Economics, Top Stories

The Closing of the High Street Theatres

In his book, Think Like Amazon, John Rossman, the former director of Merchant Integration at the everything store, invokes Captain Ahab, “the monomaniacal character at the heart of Herman Melville’s Moby Dick.” Ahab, writes Rossman, is a man obsessed with the capture of a great white whale, and each of Amazon’s 560,000 employees worldwide—not to mention those eager to emulate Amazon’s success—should likewise be obsessed, but with perfection, customer satisfaction, and “becoming inspired to develop and expand beyond your current products, services and business model.” This isn’t, he reassures, the kind of obsession that takes Ahab and his ship to the bottom of the sea, “but it’s not bad to have people on board with a little Ahab in them… being ‘nice’ all the time can be a liability for your team.”

The Amazon philosophy—more to the point, the Amazon practice—is to dominate every market into which it moves. The hyper-competitiveness cultivated by its executives, the voracious acquisition of every kind of product, and the refusal to be “nice” to staff all take their cue from the top: “Who gave you the right to waste an hour of my life?” Amazon’s creator and owner Jeff Bezos demands of an executive after a less than stellar presentation, one of several career-liquidating snarls quoted by Rossman. This approach appears to have worked to Amazon’s advantage, particularly when tested by the pandemic.

Across the richer parts of the world, locked-down citizens receive daily visits from Amazon deliverymen, often the day after they were ordered. No need to put on masks and sally out gingerly to the half-empty, possibly dangerous shops. The everything store will bring anything to you. Amazon’s second quarter sales surged to $88.9 billion, with $5.2 billion in net income—double the same period last year. This is in spite of an extra $4 billion spent on protective equipment and bonuses for its staff. Its shares rose by five percent, its employee numbers by 175,000—of whom 125,000 are expected to be retained as business continues to grow. The delivery capacity of groceries, formerly a slouch in the company’s businesses, grew by 160 percent. Amazon is now valued at $1.5 trillion.

Amazon, as Rossman testifies with unusual clarity, is an assault on shopping as we have known it until now—the space for personal contact, the slow enjoyment of “just looking.” An assault, that is, on the culture of shops. So has Amazon, a large part of the on-line retail revolution, doomed them? Maybe not completely.

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Shops in England began to appear, here and there, in mediaeval times: Boxford Stores in the village of that name may have been opened in the 14th century, and a primitive (by our standards) shop was opened at the front of a wine merchant’s house in Southampton around the same time. But it was not until the 18th century that shops began to take over from local markets and food grown, reared, or hunted in a largely rural economy. Go to Jane Austen’s novels (or the many films based on them) for scenes of ladies in their gowns and bonnets, a servant and basket in tow, taking trips to the village shops and their bowing owners. Malls for the wealthy appeared in London in the early 19th century; the world’s first self-service store—the Piggly Wiggly in Memphis, Tennessee—opened in 1916.

Department stores were a French—specifically, Parisian—invention, pioneered by Aristide and Marguerite Boucicault in 1852 with Le Bon Marché breaking the tradition of specialist shops selling one or two products only. Instead, Le Bon Marché presented its enchanted customers with floors of goods of every kind. The fashion spread to the US and to London, but it was not until the arrival of Harry Selfridge, an ambitious American trained in the Marshall Field’s department store in Chicago, that the concept of the department store—a dream palace, even a cathedral, staffed by assistants who acted as deferential but well-informed servants—really took off. Inspired by and surpassing Le Bon Marché, Selfridge commanded every detail of the store he opened in 1909 and which still bears his name. He was not the only merchant to recognise that women were his main customers, but he catered most assiduously to their desires, dreams, needs, and to their relative independence. In her 2007 history of Selfridges and of its creator, Shopping, Seduction & Mr. Selfridge, Lindy Woodhead writes that:

The great stores acted as a catalyst for change in women’s lives. For the first time women were able to “cross the line,” venturing out in public to buy goods for themselves, to experience shopping and be observed doing it without in any way jeopardizing their reputations… spending a lot more time shopping than going to church… (Selfridge) had introduced a restaurant, a reading-room, a crèche and a ladies’ rest-room complete with nurse, and so could justifiably claim to have helped emancipate women: “I came along just at the time when women wanted to step out on their own. They came to the store and realized some of their dreams.”

