.  Consequently, electric vehicles with solid-state batteries are not likely to be commonplace for two or three more years and are likely to be relatively expensive initially. As with almost all technologies, costs will decline over time as manufacturing processes are optimized and volume scales up.

There are other battery technologies that are under development currently that may eventually surpass both the sodium ion and solid state designs.  The potential payoff from a successful battery design is so enormous that the industry spends billions annually on research and development.  In the foreseeable future, however, sodium ion or solid-state batteries (or some hybrid design) are likely to be the predominant options.  Solid-state designs in particular are considered the “holy grail” because the combination of safety, long range and quick charging answers virtually all of the major objections that most people have regarding EVs.

The Case for Electric Vehicles

Once you get past the issues related to batteries, the advantages of EVs are compelling enough that even skeptics are likely to switch away from internal combustion engines in large numbers.  An electric vehicle won’t meet everyone’s needs, but I think it will become the default choice for new cars within 10 years.  As with just about every type of new technology, quality and performance will ramp up quickly and prices will decline as production processes are standardized and production volumes increase.  Here are some of the factors that will push buyers towards EVs:

Simplicity.  The drive-train of an electric vehicle has just 10 to 12 percent as many moving parts as the drive-train of a traditional ICE powered car.  That translates into less maintenance and higher reliability – which in turn means lower life-cycle costs for EVs.

Efficiency.  A typical vehicle powered by an internal combustion engine converts between 16 to 30 percent of the energy in its fuel to the propulsion of the vehicle, with the remainder being lost to friction and heat.  In contrast, an electric vehicle converts about 85 to 90 percent of the battery’s energy into movement.  This difference has an obvious impact on operational costs (along with many other factors), but it also means that EVs run a lot cooler – enough that ambient temperatures in dense urban areas might actually decline slightly.

Noise.  Yes, some aficionados will undoubtedly miss the roar of a gas engine, but I suspect most people will end up preferring a car that glides quietly down the road.  I don’t know if anyone has calculated the impact on urban noise levels but I suspect that it will be noticeable, particularly near signalized intersections where there is currently a wave of vehicles accelerating every thirty seconds or so.

Pollution.  Vehicle manufacturers have made enormous progress reducing the amount of pollutants generated by gas and diesel engines, but pollution is still an issue to some degree and it has an impact on the respiratory health of city residents. Electric vehicles produce virtually no pollution at the point of the car, and as the electrical grid gets greener total EV pollution levels will drop over time.  On a related note, since EVs aren’t carrying around 20 gallons of gas and 10 quarts of oil, there will be less odor in your garage, fewer stains on your driveway, and fewer petroleum products getting washed into streams and rivers.

Vehicle configuration.  There have been quite a few designs tried for vehicles with internal combustion engines, but the basic requirements of an engine, transmission and drive shaft (not to mention a radiator and large gas tank) limit the design choices that are economically feasible.  EV batteries are also a limiting factor but they can be split into modules if necessary, or even integrated with the structure of the vehicle.  Similarly, electric motors are much more compact than gas engines and have much simpler transmissions.  Consequently, the switch to EVs is likely to foster more innovation in vehicle designs, resulting in options that better match consumer needs.

Driveability.  This is admittedly a subjective measure, but the instant torque from electric motors and the low center of gravity from the battery pack give EVs both rapid acceleration and stable handling that many people appreciate.  

Mobile power source.  The battery packs in electric vehicles can supply power like a portable generator except without the noise, fumes and refueling needs.  At the extreme end, some EVs can power an entire home for a couple of days.  Known as a vehicle-to-home (V2H) connection, the EV basically acts as a home battery when the electrical grid is down.  Only a few EVs currently support this option and the necessary modifications to your home’s electrical panel and grid connection can cost $4,000 to $8,000.  Far more common is a vehicle-to-load (V2L) connection that is simply one or more standard outlets on the EV which (along with a couple of extension cords) can power home medical devices, refrigerators, or small space heaters for several days if needed.  Similarly, an EV can power lights, fans and a mini-frig at a campsite or various power tools at a work site. [7]

There are, of course, some disadvantages to electric vehicles other than the ones mentioned earlier, but they tend to be relatively minor.  Tires, for example, tend to wear out more quickly because of the added weight of the battery packs (EVs are 15 to 20 percent heavier than equivalent ICE vehicles).  In addition, insurance tends to be more expensive because EVs that have been in an accident have proven harder to repair (or perhaps current body shops are less equipped to repair them).  

