Why the high street is dying a mercifully quick death

14 January 2009

There seems to be little doubt that the British high street has been dying a quick death. The recent numbers returned by many big chains indicate it is curling up into the fetal position ready for a final swift blow to finish it off. Sure there are some strong brands still operating and even growing but the stalwarts of the high street are desperately thrashing for any lifeline within reach.

The truth is that old style marketing methods and business models are dead. The way stores have been operating for the past 50 years has come to an end, and the brands clinging to these out-dated models are going to see the erosion of their margins accelerate rapidly until they are a penniless corpse.

The classic high street brands have been following the industrial media cycle to drive sales and profits. Get capital, buy stock, buy advertising to push people through door, push product on x margin, buy more advertising with margin profit, and around and around. There's always been "brand truths" and other marketing jargon thrown on but the truth is stores were a sausage machine where advertising pushed people in one side and profit came out the other.

This problem with this arbitrage model and style of advertising is that it was formed decades ago when distribution of information worked very differently than today. In the past the mass media was the only way to communicate to a mass audience and the ability to control advertising meant a merchant could control the information flow to consumers.

The branding of "best price", "never knowingly undersold", "customer satisfaction", "expert assistance", "wide selection" could control the perception and real-life action of consumers. If there was no way to easily obtain information of pricing, product availability, or product recommendation consumers could be more easily swayed by the brand messaging.

This information inbalance and control of mass communication has now been almost entirely destroyed. The internet has obviously eliminated any consumer need for advertising. Advertising is no longer considered to be an information input by consumers but rather an information barrier - an attempt to deceive and annoy.

There are still old-style consumers - that demographic will exist for a while, but it is a minority that is rapidly declining. The new consumer does not need an ad to inform on pricing or product availability when price comparison sites exist. The new consumer does not need advice from an in-store "expert" when specialist forums and communities abound online.

The comments on Bitterwallet show this clearly. People are upset about traditional retailers because the brand truths no longer correlate to experience. There is an information advantage that consumers have now but traditional retailers still treat us like we are ignorant and reliant on them for information. We don't respond to typical advertising, we aren't even listening.

The Linksys NSLU2 and WRT54G aren't best sellers because Linksys dumped money on glossy ads and sponsorships. The ASUS EEE didn't create a whole new laptop sector by package sponsorship with Happy Meals and the Daily Mirror. These "boring" products are huge because they all had communities emerge organically and passionately around them.

Despite this there is a bright future ahead for the high street. It's just going to be a very different high street from today. The stores that will emerge and survive are those that have escaped old style marketing and have learned to appeal to passionate consumers and groups.

The truth is that consumers do care about products and merchants. The difference is we care about merchants and products that offer something of value back honestly, openly and transparently. The new high street is going to be composed of merchants who understand that if they aren't in a trusted relationship, if they aren't communicating to their expert consumers, if they aren't building communities and information value, they aren't needed. The alternative is to be just a cheap commodity store with a proposition built on price and service but this is the domain of online merchants.

So the death of the high street is here. It's going to take a while to get it dead and buried, we're still going to see classic retail for a while and some sectors will have it easier than others, but the writing is on the wall.