Selfridges had a good Christmas last year, while other department stores—such as John Lewis, its near neighbour on London’s Oxford Street—showed a decline in turnover and profit. Debenhams, another landmark Oxford Street building, has a closure programme stretching into next year, with few willing to bet on its longterm survival. Selfridges’ sales, however, rose year-on-year by six percent to £1.85 billion in 2019. At £170 million, profits were slightly down, but only because it had invested £300 million in the London store. It has also created a lively online presence with a delivery service rivalling that of Amazon, and an interior which features a circular bar, a Japanese flower market, a cinema, and refurbished turn-of-the-century architecture which breathes luxury.

It’s an approach which depends on lavish spending, both by customers and the stores themselves—a difficult route to follow for the increasingly cash-strapped stores and chains, many of which have been forced to close outlets that have sometimes only recently been opened. The Selfridges model does, however, illuminate one way of defying decline—a mixture of in-store “experience” and an online delivery service carefully tailored to offer goods attractive for their brands, or novelty, or price. Sharon White, the new chairwoman of John Lewis/Waitrose, has adopted a similar approach, telling the Sunday Times that she’ll cut back on the “giant stacks of stuff” in the shops in favour of better “curating” of its merchandise, together with “investing massively in home, especially on the digital side.”

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Although shops haven’t collapsed yet, many may be in pre-collapse mode. Like most people living in a city, a walk through my neighbourhood passes the drear sights of metal shutters un-raised, behind which a shop moulders that likely will not re-open, even though it’s been possible to do so in London for the past month. Some of this is creative, or at least inevitable destruction—a local grocery shop owned by a Sri Lankan closed before the pandemic hit, killed by a small version of a chain supermarket opening nearby. An Italian restaurant in the main shopping street probably won’t re-open because it simply wasn’t much good, and cosmetic improvements didn’t make it any better. The local bookshop soldiers on, but it’s on a knife-edge.

My mother was a small shopkeeper in a small town in the east of Scotland. She started it when she was still a single parent, as an adjunct to her one-woman beautician’s business. She re-married, and with her husband, she built it into a modestly successful gift shop that benefitted from a sustained rise in the income from fishing, the base of the town’s economy, and from the growth of tourism. I worked in the shop after school and during the holidays and I saw how it fitted into the town and the area and catered to the tastes and incomes of the regular customers—women (mainly) with whom my mother had been at school and who would exchange gossip, opinions, and laughs. It performed the same function as shops just like it all over the world. There were and are exceptions to this global view—as a reporter in Moscow in the last years of the Soviet Union, I saw how much a society that replaced shops with state controlled outlets (often short of necessities and bare of luxuries) suffered from a lack of small shop culture. The assistants, mainly women, appeared to dislike customers, often ignored them, were colossally rude. I guess it’s much the same in North Korea, assuming there’s anything to buy.

The small shops were capitalism’s interface with people, in which they had some power, or at least some solace—lonely and/or elderly women would take too much of my mother’s shop time with their woes or their news. They told her if they thought she was pricing too high and when they thought she should be stocking different products that they liked. You can’t argue with Amazon (or Selfridges) about price; you can’t complain that a product which was sold last week isn’t there this week; you can’t tell Bezos about your niece’s wedding (which is good, since he’d only snarl at you for wasting his life). A small shop demanded of its keeper not just to keep up with fashions and tastes, but to make an honest account to the taxman, which meant putting all the money (always cash, then) through the till. When business was slow and the bank overdraft growing, I don’t know if my mother always did so.