Finally, there is the perceived lack of charging stations – a problem that is not too dissimilar from the lack of gas stations a hundred years ago when traditional automobiles first became widely available.  Currently, there are about 85,000 charging stations comprising roughly 230,000 charging ports.  Of this amount, over 45,000 ports are of the DC Fast Charging (Level 3) variety that you would want to find if you were on a road trip.  The remaining ports are largely Level 2 which would be useful at a hotel where you are staying the night or at your workplace where you could recharge for several hours.  On a day-to-day basis, of course, many EVs are going to be charged overnight with residential Level 2 connections so that public charging stations will be needed only on long trips.

A Charging Station at a Community Center

These numbers are changing almost daily as businesses and public institutions see the advantages of providing charging services for their clientele.  Walmart, for example, recently started installing fast Level 3 chargers at its stores across the country.  When battery technology improves to the point that charging takes only 10 minutes or so, thousands of businesses will become viable locations for charging facilities.

The Bottom Line

Electric vehicles won’t be as life changing as the internet, smartphones or artificial intelligence but they have enough advantages that replacing the current internal combustion engine technology will seem like a fairly obvious decision once the next generation of batteries are widespread.  Lithium ion batteries made electric vehicles possible but came with notable limitations.  As battery technology improves, those limitations will quickly fade and the tipping point is closer than most people realize.

The result will be cities that are a little cleaner, a little quieter, and a little cooler – not a dramatic difference perhaps, but a noticeable one.  More importantly, households in our car dominated society are going to have a little more money in their bank accounts and more flexibility in their transportation options.  I used the term “revolution” in the title of this article and that was probably a bit of an overstatement.  For my generation the shift to electric vehicles will seem quite significant but I suspect future generations will be less impressed.  For them, the choice will be simple.

Notes:

1. “The Curious Case of the Segway:  A Visionary’s Ride to Reality (and Back Down Again)”; PCDworks; https://pcdworks.com/post/the-curious-case-of-the-segway-a-visionarys-ride-to-reality-and-back-down-again/

2. “Only One in Three People Think EVs Save Money on Fuel Costs”; Bumper.com; April 2026; https://www.bumper.com/car-advice/buying/only-one-in-three-people-think-evs-save-money-on-fuel-costs/

3. Katharina Buchholz; “Global Electric Car Sales Nearly Triple In Three Years”; Statista; May 2025; https://www.statista.com/chart/26845/global-electric-car-sales/

4. Robert Ferris; “EVs are giving Cadillac a shot at luxury leadership”; CNBC; September 2025; https://www.cnbc.com/2025/09/02/evs-are-giving-cadillac-a-shot-at-luxury-leadership-.html

5. “Sodium as a Green Substitute for Lithium in Batteries”; Physics; April 2024; https://physics.aps.org/articles/v17/73?utm_source=ts2.tech

6. Peter Johnson; “A solid-state EV battery that can achieve 800 miles of driving range – It’s becoming a reality”; Electrek; March 2026; https://electrek.co/2026/03/18/solid-state-ev-batteries-with-800-miles-range-become-reality/

7. Jacob Marsh; “What Is V2L?  A Guide to Vehicle-to-Load Charging”; Emporia Energy; January 2026; https://www.emporiaenergy.com/blog/what-is-v2l/

Post 66: The Impact of E-Commerce on Brick-and-Mortar Cities

 The older I get, the more out of step I become with current trends – and, quite frankly, the less I care about whether I’m in step or not.  When I need to buy something, for example, my inclination is almost always to drive to a local store.  Increasingly however, the typical consumer is finding ways to shop electronically without ever leaving their home (or office).  I do my share of online shopping because the convenience and value can be undeniable.  But it isn’t my default the way it is for many people.

