Photo: Business Formation in Numbers 2006-2023
Recently I have been reading some papers that claim that COVID-19 kick-started entrepreneurship, as more and more people changed their perspective on old jobs and started their own businesses.
I do not agree with such an assertion. My thesis is that such a trend has been brewing for quite some time. To see this, I went to census.gov, and downloaded the Business Formation Statistics Weekly Data. Actually, I dug a little deeper, I would like to see which subsectors have had more entrants over the years, so I downloaded the data by industry sub-sector – When I say subsector I mean as defined by the NAICS 3-digit codes, which is standard for economic analysis. For example, 454 standards for nonstore retailers (mostly e-commerce), and 493 is warehousing and storage.
Here I plotted in the top five subsectors that have had the largest entrants over this time period, which is show on top.
What do we see?
From the absolute numbers perspective, it is stunning to see what nonstore retailers (454), Personal and Laundry Service (812) and Truck transportation (484) have been leading the charge since almost 20 years ago.
Of course, the growth of businesses in 454 and 484 is due to the rise of E-commerce. But we can say a bit more here. We know the pie of e-commerce has been rising over the same period. We also know that Amazon has been steadily claim a market share somewhere between 40%-50%. This means that all the other smaller e-commerce businesses are growing too.
I then plotted the relative growth, holding 2006 as 100%. Here is what I got:
There we have another shocker: While nonstore retailers still lead the charge, the number two is actually warehousing and storage.
Again, the increasing trend has been there all along, even before covid. So here is my hypothesis: Technology has made selling things and moving things cheaper and easier. This is achieved by reducing or eliminating the large fixed cost of starting up a business:
- E-commerce website? $0~$100 a month.
- Shipping? ShipStation, EasyPost, etc..
- Customer service? Zendesk..
This is what I can a supplychainization process.