Online shopping is masking the birth of hybrid retailers

THE fall of yet another iconic British retailer, HMV, does little to assuage fears that the high street in its current form is in terminal decline. The statistics are bleak. According to a survey by PwC and the Local Data Company, 32 stores closed each day in July and August 2012. Over one gloomy five day period in 2012, more stores closed than in all of 2011.

Even the fact that 60 per cent of the UK population visited HMV last year wasn’t enough to save it. A shop on every high street is as out of date as a Dire Straits LP, when 30 per cent of music and entertainment is now bought online. While HMV reduced store numbers from 285 in 2011 to 247 in 2012, that was still 247 more than Amazon and iTunes – rivals that don’t have to pay millions in rent, maintenance and business rates.

The obvious trend is that customers have moved from the high street to the istreet. According to the British Retail Consortium, UK retail sales over Christmas were up 0.3 per cent from December 2011, but online sales rose by a staggering 17.8 per cent.

Almost one in three CDs, DVDs, Blu Rays and books are bought online. Bad news for music retailers. But the trend is now broadening. One in three Marks & Spencers’ dresses are bought on the internet. The theory that customers want to try clothes before they buy – to check fit and quality – is as old-fashioned as communal changing rooms. Online offers convenience, and convenience sells.

But the consumer demand for convenience is resulting in more complex changes. High street retailer Argos has teamed up with the Shutl delivery service in London to deliver orders within 90 minutes. It won’t be long before you can turn on the game, and end up watching it from a new sofa, wearing a new football top, before the final whistle. Tesco has cut back on new openings in favour of “dark stores” – internet-only shops that aren’t open to the public. With four in London already, “getting your groceries” may soon mean just a trip to your front door.

Despite the rise of the istreet, shopping will never be mouse-clicks alone. Many retailers know that combining an online presence with a physical store offers shoppers the best of all worlds. We are starting to see this translate into new hybrid offers from retailers, tuning in to customers’ smartphone-centred lives. On Oxford Street, Oasis and Karen Millen give customers iPads to browse online while they check out the latest fashions in-store. This allows busy shoppers to home in on the product they want, and quickly find it on the rails – a plus when shopping time is short.

But if retailers know they must embrace the istreet, why are so many closing altogether, rather than reducing their high street presence? For many, profits have fallen faster than they can react. And with vast property portfolios that tie them to long-term leases, many are stuck with rents they can no longer afford.

In five years’ time we are likely to find that successful retailers will have smaller stores, in fewer locations, backed by sophisticated technology and fast delivery options. And this is what customers want.

Darina Kerr is a partner at Dundas & Wilson