Delivery Vehicle in a No Parking Zone

The problem is that cities have been built with retail space as a substantial and prominent element of the urban fabric.  As e-commerce reshapes the way we shop, it is concurrently reshaping the form of cities.  Shopping districts that used to be urban focal points are struggling, suburban malls that once were dynamos of sales tax generation are leaning on businesses that offer experiences instead of products, and many strip centers that used to be the bread and butter of urban shopping are finding vacancies hard to fill.  Some retail centers, of course, are doing just fine or even thriving, but there is a general malaise around brick-and-mortar retailing that should be worrisome for city leaders.  It might not be quite as dire as the continuing struggles of the office market, but it isn’t far behind and the secondary ripple effects may be more far-reaching.

My goal with this article is to examine the current state of e-commerce, the trends that are shaping its future, and the impact that all of this is having on cities.  As with many aspects of our society, change is happening so rapidly that it is straining our ability to adapt.  The retail industry has shifted dramatically in the past 20 years but our cities are populated with retail buildings designed to last 50 years or more and are served by public infrastructure designed to last 100 years or more.  Cities need a strategy for addressing that mismatch.

The Three Dimensions of E-Commerce

The practice of online shopping has become so ingrained in our lives that it is easy to forget how recently this technology began.  The general concept and early pilot implementations have been around since the 1970s, but it didn’t seriously take off until internet access was commonplace, electronic payment methods had been ironed out, and cell phones became ubiquitous.  All of that wasn’t really in place until the late 1990s or early 2000s, and even in 2010 e-commerce accounted for just over 4 percent of total retail sales.  But in the past 15 years, e-commerce has exploded.

Volume.  Aside from recessions, retail sales volume continues to rise steadily over time – up roughly 150 percent over the past 20 years.  E-commerce volume, however, has ballooned during that same time frame – up approximately 1,500 percent and now into the trillions of dollars.  The rapid increase in online sales can be partially explained by the fact that 20 years ago it was just picking up steam and the volume was relatively low, but if you look at e-commerce sales as a percentage of total sales the trend line is steeply upward.

It is common for a new technology to have a steep growth curve initially and then gradually plateau, but e-commerce shows no signs of slowing down.  The proportion of total sales spiked sharply during the early stages of the COVID pandemic and then dropped slightly afterwards as returning to stores felt safe again, but since 2022 the ratio has resumed its upward path.  E-commerce currently represents roughly 16 percent of total sales and seems likely to reach 25 percent of total sales within the next 8 to 10 years.  The latest indicator?  Amazon recently passed Walmart as the nation’s largest retailer.  

Breadth.  It now seems hard to believe, but when Amazon was founded a little over 30 years ago it was focused almost exclusively on selling books.  It turned out that selling books was an extremely logical entry point into the nascent field of e-commerce.  Avoiding expensive retail locations provided a price advantage, selling from a warehouse meant that many more titles could be in stock than any bookstore could carry, books were an unambiguous commodity (no one needed to test drive or try on a book), and the ability to read reviews from other customers presaged the addictive rise of social media.  It didn’t take long, however, for the company to diversify into music, electronics and other consumer goods.  In just six years books were less than half of the company’s revenue and eight years later they weren’t even the largest product category.  

Amazon (and its integrated roster of third-party vendors) now sell seemingly every product under the sun.  There have always been skeptics, of course, that believed that certain products would always be sold in person and be immune to the impact of e-commerce.  That list, however, is getting smaller and smaller.  For example, groceries (particularly fresh produce and meat) were thought to be safe from e-commerce but that has changed dramatically.  It is estimated that roughly 60 percent of all US households are either current users of e-commerce for groceries or are at least capable of doing so.  Walmart – the nation’s largest grocer – has made major inroads into online grocery shopping in recent years.  Sign up for a Walmart account and they will give you the option of having your groceries delivered within a couple of hours.  For those willing to share the code to their smart-lock or garage door keypad, Walmart offers the slightly creepy option (in my opinion) of coming into your home and putting the groceries away for you.

Buying and selling cars is another product category that seemed immune from e-commerce, but Carvana broke that barrier in 2013.  Now there are an assortment of businesses that sell both new and used cars online (including Amazon as of 2024).  Virtually every retailer of nearly every type and even modest size now has an online presence in order to survive.  Many people still enjoy the experience of in-person shopping, but it is rarely necessary to shop in person if you don’t want to do so.

