The internet is killing the retail market

THERE was a time when the closure of an Oxford Street department store would have been huge news. Back in the 1970s, when Are You Being Served? was on the television, the department store was still a national institution.

Ross Clark

Visiting such shops was a day out for the family. For me, there was no bigger treat than my grandma taking me to the roof garden at Bentalls, in Kingston-upon-Thames, to see the goldfish.

Yet there was a grim inevitability about yesterday’s announcement that House of Fraser is to shut its flagship store along with 31 other shops from Plymouth to Edinburgh.

We are no longer surprised when a retail chain gets into trouble as online shopping eats into the profits of retailers which have expensive overheads to pay on physical stores.

While it is sad to see the backs of long-established businesses on the high street, there is little point in trying to resist changes in shopping habits.

For many of us it would be hypocritical to complain when stores close. I can’t even remember the last time that I set foot in a House of Fraser store.

I have, on the other hand, happily bought many things online.

Yet there are times when a website simply won’t do. I have bought books, lightbulbs and door handles online. I can’t imagine that I will ever buy a suit online.

I want to try it on, feel the quality of the cloth. And for that it makes so much more sense to visit a physical store.

I could order a suit online and send it back if it didn’t fit but that might well involve a visit to that other great disappearing British institution, a post office.

It is for that reason that I don’t think physical shops will ever completely disappear.

They will become smaller, keep less stock and maybe move to less prime locations. But we will always need them in some form – even if just as showrooms for goods we go on to buy online.

Retailers who succeed will be those which have the best stores combined with the best websites.

Amazing vintage photograph of high street shopping

That, at least, is how I imagine the retail market will settle down if its future is allowed to be determined by consumer choice.

But there is another possibility: that bricks and mortar retailers will be driven to the wall by taxation policies which unfairly favour online retailers and punish those which operate mostly through physical stores.

Over the past couple of decades governments of both colours have addressed the burden of business rates on small businesses.

There are now generous reliefs available to help, for example, surviving village shops.

Retailers who succeed will be those which have the best stores combined with the best websites

But they have been far too slow to wake up to the burden of business rates on medium and large stores – exactly the sort which have been closing by the dozen in recent months.

If you operate a high street store, it is only fair that you contribute to the cost of running the infrastructure which supports it: streets, car parks, bus stations.

It is fair, too, that you support other things which help to bring people into town, thereby increasing footfall: parks, theatres, etc. What is not fair, though, is that retailers with physical shops are made to pay a disproportionate amount towards general taxation – when their online rivals pay peanuts, in some cases diverting their profits to foreign tax havens.

Business rates have become a hopeless way of taxing businesses.

The Government finally said it will stop jacking up business rates in line with Retail Price Index

Too often they are based on property valuations which are hopelessly out of date and take little account of the decline of the high street.

It wasn’t until the Chancellor’s statement this spring that the Government finally said it will stop jacking up business rates in line with the Retail Price Index – a measure of inflation which it says is deeply flawed. It will now use the Consumer Price Index instead.

A supposed shop-friendly reform of business rates last year had the deeply perverse effect of cutting bills for the out-of-town warehouses used by online retailers while jacking them up for many high street stores.

Sainsbury’s saw its business rate bill rise by £17million to £500million – while Amazon saw its bill fall. It is the same with corporation tax, which has become a deeply unsatisfactory way of taxing businesses.

British-based businesses which make profits selling from physical stores pay full whack, while multinational firms which take orders and distribute goods through foreign-based operations can easily escape paying tax.

The Chancellor seems to be reduced to pleading in order to get them to pay some token contribution.

Many ministers can’t seem to see the unfairness of it all because they are in thrall to the “digital economy”.

They have decided that the future of everything is online and will encourage that at the expense of everything in its way.

They have decided that the future of everything is online

To create a level playing field for physical and online retailers we need to reduce business rates and corporation tax and to move more to a system of sales taxes which are imposed on any goods delivered to a UK address.

That would capture far more tax from online operations while giving some degree of relief to retailers who have physical stores.

I am not sure that we will ever go back to the glory days of the department store in the 1920s as portrayed in the TV series Mr Selfridge when their cafés and roof gardens were places to be seen.

But it would at least stop discrimination against businesses that want to sell us things in shops rather than online.

Source: Express UK