The future of the high street, The New Statesman magazine

Published in The New Statesman magazine

It's under assault from multiple threats: out of town malls, online shopping, rising rates, parking restrictions and congestion charges, a consumer slowdown... You start to wonder whether the British high street is on its last legs.

Last year online shopping broke through the #10bn barrier for the first time, registering a 33 per cent increase on the previous year. This year has been even more dramatic, with July in particular hitting a dizzy #4.2bn total, 80 per cent higher than the same month in 2006. Research companies predict that online sales will reach #28bn in 2011, knocking a large hole in the turnover of physical retailers.

Of course, many larger chains (such as mobile phone companies) have online offerings and increasingly treat their shops as 'experience' centres where consumers can see and touch products before ordering them online. But the current mix of high street names is likely to undergo a major period of churn in the coming years.

Music, film and gaming group ChoicesUK went bust this summer, with the loss of 160 stores, following the earlier demise of Andy's Records, MVC, Tower Records and Music Zone. Electrical goods chain Dixons is pulling out of the high street in favour of out-of-town locations and online sales. Market research company Verdict predicts that by 2011 online shoppers will spend #1,056 per year, compared with #606 last year, with clothing, DIY and food all doing well. "The shaking out of weaker players seen over recent years looks set to continue," says Alistair Lockhart at Verdict.

More optimistic for the high street is the backlash against the sometimes grim experience of the out-of-town shopping mall and a renewed fondness for pottering around traditional shops. One recent survey found that 77 per cent of people questioned made regular shopping trips into town, against 50 per cent in the same survey three years ago. Tesco and M&S have reacted to (or perhaps helped to prompt) the change by opening smaller stores - Tesco Express and M&S Simply Food - while the big department stores are in bullish mood: John Lewis plans to open five new stores in the next four years, while Debenhams aims to open 25.

Kevin Hawkins at the British Retail Consortium argues that savage rent rises are perhaps the biggest threat to survival for small high street retailers, along with a continued increase in out-of-town retail - as much as 30m sq ft in the pipeline. "No one single factor will kill the high street," he says, though he is surprised that 80 per cent of retailers still don't offer an online sales channel. Just over 60 per cent of British homes now have internet access, a figure likely to rise to almost 90 per cent in the coming years, so online shopping is certain to keep growing. "Shops will need to create a special atmosphere," says James Roper at the Interactive Media in Retail Group. "The high street's not going to go away. It will just be another distribution channel."