Small shops were—and still are—theatres of human interaction. When a large dog defecated on the floor of my mother’s shop to the apparent indifference of its owner, resulting in the expulsion of both, the event which was round our little town before the day was out. Within a 300-metre radius of my London home, an elderly Afghan man has a small shop selling cheap watches and other stuff next to the metro station, and likes to chat amiably about his much fought-over country. A former colonel in the South Vietnamese army has a tiny shoe repair shop near me staffed mainly by his wife, and he told me about his time in a Viet Cong prison after the fall of Saigon in 1975. To add to his general bitterness, his shop is likely to close, because the fashion for wearing sports shoes was finishing his business even before the pandemic. Further along my street, an Italian of refined taste but anarchist leanings and lively conversation sells the wines of his country. One day, while he was dramatising to me what he sees as the incipient fascism of present-day Italy, and as he goose-stepped about his shop with a rigid-arm fascist salute, a couple came in to buy wine, surveyed the scene, and quickly hurried out again.

Where but in these rooms—some of them grubby and laden with merchandise much of which may never be bought—could you walk in and find such richness of character (provided, of course, that you encouraged them to reveal themselves beyond the cash register, and they were willing to be revealed). My neighbourhood, like many of those in London, contains people from many cultures, and they have stories to tell, often with more than a little sigh. But the shop which paid for my upbringing held many examples of the human riches of the small town, in which almost everyone was a local, with family trees flowering in the same soil, going far back.

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Last year, the 313,000 small businesses (mainly shops) in Britain lost just over 1,000 of their number. So while these theatres of life are closing, until the pandemic there was no headlong retreat. Andrew Goodacre, CEO of the British Independent Retailers’ Association says that, in spite of a growth of small stores in shopping centres, “the overall net decline of -1,013 shops shows independents are struggling.” Within these numbers, there’s a strong growth in service shops (hairdressers, nail and beauty salons) and a trend to add attractions, such as coffee and tea, demonstrations of new commodities, and workshops. A gift shop near me does Tarot card readings, although I don’t know if that will save it.

But doomed? For some kind of answer, I spoke to Richard Hyman, one of the wise men of the retail trade, a consultant to the mighty in the store world. He thinks that online shopping, which presently accounts for around 30 percent of retail in the UK, will rise to 40 percent by the end of the pandemic. It will be bad for the small shops, but worse for the department stores and chains which can’t offer what Selfridges does. “And they shouldn’t try to copy it,” Hyman says. “Selfridges is high-end buying, shoppers go there to indulge themselves. That’s its niche and it’s brilliant in it. But others have to find another niche. Selfridges is a one-off.”

But ask if small shops are finished, and he says no—not if they’re prepared to change, and learn, and be creative. “People haven’t yet come to terms with what technology can do here. They’re pioneering the use of 3D in stores in America, and it’s coming to Europe: You can use it to look inside products, to place them around your home to see where they fit best. The manufacturer gets involved by having his products more open to be looked at as you would look at it in your living room—but before you buy. Then there’s 3D printing: where you can have a prototype, or even a product you’re interested in, printed out for you in a store—according to your specification, and your taste.”

In the past decade, a quartet of MIT graduates in Boston started a clothing business to make, among other things, a business shirt that moulds itself to the wearer from materials which adjust to the wearer’s body heat. In the last two years, their company, Ministry of Supply, has added manufacturing to their offering: they’ve developed a 3D printer which can make a shirt, or a suit, or what you will on the spot, in any combination of colours, materials, and sizes in under two hours. This is not confined to tailoring. Retailers with the training and the capital can invest in 3D printers, buy materials and fashion bespoke products for their customers, and some are already doing so. Once this becomes general practice, it will hurt manufacturers, warehousing, and distributors, especially those dealing in spare parts, but shopkeepers will enter a new phase of life.