Speed.  The Achilles heel of e-commerce has always been the time it takes for your purchase to be delivered to your door.  Sure, in-person shopping takes time as well, particularly if you have to go to multiple stores to find what you want, but it still beats waiting several days for your package to arrive.  E-commerce businesses are obviously aware of this issue and have invested billions to streamline the delivery process.  Average delivery time across the industry improved from approximately six and a half days in 2020 to just over 4 days by mid-2023. [1]  Shipping time is even shorter for the businesses that do the biggest volume of sales – Amazon is now down to an average of less than two days.  Delivery speed is a crucial perk for those willing to sign up for membership programs.  For example, roughly 75 percent of Amazon shoppers are members of Amazon Prime.  U.S. based Prime members received over 8 billion items in 2025 the same or next day, a 30 percent increase over the prior year. [2]

While faster is always better in general terms, things have become a little more nuanced in recent years.  In a 2024 survey, the importance of delivery speed was actually slightly below delivery cost and delivery reliability.  Ninety percent of consumers are willing to wait two or three days (at least some of the time) if it lets them avoid shipping costs. [1]

The Future of Retailing

You might be wondering why this section isn’t titled “the future of e-commerce.”  The reason is that brick-and-mortar retail and e-commerce retail are becoming more and more entwined.  Not only are brick-and-mortar businesses rolling out sophisticated online shopping sites, but e-commerce stalwarts such as Amazon, Chewy, Warby Parker, and Wayfair are opening physical stores in selected locations.  Amazon is building several 30,000 square-foot “department stores” and may even experiment with much larger “supercenters” similar to Walmart.

The official name for this trend is “omnichannel retailing” and it has been underway for the past 5 or 10 years.  The term basically means that every retail business is scrambling to connect with their customers using every conceivable communication channel possible.  Don’t want to come into our store?  Visit our website!  Prefer learning about new products through social media influencers?  Then checkout our presence in Facebook Marketplace, Instagram Shops or embedded product tags in Reels and Stories!  Even TikTok has an estimated global e-commerce impact of more than $30 billion.  Once a haven for small retailers, TikTok Shop now attracts major brands that are reporting huge year-over-year sales increases.  [3]

Predictably, the latest “channel” is artificial intelligence.  Instead of visiting multiple websites, comparing product selection and price, and then placing an order, simply describe what you need to your AI tool of choice and let it find the best product and the best price.  Within a few seconds, AI will have recommendations clearly explained and organized for your review.  According to a recent survey, nearly 60 percent of online consumers have used artificial intelligence to help with shopping decisions. [4]  AI has become a trusted friend to many people – a friend, it should be mentioned, that has instant access to almost unlimited information.  Nearly half of users trust AI more than their human friends to help make fashion decisions. 

I decided to test AI as a shopping channel when my old laptop shot craps the other day.  I told Google Gemini what I was looking for and asked it to find the best deal.  Almost instantly it identified what it thought were the best options and included links that took me directly to the respective websites with the product pre-selected and ready for check-out.  I used one of the recommendations for my purchase without searching to see if I could get a better deal.  I’m not sure I trust it enough to be a regular user, but the experience was eye-opening.  Speaking of trust, some people are reportedly empowering AI agents with payment information so that AI can not only find the best deal, but go ahead with finalizing purchase and delivery details.  I am definitely not there yet and may never be, but younger generations are unlikely to have the same reservations.

The rise of artificial intelligence is likely to hurt physical retail stores in two additional ways.  First, AI tools are likely to focus shopping decisions on value or fit which will weaken the impact of brand recognition – something that traditional stores tend to rely on heavily.  The exception may be at the very high end of the spectrum where value and function are less important than the social statement that is made by wearing a particular brand.  

Second, AI tools are going to enable what is often referred to as hyper-personalization.  Your favorite AI-bot will know so much about you that its recommendations will almost seem like an extension of your own mind.  Virtual shopping software will assist in this process by letting you “see” how clothes, eyeglasses or makeup will look on you.  Physical stores will try to replicate this ability with AI-powered kiosks or display panels that supplement sales associates, but for many people the online experience will be too convenient to ignore.