TOPICS:   High Street News

32 comments

  • Sergeant R.
    yeah yeah, blah blah blah. Sure, the weakest will die, but there will always be places like Tesco. You can't get a case of beer at 21:00 on the internet and drink it the same night.
  • The B.
    I'd use my local greengrocers and butchers more often (I got a lovely pair of T Bones from the butchers last week), if the fuckers kept more convenient hours, Mon - Fri 9:30 - 4:30, Sat 8 - 12 (and everything decent is gone by 8:30), if you're not prepared to put in the graft then don't complain if it all goes tits up.
  • Mike H.
    Think of the positive implications Paul, the chavs might actually have to find jobs instead of trawling the shops all day!
  • ungulator
    for Daily Mail readers comments see above, typical grumpy rubbish
  • Matt B.
    Well written, thoughtful. Think that Bob and Ramsbottom both make good points, that were a bit missed. It's not just price, and trust that shoppers go on - the other big thing is convenience. Buying online is vastly more convenient for MOST things. There are things which are not convenient to buy online, such as perishables, and things that you want on the same day. Food stores are going to be around for a long while, and the uptake of online grocery sales has been a noticably slow sector, compared to electricals, for example. And I think that convenience is a big part of that.
  • Paul Nikkel EDITOR
    Yep I agree Matt Bee and I didn't cover that off properly as you say. There are definitely some sectors that won't be affected the same way. FMCG's like shampoo and hairspray will stick around for a long time and food is definitely sticking around. I was thinking of the more classic consumer goods and retailers like Debenhams, PC World, Littlewoods, whatever. As I say at the end - the current high street will die but it will be reborn. It will always be around, it will just look and act differently.
  • The B.
    Ungulator, thanks for the well informed, educated input, some good trolling there mate. If you keep it up as well as you do in bed we should all get another 10 seconds worth of comments out of you.
  • Lawl
    Lawl at the above comment, truly amusing indeed.
  • andy y.
    Bitterwallet goes academicl. I shall ensure you guys are first to my thoughtspeak reguidance camps come the glorious day. Siberia awaita
  • Biffo B.
    Deep shit Paul. They've dug their own graves, and deservedly fallen in. RIP
  • Liddle m.
    Good article Paul - thanks. Was discussing this topic a few days ago with my father and one of his friends, both retired businessmen from the retail trade who now rent their high street premises. They are obviously more concerned about the long-term prospects of current and future tenants than they have been in a while, and you've captured exactly the point I was (not very successfully) trying to get across to them - that consumers are getting smarter and retailers need to acknowledge, respect and build on these 'smarts' if they want to thrive. On that point, I'd like to hear which retailers/high street businesses you and others think already do this. We all seem to talk a lot about those businesses that piss us off - but who are the ones we are currently loyal to and why..?
  • Cam
    "The internet has obviously eliminated any consumer need for advertising." The internet has acutally led to a significant increase in advertising. So many websites now have advertising on them and often it is subliminal advertising. You may not realise it, but advertising is everywhere online, and more often then not, you will use it online. The consumer need for advertising hasn't gone away with the internet, if anything it has grown multi- fold, it is just in a different form to a newspaper or a magazine, but it is still there.
  • Paul Nikkel EDITOR
    I think we are seeing this emerge first with product brands rather than with retail brands. I guess the best example (sorry haters) is Apple who have successfully moved the product cult into retail. If you look at the Apple Store it is a very different concept to most retail. First they are experience stores - the products are out and meant to be played with, the atmosphere is trendy and open etc. Second they are educational, they have the little theatres for product discovery and learning. Third they play on the expert angle with their Genius bar and consultants (sure they get flack for level of experience sometimes but it's a step above most consumer electronic retail). If you go to an Apple Store it is packed out with passionate users kicking tires but they are also dragging in their friends. In many ways it less about pushing someone in and then out with a product and insurance and expensive ethernet cable - and more about the brand experience itself. I would look more to product brands though for guidelines about how to build a real community that cares and actually enhances your brand. The NSLU2 slug is a great example - there's whole forums about the thing and people enhance the product by building on top of it and making it more useful. The Arduino open source micro-controller and platform is a great also. These guys have been focused on the end user and community from day one both in the way they license the tech and the community they built around it. Who would think a circuit board and controller could become mainstream (not quite yet ...) and sexy? A more traditional example might be the D&D type hobby stores where they sell products and figurines but also host the players themselves for games. They are also building a vibrant community around the game as well as the products they sell. I think any store that changes their thinking to where consumers are actually what makes the company tick instead of being a commodity will win in the end. If you can show you are an expert, that you can add value to the whole purchasing and product lifetime, people will respect that and form around it. Also as I noted I think the alternative is to go solely on price and service which is what Amazon has done. I do not see the ability to do that offline due to the increased overhead though and I think those who win there will be an online only proposition.
