The changing face of retail: the end of consumerism, or the democratisation of capitalism?

2018 certainly appeared to be yet another brutal year on the high street with the felling of yet more seemingly untouchable ‘giants’. So is bricks and mortar retail finished? To answer this we need to analyse the ‘mechanics’ behind what is actually going on. 

All too often the ‘internet’ is now considered the ‘panacea’ for retailers. However, simply pitching bricks and mortar vs. ‘The Internet’ is grossly over-simplifying things to say the least! ‘Internet Shopping’ is reliant on super-efficient distribution which, thanks to intense competition amongst couriers, and technology, is now accessible to anyone at tiny prices. This means the ‘internet store’ does not require masses of (real estate!) space as the whole supply chain can be kept extremely ‘lean’ against real-time demand. Furthermore, nor does the ‘e-commerce’ retailer require expensive ‘premium’ property (i.e. traditional town centre retail frontage!) to merchandise product to the consumer. It is easy to see why, therefore, the huge spaces occupied by the traditional department store have become largely ‘redundant’ and a liability to such retail businesses; especially when coupled with the business rates attracted by such property. When you consider that many retail leases will have had relatively long ‘term’ periods (I.e. tens of years) it is easy to see how the rapid uptake of digital marketing and commerce (and low overhead costs of the brands utilising this business model) have left ‘competitors’ struggling behind hampered by now relatively high fixed overheads, the much higher ‘margins’ that have to be maintained to cover these costs and a, relatively, much more restricted ‘physical’ marketplace.

So, if anyone can theoretically establish an e-commerce store with little requirement for floor space, is this not the neo-liberal dream form of capitalism realised? Well, not quite. You see when consumers were inextricably ‘coupled’ with premises (i.e. since the rise of consumerism in the 1950’s), the length of a retailers frontage multiplied by the relative proportion of the footfall it was exposed to in any one location determined the value of their prime ‘space’ and, crucially, still does for most. The exponential rise of online sales as a proportion of retail has resulted in huge market failure amongst the retail property sector and, moreover, its institutional investors who are the real puppet-masters, ultimately requiring a return (from rents that were expected to continue increasing) from much of this estate. Tenants have pulled out in droves and the ‘land asset’ now becomes highly speculative (but inherently valuable still due to still being ‘finite’). This ‘restructuring’ of town centre real estate has a knock-on effect on small independent retailers however. Consumers viewing the exit of huge stores like HoF could be forgiven for losing confidence in town centres! It reinforces the notion that online or out of town are ‘cheaper’, ‘more convenient’ and rings alarm bells about the direction the economy may be going in in general prompting ‘belt tightening’…

The ‘value’ in the retail sector is no longer in the real estate; it is in ‘information’. The ability to present a product to a consumer and convince them to purchase amongst a truly global marketplace is where the investment of large retailers now needs to go…and who ‘owns’ this? Not the institutional investors but the ‘disrupters’ of Silicone Valley!

For us, as a small independent, we see the future of retail as being a hybrid between good social media presence and a traditional retail outlet; plus other ‘experiential’ offerings around this at a local level. That is why, we believe, the high street still has relevance to everyone at a real ‘community’ level…

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