Why retailing is not dead yet

It has been a long time since anyone could make any money from owning a shop. From Woolworths to Comet, a whole string of them have gone bust in the past decade. Customers have switched to buying everything online. Business rates have risen relentlessly higher, squeezing profits. Staff have become more and more expensive as the minimum wage keeps on going up. And property developers through the 1990s and 2000s built too many shopping centres and out-of-town retail parks.

But perhaps the real problem in retailing was not the competition or punishing taxes. It might be that there just hasn’t been enough innovation – and that shop owners are themselves responsible for the decline of their industry. There are a few signs that a few retailers at least are starting to get that – and instead of just complaining are trying out new ways of selling things. 

In the US, Amazon has just launched its first full-scale cashier-less grocery store. You don’t even have to check out. You just walk in, pick up the stuff you need and go (it uses your phone to debit your account automatically). Whether this works out or not remains to be seen. But it is something new and different, and a lot more convenient if you are in a hurry.

Meanwhile, Amazon’s technology rival, Apple, is pushing forward with a retail chain that already has more than 500 outlets worldwide. As anyone who has ever stepped into one will know, its stores are lavishly fitted out and expensive to run, and yet they hardly appear to be interested in selling you anything. They don’t even feel like a shop – and yet they have one of the highest turnovers per square foot of any chain in the world. Again, it is a very different approach to retailing.

Ikea, too, has started developing plans for renting rather than buying furniture. It has partly done that to address climate change, but it may also be a better model for a world in which home ownership is in decline (and where many people prefer to “stream” products rather than own them). Others are trying out membership schemes, partly modelled on the success of Amazon Prime. Tesco has revamped its Clubcard as a membership scheme and Walmart is planning something similar in the US. 

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There are new technologies that are starting to emerge too. Virtual changing rooms that use artificial intelligence (AI) to let you see how clothes will look on you are moving into the mainstream. They will free-up floor space and may well encourage people to buy more things in new and different ways. Facial-recognition software is making cashier-less stores possible and making it easier to crack down on shoplifting, which reduces costs and will allow chains to reduce prices. As AI gets more mainstream and robotics improve there will no doubt be lots of new ways shops can be run. 

Most of the retail formats we are familiar with on the high street were tired and stale. The department store was an Edwardian invention. Huge buildings with lots of different concessions might have been exciting in 1910, but it is a long time since they set any pulses racing. The supermarket was more or less perfected by the 1960s: they have got slightly bigger in the 50 years since then, but otherwise have hardly changed at all. Bookshops, clothes shops, toy shops and pharmacies – all look much the same as they did 100 years ago. 

But with new ideas and new formats, there is nothing inevitable about retail’s demise. Amazon is investing billions in retailing, but doing it in new ways. Apple is opening more and more stores, but bringing some flair and imagination to them. There is a vast space starting to emerge for retailing entrepreneurs who can work out how to integrate artificial intelligence and virtual reality into a physical format and offer something different. In truth, the real problem in the retail industry was that it had become too conservative and dull, with too many shops that all looked much the same and very few new ideas. Retailing may surprise us yet by staging a revival.