The second large shift Hyman forecasts is in the behaviour of landlords, and here, he does use the example of Selfridges: “It’s not just a high-end store: it’s in constant change. Now a new department. Then a cinema opening. That model of permanent newness is what landlords have to adopt if they’re going to stay in the retail market. Till now they’ve rented out space and taken the rent. It’s been profitable, but it was passive: now it’s becoming less profitable, and they have to be proactive. They too have to be in constant change. They don’t now need a long rental agreement because it won’t give them the returns they’ve had till now. They have to give short-term leases, always on the lookout for the next thing, shuffling the cards in their pack to get the best hand. They are going to have to have a relationship with people they didn’t meet before: the customers. They have to find out what they want, and make sure someone is supplying it. It’s going to have to be a much more creative, a much more proactive world. The stores the landlords will want will be small retailers who have something original to sell, and an original way of presenting it. So no, it’s not over for the small businesses: not if they can learn.” For landlords, as for retailers, learning and changing is hardly a choice—not doing so courts failure. Retail landlords were cutting rents before the pandemic, as department stores moved into loss and screamed for some relief—last year, Apple demanded a cut of 50 percent in the rents of its 38 UK stores, to bring these in line with other (much less profitable) companies.

On this analysis, retail becomes another part of our economies and societies that is set to undergo large-scale transformation in the next decade or so, as tentative moves into these technologies accelerate, and those who don’t follow them lose market share. It’s an optimistic view: that technology can make shopping better, more responsive, and more exciting. It’s unlikely to be available, though, to many of the present generation of shopkeepers, most of whom have only limited experience of the digital world and lack capital. Nor is it a vision which preserves the culture that I—no doubt nostalgically—have invoked here; an amalgam of the gossipy, the bizarre, the combative, the humane. That seems certain to be doomed, or to survive in pockets, perhaps in small towns, where it is deliberately kept alive by citizens who still value it enough to provide life support.

There’s some form for this: Book buyers often choose to patronise bookstores, even if Amazon is usually cheaper, and has a selection thousands of times larger. They want the particular pleasure of browsing to continue. And they may seek out people like Andrea and his formidable expertise about the wines of Tuscany, Piedmont, and Sicily if they still want to speak to someone who’s an expert and can advise and guide. How shops are shaped in the next decade will depend greatly on technology, but they may not be wholly beyond our power to maintain as 20th-century relics, prized for what they give to their customers, as well as what they sell them.

 

John Lloyd is a contributing editor to the Financial Times and co-founder of the Reuters Institute for the Study of Journalism at the University of Oxford. His latest book is Should Auld Acquaintance Be Forgot: The Great Mistake of Scottish Independence (Polity Press).

Photo by Markus Winkler on Unsplash

Comments

  1. I was bemoaning the fate of small retail at the hands of Amazon to an elderly acquaintance who was raised on a farm in northern Saskatchewan in the 40’s and 50’s. On the Canadian prairies there were few shops at that time - the distances were huge and the population very scattered, and not very wealthy. Everything was purchased from catalogues, usually Eaton’s. A family would order once or twice a year: back to school clothing, furniture, kitchen supplies, tools and hardware all at once.

    Then department stores began to show up in the bigger centers. My friend recalled the marvel at being able to see and handle the merchandise before you purchased it. A consensus quickly emerged: “No one will ever buy from a catalogue again!”

    Now two of my children are working within Amazon. It is a truly remarkable, if somewhat dehumanIzed, venture. ( It brings to mind GK Chesterton’s phrase “wage slave”. ) Everything is efficiency and metrics. The fervor is palpable.

    But fervor doesn’t last for long. Once Amazon reaches stasis - and it will (indeed it must) - that fervor will inevitably dissipate and the fierce focus on efficiency and metrics will too. Then, the problems will begin to manifest, the margins will erode, customers will sense the decline, something new will begin to rise and people may even begin to say: “No one will ever buy from Amazon again!”

