The Death Throes of the ‘High Street’? – Part 1

I have never been inclined to be the harbinger of doom. However, from where I’m standing, the facts, and what they might mean for the future of ‘High Street’ shopping, seem irrefutable.

We are already seeing businesses in ‘High Streets’ up and down the country suffer. More and more are closing. This might partly be attributed to the recession; and of course there has been a decline over a number of years that could be due to other means. The increase in out-of-town shopping centres certainly has not helped, the retail giants massed together with enormous car parks, fast food outlets, cinemas and more. But now a new threat has emerged: much larger and more virulent than ever before. The traditional customers are now staying at home and doing their shopping on the internet.

Month by month we see a continued increase in the number of people buying online. These people used to shop in the ‘High Street’ of the villages, towns and cities all over the UK. If you’ve watched the news on TV or in other media at all over the last few months, you can’t fail to be aware of the problems local (and often national) retail traders are experiencing.

Online however, it is quite a different story. In July 2010, online retail sales in the UK reached £5 billion. This is approximately 20% of UK retail sales, and represents an increase of 18% compared with the same month in the previous year, with sales volumes up by 1.1% on June 2010.

Online sales are increasing year-on-year at an exponential rate. Back in 2001, the average (mean) spend was just under £150 million per month (total online sales for the year 2001 were £1.8 billion), and there are no signs of this growth rate slowing.

To put this into perspective, the top three shopping streets in the UK (in terms of sales volumes): London’s Bond Street, Oxford Street and Regent Street, together, took just over £5 billion in sales for the whole of the year 2009. This is by no means a small sum, but the whole of the annual income is comparable to just one month of sales for the shops along the ‘online high street’!

Interestingly, almost all non-food sectors are reported as showing strong growth online, with the biggest increase of 68% being seen in clothing and accessories. This is certainly not the same kind of performance that is being seen elsewhere.

What’s more, the online shops are open 24/7 and accessible from every home, office or even café that has an internet connection, Wi-Fi hotspots have sprung up everywhere and many people are now shopping (and comparing prices on the spot) from their smartphones.

A series of reports from research company IMRG/CapGemini adds some weight to this. IMRG/CapGemini predicts that if current trends continue, within 10 years 50% of the UK’s retail sales will be carried out on the internet.

Of course, a prediction is only that, a prediction, but even the most sceptical can not ignore the enormous increase in online sales, and actual performance has surpassed all predictions made in recent times.

While this is likely to have a devastating affect on those who have their livelihoods in the high street, the broader impact is potentially far bigger.

I wonder if councils – not known for being fast moving when it comes to policy – are ready and equipped to rethink their development strategies and seek innovative ways of attracting people to town and city centres. Or to find ways of their communities engaging with the local area through the internet (beyond finding out when the next refuse collection is from a bloated, confusing website).

Governments might also experience falling tax revenues, where companies that are set up to trade and sell online only, can base their headquarters in offshore locations more easily that traditional ‘bricks and mortar’ companies thus benefiting from lower taxes as well as labour costs.

Speaking of Governments, most major countries are pushing for the roll out of faster broadband and service providers are also developing faster and better ways of providing internet access. In South Korea, and perhaps more surprisingly Latvia, broadband download speeds are in excess of 20Mbps, with 10Mbps broadband being considered slow. Yet in the UK we can’t even get it together for 50% of the population to have 2Mbps download speed, with many in rural UK areas restricted by no-go zones or not-spots. Finland has declared broadband to be legal right for every citizen (from July 2010)! So when will the UK catch up with this, if we are to compete in a global marketplace, we at least need to be competing on a level playing field. This is even more important post-recession.

The larger national chains are already preparing for this transition of customers’ activity, with Tesco being current leaders in the race to gain market share with online grocery, home products and everything else they can manage to provide while providing home delivery for the weekly shop.

Young, fast-moving and well-funded start-up businesses are looking at the marketplace and seeing that there is a raft of opportunities to be had online as internet usage becomes mainstream – not just for the geeks or the young - and continues to permeate the population.

The future is exciting for those who are determined to take part, be engaged and make the investment. However, those who are determined to stick their heads in the sand, or make smug remarks about not really being ‘into’ technology, or even worse all those people out there who say: “Oh yes, our website is under construction,” or more often: “… redevelopment at the moment.” But when we look at the sites, there is so often evidence that they have been ‘under-construction’ or ‘redevelopment’ for years (or even in some cases – a decade). I can only assume they are hoping ‘it’ (the internet) will stop soon or maybe they think it just won’t ‘catch-on’, as someone said to me back in the 90s. What are they waiting for and what are they going to do when they can no longer rely on the dwindling numbers who take the journey through a high street that has only a few shops in it?

The reality is, in a mere 15 years, the internet has become the most dominant feature of daily life, creating unimagined opportunity for many and changing the very fabric of our society. We have no way of really telling what effect it will have in the next 5 or 15 years, or whom it will affect the most.

In part 2 we will be discussing how the high street has been under attack since the 1980s and how business owners need to act to stay afloat.