Retail revolution puts paid to manipulative property groups

The shopping revolution will break the retail myth that location is king – and make life uncomfortable for property developers. By George Pitcher. George Pitcher is chief executive of issue management consultancy Luther Pendragon.

A well-to-do friend of mine recently found himself explaining the benefits to his mother of being online. He expanded on the future of shopping, explaining that one advantage of the forthcoming digital age would be the ability to do all your shopping by fibre-optic telephony, enabling us to shop from home and have our precise order delivered, without ever having to set foot in a shop. “I see,” said his mother. “Just like we used to in the old days.”

There is much to be said for digital information delivery and the future is undeniably bright. But what we should remind ourselves is that much of such progress is cyclical. What we will be enjoying is a return to some of the leisured living habits of days gone by. These habits were superseded by the march of progress, including an industrial revolution that was seen as very much the sort of advancement of civilisation that the digital revolution is perceived as today.

I might add that it is in the nature of revolutions to deliver the fruits of privilege to the masses. In some revolutions, such as our own Victorian industrial one, this is something of a con – the development of railways and factories, far from liberating the masses, exploited them. In others, it delivers fruits of capitalist privilege that the masses are wholly incapable of managing – modern Romania and Albania are cases in point.

The home shopping of yesteryear, to which my friend’s mother referred, was confined to the middle classes, in those days a relatively small proportion of the population. What Britain’s largest mass-market retailer, Tesco, is offering today, through the economies of modern technology, is home shopping for everyone.

In saying that Tesco is offering mass-market home shopping today, what I really mean is that it will be offering it soon. The company was expected in some City quarters to use its interim results statement last week, in which it consolidated its grocery retail lead with a profits rise from 326m to 346m on the back of a 15 per cent increase in sales to 7.7bn, to announce that it was rolling out its automated home shopping trials to all customers within the confines of the M25. It didn’t do so, but it will soon.

Tesco Direct, as it is known, follows freezer cabinet chain Iceland’s initiative to provide a nationwide home delivery service to customers at its stores and a phone and fax service in Edinburgh and the North-east. Tesco goes further, with plans to exploit Internet access to customers. And where Tesco goes, Sainsbury’s is sure to follow – it has home shopping trials in Watford and Solihull.

This not only means that the likes of Iceland, Tesco and Sainsbury’s are, through modern technology, going to deliver a service with which our well-heeled forebears were familiar through the good, old Bakelite telephone, it also means that we are witnessing the first tentative steps by the retail industry into a digital revolution that will knock down some of the preciously-held tenets of retail faith.

The hoary old saw has it that the three most important factors that influence the success or otherwise of a retail enterprise are location, location and location. Clearly, geography has a dwindling role in the home shopping revolution, but it has a long way to go before the shutters go up on high street and out-of-town sites. At present and for the foreseeable future, home shopping is a competitive adjunct, rather than a replacement option, for Tesco & co.

There are, however, some symptoms appearing, some climatic shifts of attitude which suggest that location is being diluted in strength of consideration. One such symptom is the apparent struggle that Sears, the Selfridges-to-shoes chain, is having finding buyers for all or part of its British Shoe Corporation, which contains such well-known brands as Dolcis and Shoe Express.

Whether urban or out-of-town, Sears is known always to have struck the keenest of deals on location. Shoe City has fashionable out-of-town sites, but is apparently inspiring limited interest. One retailer is said to have decided not to bid for any of the businesses because the property portfolio is not attractive enough.

No one should be so foolish as to suggest that the dawn of home shopping has as yet had any effect on property valuation in the retail industry. But it will. What has dented retail property values is the increasing mobility and access of the population which was the original stimulator of the out-of-town boom.

Technology and the new home shopping revolution will further erode the importance of retail location. And the losers will be the property developers who for so long have called the tune, as well as played the piper. Another friend of mine, who runs a retail chain with hundreds of sites, told me that his company still did not have the clout to stand up to the developers, which dictate access to sites as well as price.

That will change. It would be invidious to name, as I’m sure my lawyers would agree, any property companies that have so manipulated the market. But we know who we’re talking about and, as their nemesis in the shape of home shopping approaches, most would only say that it couldn’t happen to nicer people.

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