Impact on Cities

To my surprise, the more I looked into e-commerce the more I realized that the impact on cities was not uniformly bad.  Online shopping is forcing some uncomfortable transitions, but there are some positives as well which means that the overall impact is a mixed bag.  

The rise of warehousing.  From a construction standpoint, the big e-commerce winner has been warehousing space.  For each one percent rise in the share of retail purchases going online, there is a corresponding increase in warehouse demand of 50 to 70 million square feet. [5]  E-commerce fulfillment centers have been popping up all across the country in recent years and continue to be built at a rapid pace.

This isn’t, however, the type of warehouse space that most people are familiar with.  A traditional warehouse houses bulk quantities of goods shipped from one business to another.  A fulfillment center may receive goods in bulk, but they are quickly broken down into individual units that can easily be shipped to individuals.  Although fulfillment centers come in a variety of sizes to suit a variety of purposes, they typically are very large (500,000 to 1,000,000 square feet), high ceilinged and very automated.  Many centers basically operate 24 hours per day, seven days per week.

From a local government standpoint, e-commerce warehousing has both pros and cons.  On the positive side, these facilities pay a moderate amount of property tax but demand relatively little in terms of public services (e.g. parks, schools or police services).  They often prefer to be located near railroad tracks or interstate highways – sites that generally aren’t great for residential neighborhoods – and they are relatively benign from an environmental standpoint.  

On the down side, fulfillment centers are out-of-scale aesthetic disasters that do nothing for the character or vibrancy of the city, and produce little sales tax or secondary economic benefits.  No one says “hey, let’s go hang out at the industrial park and watch the UPS trucks come and go.”  Fulfillment centers might be a useful part of modern life but they are not what makes a city great.

Somewhat more troubling is a recent trend spurred by the demand for same-day or two-hour delivery service which is leading to mini-warehouses stocked with frequently requested items.  These micro-fulfillment centers are often just 5,000 to 15,000 square feet in size and are typically located in the heart of urban centers.  They are great for meeting the needs of shoppers desperate for a bottle of Advil, a package of Huggies, or a bag of Purina Dog Chow, but they are a dead zone in terms of pedestrian activity.  They typically occupy street level space that might otherwise have been a shop or restaurant, but now is a warehouse with blacked out windows.  Fortunately, they tend to gravitate toward Class-B or -C commercial space that might otherwise be vacant for an extended time, but the facilities generate delivery and pick-up traffic that the buildings are ill suited for and which may disrupt other nearby businesses.

Shifting retail space.  You would think that e-commerce would be ringing the death knell for retail development but it isn’t quite that simple.  Keep in mind that retailers are constantly chasing disposable income and disposable income keeps moving, thus sustaining new retail development.  Retail shops particularly covet affluent young families with children, new houses, and unfulfilled ambitions because they want/need to buy lots of stuff on a regular basis.  In the past, affluent families congregated in sprawling suburban subdivisions accompanied by new parks, new schools and new shopping centers.  Demographic trends (i.e. fewer kids), high interest rates, long commutes and housing affordability issues have put a crimp in that pipeline, but it isn’t empty yet.  

Plus, many people still prefer in-person shopping in physical stores (at least part of the time).  After all, eighty percent of purchases are not made online.  Even though that number is dwindling, it means there is still demand for brick-and-mortar storefronts.  Hence, new retail centers are being built, but not as many as a decade or two ago.  The shifting retail demand pattern inevitably leaves some shopping centers or retail districts with declining sales, however, and the loss of business to e-commerce platforms simply makes things worse.  Particularly hard hit have been retail categories such as electronics, books, apparel and home furnishings.

