Darina Kerr: The high street must adapt or lose out to the i-street

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.

A shop on every high street is as out of date as a Dire Straits LP – 30 per cent of music and entertainment is now bought online.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, and they can take advantage of customers moving from the high street to the “i-street”.

Almost one in three CDs, DVDs, Blu Rays and books are bought online. Online offers convenience, and convenience sells. But consumer demand is resulting in more complex changes than purely a shift online. High street retailer Argos has teamed up with the Shutl service in London to deliver orders within 90 minutes. Tesco has cut back on new openings in favour of opening “dark stores” – internet-only shops that aren’t open to the public.

Despite the rise of the i-street, shopping will never be exclusively online. Combining an online presence with a physical store offers shoppers the best of all worlds. We are starting to see this translate into hybrid offers from retailers, tuning in to customers’ smartphone-centred lives. Customers browse online while they check out the latest fashions in-store, allowing them to home in on the product they want, and quickly find it on the rails.

But if retailers know they must embrace the i-street, 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.