Why the death of the high street is actually a good thing for men – and a bad thing for women

As more major retailers move online, roles traditionally served by women will inevitably diminish with the disappearance of the shopfront

The story from Next, the UK fashion chain, is a terrifying – or exciting – example of the gale sweeping across retailing. Its online sales in the third quarter were up nearly 13 per cent, while its store sales were down 8 per cent. Overall, yes, sales were up a bit, but not by enough to stop the company’s share price falling by 5 per cent. Ouch.

This is a story repeated, of course, across the developed world. Relentlessly, inexorably, retailing is shifting online. The UK is interesting because the switch has gone further than elsewhere, in that online retail accounts for a larger share of the total than in any other major economy – a point acknowledged by Philip Hammond in his budget speech on Monday.

At some stage this shift will ease off and stop, but there is no sign of that yet. Governments can try to take some pressure off the high street by cutting property taxation, as the UK is doing, but ultimately it will be a combination of economics and consumer choice that will decide. What do we know about this? Economics first.

Selling online is generally cheaper. A lot depends on the type of product but as a rule of thumb online costs are between 10 per cent and 20 per cent below high street ones.

There is a US study here that shows a garment costing $45 and retailing at $150 would give a $24 profit if sold in a shop and a $45 profit if sold online.

On the face of it this should be very good news for retailers: the shift should double their profits. Unfortunately is does not work out quite like that. First, traditional retailers still have the costs associated with physical stores: the leases, the staff, heating, security and so on. If they close the store they will lose some sales, so managing costs as the switch happens usually means they take both a one-off hit to profits and some ongoing loss of business.

A new online retailer, by contrast, does not have those legacy costs. So, for start-ups, going online is a no-brainer, assuming that the business has ways of attracting attention other than having a physical store. That cuts the entry cost, but ease of entry into any business means more competition, which is why so many new fashion lines go under.

For other forms of retailing, while costs are generally lower, the balance of advantage is narrower. Look at Lidl and Aldi, both still opening physical stores. Why? Home deliveries are expensive, and the logistics hard to manage. I think most of us are astounded at the ability of delivery services to arrive within one-hour windows, but it takes a huge amount of detailed admin and a lot of labour to achieve that. If you can get people to select, sort, purchase and carry home for free, that is money you don’t have to spend. That is why food and grocery delivery is likely to remain a luxury way of shopping.

Where costs are different, retailers can adjust by differential pricing. But that carries risks. It is probably better to charge more for a service that costs more, but the difference cannot be too great. The danger is that people go into a store, decide what they are going to buy, then pick it up online at a discount. Not good business.

There are two other economic effects to note. One is that online retail replaces jobs that on average are done by women with jobs that are on average done by men. There is no reason why that should necessarily be so, and I have seen no official study on the shift. But it does appear to be the case, at least in the developed world, that a delivery driver is usually male and a store assistant usually, or at least frequently, female.

The other is that property prices will adjust. When we looked at this three years ago, Fifth Avenue in New York was the most expensive shopping street in the world in terms of rent per square foot, with New Bond Street in London number four. Last year it was still in that place, with New Bond Street up to number three according to Cushman and Wakefield, the real estate agents. Causeway Bay in Hong Kong was number two. So the very top end looks safe. The pressure is further down the chain.

If that is right, regular high streets will come down in price and shops switched to residential use, rather in the way central location car parks are being switched already. Before you lament this, remember that many of our shopping streets were once residential. Look how shopfronts have been built onto early 19^th century buildings that were once homes. There is a parallel here in the conversion of offices to flats, something widely acknowledged to bring social benefits – though I am not so sure about converting pubs to homes, another big trend.

At some stage the shift will stop. People will chose to shop rather than have stuff delivered. As yet there is no sign of that, as the directors, employees and shareholders of Next have found to their cost. But for what it is worth, my guess is that within ten years the worst – or best – of the shift will have taken place.