The Second Death of the High Street

If you’ve walked down a British high street, particularly one in a smaller town, then you will have noticed a change. Certain shops are gone forever, many are boarded up or replaced with charity shops, vape liquid retailers and the like. If an independent coffee shop or craft goods shop opens anywhere but the wealthiest areas, they have their work cut out for them. 

Currently, 38 stores close each day across the UK (in 2019, it was seven), with closures concentrated in chemists, chain pubs and banks. Some areas are doing better than others. Retail parks are showing net growth – convenience stores, coffee shops and value retailers are all growing and there is an increase in store openings, though this could be down to rental prices dropping.   

High street retail has already died once. The growth of eCommerce throughout the 21st century followed by the COVID-19 pandemic destroyed a huge number of once-unassailable high street brands. It appears the Highstreet is undergoing a second demise, perhaps slower this time, but just as surely. 

What’s happening to the High Street today? 

There was a time when some of the UK’s biggest companies were retailers, and they had presences everywhere larger than a small town. Companies like BHS, Homebase, House of Fraser, HMV, Maplin, Mothercare, Toys R Us, Woolworths and many more have disappeared altogether, and staples like Marks & Spencer and W.H Smith are hanging on by a thread. Often, these spaces have been boarded up with the occasional independent shop taking over spaces vacated by big-name retailers. Reducing prices doesn’t seem to be an automatic silver bullet: budget retailer Poundland is currently up for sale.  

Lately, successful businesses tend to either offer something that you can only get in person (hairdressers, nail salons) or places you might visit casually – getting a pint of milk from a convenience store or stopping for a coffee. These retailers have their place, but there isn’t enough demand for them to support many high streets, hence the rising number of vacant spaces. 

Our own whitepaper, What SMEs Need From Their Payment Provider, we can see there is a lot of ambivalence and a fair bit of pessimism about the small businesses that make up a large part of the high street. A quarter of the public feel pessimistic about the direction of the economy, and only 14% would describe themselves as ‘very optimistic’. When asked what they want from SMEs, three points stood out: easier refunds, an online presence and low prices. While there are good reasons that small businesses on the high street can’t offer refunds that are as customer friendly as those offered by eCommerce giants and they won’t have as strong an online presence, the price factor is important. Our survey shows that only 21% of UK residents prefer to buy from smaller businesses over larger chains when possible, and we would hypothesise that this is largely because, rightly or wrongly, they don’t perceive small businesses to offer the same prices or level of service as bigger companies. 

Is eCommerce to blame? 

There is a chicken and egg debate about the emergence of eCommerce as a major force in the retail economy and the decline of the high street. That is: did eCommerce, with its lower prices and greater convenience outcompete high street shops or did higher prices caused by rising business rates that led to high prices push people toward eCommerce? 

The answer is more complex than either argument can encompass. eCommerce was always going to take a chunk out of physical retail – there are going to be goods that are hard to find online, especially in smaller towns; there are going to be times when it’s easier to buy an item online rather than go to the shops. When eCommerce emerged in the early 2000s, the question wasn’t whether it would replace the high street, but how the two would live side by side, and for around a decade it looked as though the high street would continue to reign supreme – eCommerce was associated with expensive failures like Pets.com. 

If we look at the Office for National Statistics’ graph of eCommerce as a percentage of total retail sales, two things stand out. The first is the obvious massive rise during COVID, a near 20% increase between January of 2020 and January of 2021. What’s interesting is that after COVID, the year-on-year growth of eCommerce seems to have stalled – typically, eCommerce’s share of UK retail would rise by 1-2% per year, but that trend seems to have stopped. This would seem to indicate that slow death isn’t exclusive to the high street, but is a wider, systemic problem due to, to put it simply, ordinary people not having enough money. 

What’s also interesting is that since 2009 there has been a major spike in eCommerce sales on November each year. This shows that more people started doing Christmas shopping and shopping in Black Friday sales (an American import that was little known in the UK until relatively recently) online instead of in stores. For certain stores, this could be a death sentence – toy shops and luxury goods retailers rely on holiday sales. 

Ultimately, the graph shows that either the rise of eCommerce is inevitable or that high streets have failed to adapt. Both are somewhat true, but the latter shouldn’t be discounted. During the first death of the high street retailers didn’t respond by doubling down on what physical stores do well but through shrinkflation, automated checkouts, cutting staff numbers, poor layouts that emphasise filling shelves with as much as possible over the shopping experience (with the exception of one of the few retail success stories, the Apple Store) and lately overbearing security measures to counter a ‘shoplifting epidemic’ that largely does not exist. 

Why is the high street dying (again) and what can we do about it? 

So why is the high street dying? While the first death of the high street was down to competition from eCommerce, today the simple answer is price – you can’t have a high street when ordinary people don’t have enough money. The costs of essential goods and housing have been rising steadily, so ordinary people simply can’t allocate the funds to shopping on the high street. They either have to avoid buying things completely or try to get the best price, which usually means shopping online. To put it simply, the competition isn’t from eCommerce, it’s from electricity bills that have doubled in the last decade and rent that has increased by 9% in the last year alone, and rent and electricity bills will always win. Younger people, particularly those who became adults during or after the pandemic, may have no real emotional attachment to the high street – all of their major shopping experiences happened online and they have grown up seeing their local high street as a row of ‘shop to rent’ signs. 

What happens if the high street dies?  

The first and most noticeable effect of this particular part of history repeating itself will be urban decay - boarded up shopfronts will deter investment and signal to British people that they are living in a declining nation, increasing crime and decreasing social cohesion. Job losses will also be a factor. It isn’t just shop workers themselves who will be hit, but an ecosystem of tradespeople from window cleaners to electricians and shop-fitters. With them gone we will have a more homogenous, less fufilling job market – more warehouse workers and delivery drivers. We also lose a key site for innovation and entrepreneurship. Small, independent shops offer a chance to build a customer base that can scale to become something much larger, meaning that the only businesses that will have a chance will either be digital first or backed by venture capital. Lastly, and most importantly, high streets are a shared space where people can still gather in a world that is becoming increasingly siloed. With a decline in third spaces already causing mental health problems, the disappearance of the high street will only make things worse. 

There are two things that high street retailers can do in this situation. The first is to emphasise what it is that high street retailers are good at by having well-stocked, well-designed, well-staffed stores with knowledgeable employees trained to build personal relationships. That requires investment, but stores that have done it, like the Apple Store, are thriving. The second is to reduce prices – really, the only way that you can compete in this environment is if you have price parity with eCommerce, and that will be difficult. Difficult, but not impossible – every part of a company’s operations can be tightened up to make them either cheaper or deliver more value, including the payments systems that allow funds to move in and out of the business. If the high street has spent the last two decades dying a death of a thousand cuts, thousands of seemingly insignificant adjustments to how it functions may release enough funds to make the kinds of investments that will save it.