  • Paul Nikkel EDITOR
    Hi Cam - unless you are a merchant I think you're wrong :) How have you used advertising in the recent past? I don't mean did you experience it. I mean did it give you information in a way that you wouldn't have got it otherwise.
  • Cam
    You have to remember that the majority of internet users don't use places like hotukdeal or other sources to find the informatoion they need. Advertising still plays a major role for many people - which is why many people make millions from it. Just because this community doesn't need advertising, doesn't mean it applies to the majority.
  • erik
    Geez Its not rocket science UK High street goods have to include 15% VAT. Internet products at £18/£36 imported from outside the EU like Jersey/Guernsey dont So UK high street goods cost 15% more That is why high street food retailers are suffering least (no VAT on food) This is why the 2.5% cut in VAT isnt working (do I pay 15% VAT on the high street or 0% vat on the internet)
  • erik
    The internet has obviously eliminated any consumer need for advertising err so when you google hot deals and hukd comes up top of the list this has nothing to do with advertising, setting tags etc eh? As Cam said the internet has just provided another platform for advertising. Classified job adverts make a lot of money on the internet as an example, and give you information in a way that you wouldn’t have got it otherwise. From Job adverts, new product launches, sponsorship, sales, advertising is everywhere and here to stay. Blaming and kicking the high street is unfair and ignorant, since it provides thousands of jobs and without it the UK economy will totally collapse
  • Cam
    Not that many companies based in the UK acutally ship from Jersey/Guernsey. Yes some do, but the majority don't.
  • erik
    Are you sure? Yes the UK government basically asked the Channel Islands to give a time limit to UK retailers. Tesco Jersey is no more as an example, but there are ways around this Lets take the DVD/CD market with many items under £18 and so VAT free to imports (thats why many prices are £17.99 online): Arent these using the channel islands?: HMV (Guernsey) Play The Hut (Currys, Dixons, now Tesco, ASDA, Sendit) Amazons preferred merchant Indigostarfish Are there any UK based online retailers of DVDs that dont use the channel Islands at all? Zavvi and Woolworths have gone from the high street of course.
  • Paul Nikkel EDITOR
    As I mentioned in my response to Cam I did not say advertising is gone. I said the consumer need for it is gone. Yes, I mean advertising as understood and operating in its current form. "new product launches, sponsorship, sales," I do not think any of these have an advertising future for acquisition and sales models. Consumers do not need advertising to become aware of new products, of product availability or for pricing information (which is what a sale fits into). Classifieds is a good example of informational advertising however this is on the part of individuals rather than merchants. Classified job ads would be on the part of merchants but I don't think advertising for jobs and hiring people is the revenue generation model for most businesses :) Thanks for your comments.
  • Liddle m.
    I don't think anybody is "blaming the high street" here, just proposing that it is changing and that to be successful on it means adapting to new realities. And new realities do exist. Ask anyone who grew up and matured in the old paradigm - they are the ones who experience changes strongest precisely because they feel relatively locked out of the new ways of doing things. But that doesn't mean they don't want to be part of these changes. They mightn't have all the 'smarts' of young Apple users, but they still desire those things Paul mentioned - expertise, respect and a sense of community. These 'goods' used to be provided in the days before McDonaldisation made us all so cynical. What we might be seeing now is a post-McDonalds era (or de-McDonaldisation as Ritzer terms it) which will return to the idea that adding value means something akin to adding values. The examples in Paul's 5:47pm post seem to characterise this kind of outlook... Long may they prosper.
  • Cam
    Erik - you have mentioned 10 retailers there, most of which relate to the sale of DVDs/ movies. What about the thousands of other retailers selling thousands of different products?
  • Micky
    'These “boring” products are huge because they all had communities emerge organically and passionately around them.' SHEEP
  • erik
    Cam I actually agreed with your posts I disagreed with the original post, headline and image. Yes the retailers I listed all relate to DVDs/CDs/Games I chose them as an example showing that most of the online sales in this field take advantage of the VAT free import duty on goods under £18. I feel it serves as a good example when you look at the UK high street casualties in this field: Choices UK Fopp Zavvi Woolworths Saying that they mercifully went under with an image of a man with a gun pointed to his own head suggesting that it is their own doing is totally unfair. Having to sell the same product at 17.5%/15% more than online rivals means they didnt stand a chance We are talking about people’s livelihoods here, I dont find it merciful that people are losing their jobs. Food and books/Newspapers are VAT free so that may help explain why the likes of WHSmith/Tesco are still surviving. I could have used electrical goods or IT etc simply do a google search for 17.99. Unfortunately its not just retail, think about the service sector. People have given Apple as an example but I remember when they launched a new product called ipod. They advertised heavily in Newspapers/Magazines/TV/Web branding the product as ultra cool in contrast to the way they launched the Newton which tanked. It efectively saved the company with its Think Different advertising slogan. Reed the Anglo-Dutch business publishing giant recently valued at £1.2bn makes most of its money from classified advertising in print and now more so on the web. It still makes money from feature advertising though from companies such as er Apple. Sponsorship is the life line of many professional sports today, from football stadiums and shirts to Grand Prix and Rally cars. The likes of Honda never made a profit directly from their involvement in Formula One. It was brand association, you know, my car has the same engine make as that F1 car. Why do companies use the London 2012 logo on their ads? Its because they want us to know that they are involved in sponsoring the event, helping pay for it and the athletes and ultimately our enjoyment of it. This is one of the thousands of examples where advertising gives me information that isnt always given elsewhere when a company doesnt get alternative publicity for it. Sadly I’m the only one who has produced facts on this thread.
