This article was originally published in Spring 2019.

An unforeseen revolution has made us all into super shoppers – and shops into receiverships.

The retail industry is in distress across the world. The culprit? Lack of profitability. Walmart, the world’s largest retailer, has seen its net profits fall from 3.5% to 1% between 2006 and 2018. Amazon loses money internationally, and – once you allow for profits in sectors which are far removed from e-commerce – makes no meaningful profits in the US. Skim through the financial results of most UK retailers and you will see much the same picture.

Walmart’s gross profits, however, have not been reducing – they actually increased from 23.5% to 25% between 2006 and 2018. And we see the same apparently healthy situation in some UK retailers. Overall demand is increasing.

So what is going wrong?

Businesses have simply been finding it impossible to absorb higher costs by increasing their prices. Their gross margins are sound – but their net margins are suffering. We hear laments about business rates being too high. Perhaps they are, but they only become crippling when their cost cannot be passed on to customers.

Uneconomic pricing is not new and is usually short-lived. It occurs when, for example, supply exceeds demand, or when companies mount aggressive sales campaigns in order to increase their market share. But we have now entered a different era, when the laws of economics no longer apply. We are in the world of the intelligent shopper.

You may think that online shopping is a revolution brought on by the internet. And up to a point you would be right. But if you are as old as I am you would remember the days when home shopping was proportionately at least as large as it is now, when the milkman called every morning and the local grocer made his weekly delivery. You could order from most decent-sized shops just as you can now.

What you could not have was access to information that allowed you to compare prices and deliveries of all manner of goods and services and choose the cheapest and the best. This has been a revolution which no one forecast but which has made us all into intelligent shoppers – and shops into receiverships.

It has allowed consumers to benefit from lower prices but it has forced retailers to enter races to the bottom. Small retailers cannot sustain their businesses on paper-thin margins: 20,000 a year are closing down in the UK. Many of our high streets – having seen the collapse of Woolworths, House of Fraser, British Home Stores, Debenhams, Oddbins and others – are like ghost towns. Meanwhile, on the outskirts, Sainsbury, Tesco, and Asda are in a fight with Lidl and Aldi, whose business models are based on less choice, lower costs, and slim margins. The end is not in sight. The intelligent shopper is ruthless. He or she will search for the best deal and take it. The industry will evolve and survive. But it will be hard