  2. In some areas I’m all for creative destruction. In other areas I’m not. With the big data Amazon holds it should be possible for Amazon to use only the data side of its vast resources to rejuvenate the High street and Main street- once they’ve done destroying chain stores, that is. It might only require only a tiny sliver of total volume to generate a reflowering of commerce in city centres and towns.

    Of course, I’m not suggesting that they do it out of the goodness of their hearts. With the right strategic purchasing of real estate they, or investors paying a percentage, could make a mint. My own local city of Norwich provides a route map of how to anchor thoroughfares with public facilities like libraries, malls and parking. And Amazon possesses a big data advantage, in terms of knowing which types of boutique experiences might sell, and how to add value by providing multiple shopping experiences along a specific route.

    But the real advantage comes in terms of the leverage it gives against potentially antagonistic politicians. If you are one of only a handful of companies capable of rejuvenating dilapidated areas of a city, or bringing enterprise back to small town America, then any talk of breaking up a perfectly good business will vanish out of the window. It allows you to play the benefactor, when normally the media presentation about your company is anything but fair.

    A couple of things to consider. First, plain noted and labels should be very much the order of the day, given that you would want to shield your company from the occasional malfeasance of small holders. Second, be scrupulously fair to the little guy, because its an investment in reputation as a saviour, as much as a good business opportunity. Third, its a great test-bed for expansion online, as the IRL experience might help generate ideas to market successful products online.

    With minimal resources and the right marketing, Tech Giants could go from often maligned monopolies to the saviours of the retail environment. It can’t be just restaurants, entertainment and leisure in our city centres, because that would represent the loss of a centuries old way of life. With the right type of planning, Craft Fairs and Farmers Markets could make a return to our city centres seamlessly feeding into existing retail infrastructure. Local council officials could even grant busking licences to particularly talented street entertainers, with restaurants working with street food vendors to cross-pollinate each others outlets.

    And with a helicopters eye view and the the telescope of data, Amazons algorithms could analyse broader customer experiences, creating a natural feedback experience between online and IRl. To some this might sound dystopian, but to me it sounds like retail heaven. Just so long as I get my handmade chocolate shop back in Norwich…

  3. Amazon or Washington Post, Bezos is selling us loads of crap. Maybe we should sell him California, before Calpers gives it to China.

  4. Thank you for a lovely trip down memory lane.

    To this day I can remember many of my childhood shopping experiences - the shopkeepers I met, what we talked about, etc. I have no memory of the sterile online shopping “experiences”.

  5. I’m good with giving California to China. In fact, throw in the whole west coast.

    But, what will China charge to take them off our hands?

  6. I’ve finally figured out what’s gone horribly wrong with our society - our elites are completely disconnected from empirical reality, and also are economic ignoramuses.

    A few quick points before I get back to plotting my escape from the “polite society” represented so well here.

    • Amazon has engaged in massive antitrust violating behavior but has yet to pay the price. Diapers.com may be the best recent example. It basically underprices everyone and holds that price until the competition goes out of business. It can only do that because…

    • We don’t enforce anti-trust laws properly. And…

    • Due to Zero Interest Rate Policies, the stock market gains so much capital that wouldn’t have gone into stocks in the past. But yield chasing “investment managers” have to do so, and Amazon played that ride perfectly. It managed to make very little money for a very long time and still raise money and keep a high stock price - virtually impossible during any other period of time for any company ever.

    There is much more to the story - I’m in the biz, I know that. But the large bore trend they rode aside from the internet was a very particular path through capital markets that no other company could replicate, due to macro circumstances. For years and years and years, Amazon shareholders put up with no profit in ways no other companies would. But remember, it was one among many internet stocks with insane valuations, which is another circumstance they rode but did not create. Zero interest rates meant the money had nowhere else to go.

    I have been involved in startups my entire life. And I can tell you, being a cruel task master or perfectionist isn’t an asset, it’s a liability over the long term.