The perceived k-shaped economy – where the top 20 percent of households thrive and the remainder struggle – has helped luxury brands and value retailers at the expense of mid-range stores.  Some chains have either closed many of their locations or gone out of business entirely.  The remainder are trying to find some hybrid middle ground that captures the “omnichannel” strategy discussed earlier.  Walmart, for example, is pushing hard into e-commerce and is using many of its 4,000+ stores as mini fulfillment centers.  Because of its wide geographic coverage, Walmart can deliver to nearly 95 percent of U.S. households in 3 hours or less.  Customers now expedite roughly a third of store-fulfilled orders so that they arrive in 1 to 3 hours. [6]

The final shift in brick-and-mortar retailing is an increased emphasis on making the experience of in-person shopping fun.  Many centers that were struggling are now jam packed with restaurants, bars, entertainment uses (e.g. arcades, putt-putt golf, etc.) or retail services (e.g. day spas, nail salons, etc.).  This shift was partly a desperation move to fill vacancies left by traditional retail stores that drastically cut back locations, but it has morphed into a sustained strategy for keeping rent income flowing and foot traffic high.  Fun is a valuable differentiator compared with online shopping.  This approach doesn’t work everywhere, however, which means that some older shopping areas have high vacancy rates and no viable turnaround plan.

Delivery traffic.  If the previous two sections showed the impact of e-commerce as less destructive than expected, then surely the thousands of delivery vehicles roaming every major city will make up for it by being unabashedly bad.  After all, it is a rare day when at least three or four UPS, FedEx or Amazon trucks don’t go down my quiet residential street.  But as it turns out, there are pluses and minuses here too and there is actually a surprising lack of definitive studies on the impact of delivery vehicles.  I suspect this is because the true answer is “it depends.”

So here is my two-part hypothesis.  First, in low-density residential neighborhoods the presence of delivery vehicles may be very visible but the overall impact is probably positive.  Keep in mind that the delivery route of a single Amazon truck replaces dozens of shopping trips taken by individual household residents.  And in contrast to the relatively random approach to shopping that I and many others take, every part of an e-commerce delivery has been ruthlessly optimized.  All of this doesn’t make a great deal of difference because most residential streets are well below capacity in terms of the vehicle trips they carry, but I am reasonably confident that e-commerce ends up reducing the total number of trips in low-density areas.

In addition, most of the large e-commerce businesses and delivery services are shifting to electric vehicles much faster than the general public.  Thus, total pollution levels are lower now or at least soon will be.

On the other hand, in dense, urban areas the impact probably flips to mostly negative.  There may still be fewer total trips, but other factors come into play that make e-commerce more problematic.  To begin with, many household shopping trips in heavily urbanized areas are likely to be completed using walking, biking or transit as the primary transportation mode.  Where a car is used for shopping, the trip typically ends in a parking garage or lot where it doesn’t obstruct traffic.  While there are some e-commerce deliveries by cargo bike, the vast majority use delivery vehicles and that is problematic for two reasons: (1) they increase total vehicle miles driven on streets that are near capacity, and (2) they have drivers who routinely double park during deliveries which obstructs the flow of traffic.

In a low-density setting a UPS delivery truck can almost always pull over to the curb so that traffic can easily go around and the delivery time frame is measured in seconds.  In a high density setting, drivers can almost never find a loading zone that takes them out of traffic and the time it takes to find the correct recipient or package drop-off location in a 30-story building can easily be several minutes.  Thus, traffic - which is already bad - is almost always made worse by the e-commerce delivery process.

Cities, of course, can address the problems caused by double-parked delivery vehicles by issuing tickets.  Most cities do just that, issuing tickets for double parking by the thousands.  Unfortunately, it has not had the desired effect.  Drivers have been instructed by their employers to double park anyway so that package delivery times can be kept as low as possible.  Paying tickets has become simply a cost of doing business. 

A recent study in San Francisco found that the city issued nearly 15,000 parking tickets in 2023 to the top delivery services. [7]  No city, of course, wants to deal with the administrative processing costs for 15,000 tickets if it can be avoided, so most have some form of consolidated payment option which allows bulk violators to pay a reduced fine amount in exchange for not contesting any of the tickets.  In the end, it is something of a win-win for both the city and the delivery companies but it underscores the fact that the e-commerce delivery system is incompatible with the urban form of most large cities.

The Bottom Line

E-commerce is changing the face of retail which, in turn, presents challenges for the urban form of cities, but it is not a complete disaster.  It is simply one more change agent that cities need to adjust for as future zoning and infrastructure decisions are made.  There is no magic wand, but I have a few suggestions for minimizing the pain.