  • Paul Nikkel EDITOR
    Hi erik, I would have to respectfully say we have very different opinions about the future of advertising and marketing. There's nothing to argue about really. We see the dynamics of the current situation and the future very differently.
  • Chris
    Paul, if advertising is dead because of the internet, then why is my inbox full of e-mails from Sainsburys, Mothercare and many many more companies? The internet has brought about targeted advertising, aimed specifically at the people that are most likely to use that product. You don't see Stanna advertising stairlifts on www.miniclip.com do you? Many big name companies don't even trade off their websites, they are just huge advertisements to get you into store, the likes of Aldi, Lidl and Poundland amongst others
  • phil m.
    Stores need to be more agile in their stock and also have a more "advisory/consultive" approach. The high street doesn't fail because of the business model, it fails because it still believes in ripping people off and going for the hard sell. People want to feel looked after, not sold to. Basically the future should be that the Internet is where you shop if you know what you want and you want it cheap, but don't care too much about timescales or customer service. The high street is where you shop if you want good advice, to be taken care of, and get a decent deal if the not the cheapest but safe in the knowledge you'll get good customer service. They should both be able to survive, hopefully.
  • Paul Nikkel EDITOR
    @Chris. I said a few things in different ways but I am not saying "advertising is dead" rather "The truth is that old style marketing methods and business models are dead. " When you refer to targetted advertising I don't think that has been the online advertising revolution as much as the ability to align with behaviour more accurately than before. What I did say is consumers no longer need advertising for information. I think that's a pretty big shift. The merchant ability to control information flow and brand perception through control of mass media (which is what advertising was) is over. That's still what a lot of high street merchants presume they control and which is why there is such a huge disconnect between their opportunity (which phil mycock points out) and they way they treat consumers. The complaint about the high street isn't usually that they are too convenient or too accessible but rather that they treat customers like idiots, they are poorly trained and poorly priced. Those are all characteristics of the old model which relied on an information advantage. @phil mycock - I agree. That's the big opportunity for high street merchants that they are dropping the ball on and where I think we will see things moving too.
  • Paul Nikkel EDITOR
    I should also clarify that these are opinions are about why the high street is failing and where we are heading. We're not there yet and won't be for a while. However I think the trend has started and it's only going to increase...
  • Anna
    http://www.bbc.co.uk/blogs/technology/2009/01/etailing_has_the_revolution_ar.html Contains interesting facts such as: - traffic to the top ten UK retail websites was up by 37% in the last quarter of 2008 compared to the previous year - the high street had a pretty miserable Christmas Note how most of the top 10 most popular retailer websites are the old high street stores which have made a concerted effort to do well in the online world.... Argos... Next... Marksies... :)
  • scouse
    If you dont think advertising is still as prevailant as ever you really need to open your eyes next time you browse the web. The high street is dying due to overpriced goods being sold with little to no customer service to account for the extra cost , Woolworths were massively overpriced compared to other highstreet retailers with staff that didnt really care if you were there or not until they got their redundancy notice , maybe a little harsh but true , DSG is another retailer that if they are not careful will vanish , bad customer service , high prices and a very bad followup record are making customers shop elsewhere , in truth if the staff actually showed some interest or willing to help then im quite sure joe public wouldnt mind the extra cost incured , unfortunately they dont and are generally too busy adding up their sales to see if they are getting bonus this month. There are lessons to be learnt but i doubt many retailers will take heed.
  • D
    The death of the high street is due to Tescos brainwashing and the government letting them into every town,city, village. I HAVE TO WALK PAST THREE OF THERE SHOPS IN ORDER TO GET IN TO MY CITY CENTRE. All seems rather obvious that some people are getting rich of this. Q: EVERY LITTLE HELPS WHO EXACTLY ? LORRY LOADS OF LOCAL BRITISH MONEY BEING INVESTED IN ASIA & THE USA. Thanks for the corruption that tescos is causing. Also putting local trades people to loose thousands out of there area every week. NO MONEY LOCALLY CIRCULATING = LOCAL RECESSION. Keep watching the brainwashing conditioning adverts. Then you can all thank yourselves for having a local recession. Research tescos going ito Asia I certainly never shop there or at any supermarket. Keep your local money circulatng and everyone will benefit from it.

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