    My hypothesis is this. Amazon feels guilty about it’s ill-gotten gains, so they have to created a superiority narrative to justify their unjustifiable, predatory behavior. And to fulfill that narrative, employees must work in an environment that pretends to be superhuman, but it’s just abusive. It’s not special, they aren’t better than anyone else, they just had really good circumstances and didn’t flinch when it came to criminally predatory competitive behaviors. The rest is all a story they tell you to cover up their good luck and perfidy…

    And let me try and deflect the obvious comment - of course Amazon did a lot right, so did Diapers.com and the dozens of other companies Amazon purposefully destroyed. But without these macro factors and incredibly good timing? It never happens.

  7. One Amazon or a hundred Amazons, the small grocery shop at the corner of your street cannot be effaced from the face of this Earth. Big sharks are coming for the small fish, everywhere and all across the globe, aided by the social media power and the outreach of the Internet. Imagine a multi-billion delivery business asking a non-descript customer on the Internet where he/she would like that half-kg of tomatoes, etc. to be delivered. Well, the big sharks are kneeling before the poor guy because their 4G/5G outreach and money muscle tells them that they can snatch the business of the small shop, the millions of these small shops across the globe. Largely possible, yes. But not totally. Can the big-data-delivery-devil offer all the services that the small shop around the corner offers? Let me list some:

    1. A shopkeeper with his shop located in the deep forest can offer shelter from rain or wildlife to a stranded customer. At times, the shopkeeper can offer even a cup of tea if found that the customer indeed needs some warmth from the cold weather, all for free.

    2. Customers from a small hillside village, say in Nepal, often visit the small shop to read a newspaper for free, even when they are not buying anything. It is just camaraderie!

    3. Small corner shops sell most things on credit, often making an entry into their notebook about the money due against each customer, to be recovered when the customer, who is a known person living closeby, can pay.

    4. Most small grocers/shopkeepers doing business in essential items, like veggies or medicines, have already become smartphone savvy in the past few months, particularly during the lockdown. A vegetable seller, takes orders from you, 20 minutes before you reach his shop on phone, and keeps ready your stuff all-neatly packed, when you arrive, puts them all in the dickey (trunk) of your car, at no extra cost, while you keep sitting safely in your car, during these Coronavirus times. A delivery boy from a 24x7 chemist reaches your home on his two-wheeler to deliver urgent medicines, ordered by you just 20 minutes ago, during the middle of the night.

    Which of the above-listed services these big-data-delivery tycoons with huge digitalized warehouses can offer, may I know? And I can offer several other services beyond the four listed above.

  8. The data accumulation and subsequent behavioral modification of the tech giants is my concern as well as the eviscerating impact to local retail. AWS is another beast that Amazon owns that is the backbone of most of the online/cloud world which is also disturbing… they should have been addressed years ago in anti-trust litigation but their lawyers were light years ahead of the US government…

  9. I enjoyed this article/review but can’t share the author’s optimism, at least not for italy. I’ve seen reductions and closings and valiant failed attempts over the years and sadly the people have chosen. It was telling that the only shops they lined up for during the lockdown (besides groceries) were chinese junk shops (the mini walmarts of europe). Your average consumer is like your average kid. They have crappy taste. And for everyone else, there’s amazon, with no lines and cheaper prices. No one gives one tiny thought to “community.”

    On the other hand, better amazon than alibaba…

  10. @PerryMason: I agree. The data that Amazon collects is the real value of their model. Imagine having not only instant feedback about the purchasing trends of the entire globe, but the ability to test purchasing behavior with decoy product offerings? If you had access to Amazon’s data you could play the stock market with impunity. You would know down to the second where people’s money and interest is going. I have to assume they are leveraging this data advantage to the hilt and investing idle cash according to the market trends they see emerging moment-by-moment.

    And yes, better them than Alibaba. At least that market is somewhat isolated. For now.

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