Scale back new retail zoning.  As discussed above, there will still be a need for new retail development in growing cities, but it will be less than has historically been the case.  If e-commerce is siphoning off approximately 15 to 20 percent of retail sales, cities should plan for a roughly equal reduction in new retail square footage.  This is particularly true for large scale shopping centers aimed at a community-wide or regional market.  These centers have traditionally been supported primarily by department stores and apparel stores which have been particularly hard hit by e-commerce.  There will still be some demand but cities should be skeptical of grand plans that seem to harken back to the early 2000s.  Cities should be especially leery of developers requesting public subsidies or up-front public infrastructure commitments.  Over-zoning for retail development will simply cannibalize existing shopping districts causing premature decline.

Expand loading zones.  Everybody loves on-street parking because it is convenient to use and either free or wildly underpriced.  But it is arguably the least productive use of the public right-of-way, particularly in dense city-center locations.  Instead of parking, cities should block off at least 50 to 60 linear feet of loading zone space on virtually every block face.  This will lessen the congestion caused by double-parked delivery vehicles and facilitate the growing utilization of robotaxis and network transportation services (e.g. Uber, et al).  This is likely to be very unpopular politically – local businessmen will swear that any reduction in parking will force them into bankruptcy – but cities should at least start a pilot program to gather actual data on the impact on both business and traffic.

Encourage package delivery centers.   Cities should strongly encourage any large residential complex or high-rise office building to have a ground floor package delivery center that offers a convenient and secure way for packages to be delivered and stored.  Developers are already doing this voluntarily because it is a valuable amenity for tenants, but cities should push to make this practice as universal as possible.  Even suburban subdivisions should think about providing a secured package delivery station in order to thwart porch pirates.  The technology is already available to make this workable and it would cut down on the number of packages delivered to office locations simply because people don’t want packages left unattended on their doorstep.

Finally, several delivery companies are testing out delivery via unmanned drones, either airborne helicopter-type vehicles or sidewalk based robots.  I don’t think any of these delivery devices are ready for prime time and they all have major potential pitfalls.  If cities are approached by companies wanting permission for this kind of service, they should just say “no.”  Let some other city be the guinea pig until the technology is proven.

Notes:

1. Sandy Gosling, et al;  “What do US consumers want from e-commerce deliveries?”; McKinsey and Company; February 2025; https://www.mckinsey.com/industries/logistics/our-insights/what-do-us-consumers-want-from-e-commerce-deliveries

2. “Amazon sets new Prime delivery speed record in 2025”; Amazon News; February 2026; https://www.aboutamazon.com/news/retail/amazon-prime-same-day-next-day-delivery-2025

3. Allison Smith; “Sales from major brands on TikTok Shop nearly doubled in 2025, drawing Ulta and Sally Beauty”; ModernRetail; March 2026; https://www.modernretail.co/technology/sales-from-major-brands-on-tiktok-shop-nearly-doubled-in-2025-drawing-ulta-and-sally-beauty/

4. Caroline Mackey; “Nearly 60 Percent Use AI to Shop – Here’s What That Means for Brands and Buyers”; University of Virginia, Darden School of Business; June 2025; https://news.darden.virginia.edu/2025/06/17/nearly-60-use-ai-to-shop-heres-what-that-means-for-brands-and-buyers/

5. “The E-Commerce Boom Isn’t Over:  Implications for Logistics Real Estate”; Prologis; March 2025; https://www.prologis.com/insights-news/research/e-commerce-boom-isnt-over-implications-logistics-real-estate#:~:text=E%2Dcommerce%20penetration%20growth%20translates,of%20net%20absorption%20by%202030.

6. Melissa Repko; “Walmart hikes sales and earnings forecast as it attracts shoppers across incomes”; CNBC; November 2025; https://www.cnbc.com/2025/11/20/walmart-wmt-q3-2026-earnings.html

7. Noah Baustin; “One year, 14,000 tickets:  How delivery giants shrug off fines and flout SF’s parking laws”; The San Francisco Standard; July 2024; https://sfstandard.com/2024/07/31/ups-fedex-delivery-parking-tickets-2023/