Government Urged To Support Online Retail As Stores Close

In a painful month of liquidations and closures for Britain’s retail stores, commentators are urging the government to invest in online retailers, claiming they have the potential to create jobs and stimulate the economy.

The last few weeks have seen the Borders bookshop chain go into liquidation and Nokia announce it will close its flagship London store, while Amazon moved quickly to deny rumours that it plans to open brick-and-mortar stores on British high streets.

On Monday it was announced that Nokia will close its flagship £4 million store on London’s Regent Street, after failing to tempt customers away from the popular Apple store across the road. Commentators described it as a “symbolic defeat” for Nokia, which has struggled to compete with Apple in the UK’s smartphone market.

“There was no question that the store was trying to replicate what Apple had done and build up the brand rather than shift devices,” CCS Insight analyst Ben Wood told The Times. “The question is why that strategy has worked for one company and not for the other.”

The news coincided with rumours circulating since the end of last week that Amazon was planning to invade the British high street with brick-and mortar stores to support its rapidly growing website. There was some speculation that Amazon wanted to cash-in on increasing demand for “click and collect” services, where shoppers buy online and then pick up their goods from a nearby store. These services have gained traction since the recent Royal Mail postal strikes have highlighted the fragility of mail-order businesses.

Despite this, the rumours came as a surprise in the wake of the Borders bookshop chain going into administration only days earlier, particularly as the company’s cash flow problems were largely attributed to increased competition from online retailers. The trend has traditionally been for troubled retailers to move into the online space rather than vice-versa, just as the Woolworths brand did after going into administration at the end of last year.

The Sunday Times originally cited property landlords as its source for the scoop. However, Amazon has since denied the rumours, saying it has “no plans to open stores anywhere in the world”.

Taken together, these incidents suggest that British consumers are increasingly opting to shop for media and tech gadgets online rather than trawling around the high street – a trend that could cause problems for physical chain stores. A study by the European Union Eurostat Service released this week found that uptake of online shopping in the UK is the highest in Europe, with around 66 percent of individuals aged from 16 to 74 reporting they have bought goods on the web over the last 12 months.

In accordance with this trend, the government is coming under pressure from various members of the industry to support online retailers through the recession. Dominic Monkhouse, UK MD at online business hosting provider PEER 1, has written a letter to Prime Minister Gordon Brown citing the potential of this sector to play a key role in Britain’s economic recovery and calling for more to be done to help businesses overcome the impact of the global economic downturn.

“2009 has been a tough year for British e-tailers,” wrote Monkhouse. “These businesses, often the brain-child of Britain’s finest entrepreneurs, would under normal circumstances be flourishing. They have the potential to create jobs and stimulate the economy, often exporting internationally and bringing in much needed revenue to the UK.

“The credit crunch, global downturn and postal strike have all worked against these businesses that have so much potential. I urge the Government to do its bit to nurture these green shoots by considering tax incentives that will help these businesses capitalise on the momentum that they have built up … A small investment and the right stimulus package could create a world-leading sector. The time to act is now.”