The high street is losing because it cannot beat ‘big box’ economies of scale, says Kevin Hawkins

As our anaemic economic growth fades away, the implications for consumer spending in general and retailing in particular are becoming clearer by the minute.

Internet shopping continues to grow, but most traditional retailers are cutting margins to stay afloat or closing down for good. There are still plenty of would-be entrants to the industry in 2009 alone, some 21,000 new retail businesses were created. In the same year, however, 26,000 retail enterprises disappeared and the rate of attrition has almost certainly increased since then.

A longish period of consumer parsimony will speed up changes to what we buy and where we buy it, changes traditionalists and backward-looking romantics have decried and vainly tried to reverse. As William F. Buckley once observed: “Idealism is fine, but as it approaches reality, costs become prohibitive.”

The decline of the high street as the place to do our main shopping started long ago and in many locations has now gone beyond any realistic prospect of reversal. It’s hardly surprising, therefore, that the erection of a defensive barrier against further decline should now be advocated in some quarters.

Lobbyists for small shops have called for the ‘town centre first’ objective in national planning policy to become ‘town centre only’, with no retail development allowed in other locations. Maginot Lines, however, only preserve illusions. Most of the 40-odd million square feet of retail space now in the pipeline is ear-marked for non-central locations. Why? Because that’s where the basic retail offer of price, range and convenience is most effectively delivered, to the apparent satisfaction of most shoppers.

Some observers claim the era of ‘big box’ retailing is over, citing the diversification of the big supermarket chains into small convenience stores. Forget it. In this industry, unless you are a small, specialist shop with a unique proposition, you need scale. This comes in two forms the scale economies derived from a national network of stores and distribution centres in good locations, and those arising from store size.

A ‘big box’ has the lowest operating costs per square foot. The predictions we heard in the ‘dot-com’ boom that property-based retailing would soon be a thing of the past are still way off the mark. Size alone doesn’t guarantee survival, but in this climate, it sure helps.

Kevin Hawkins is an independent retail consultant