Can the cathedrals of commerce be saved?

Émile Zola called department stores the cathedrals of modern commerce. They now stand abandoned. Amazon is the new religion.

In his 19th century novel The Ladies’ Paradise, French writer Émile Zola described the department store as “the cathedral of modern commerce”.

The cunning Octave Mouret is the protagonist of the story.

His ingenious plan to buy up a lot of stores and sell their goods at bargain prices under a single roof is putting all neighbouring shopkeepers out of business.

Paris was the birthplace of the world’s first shopping mall, Le Bon Marché. Parisian Zola was not a fan.

His novel was a critique of capitalism, which he saw turn into a religion with faithful worshippers. The rise of department stores contributed to this development.

But 135 years after the book was first published, those same cathedrals of commerce have been abandoned by their flock.

Debenhams and Marks & Spencer struggle to keep the lights on. House of Fraser was recently brought back from the brink – but for how long?

E-commerce giant Amazon is to the department store what the department store was to shopkeepers in the Paris of Zola.

In the age of Amazon, can department stores be saved?

Successful formula

Department stores changed the nature of shopping in the 19th century.

They introduced catalogues and other new marketing techniques to sell their products. They did mail orders. And they introduced people to the escalator.

On top of that, department stores charged less for products and made shopping more convenient for consumers by having all kinds of shops under a single roof.

Shopping stopped being a household task and became more of a leisure activity.

Innovation, low prices, and more convenience is the formula that once made department stores so successful.

Now that same formula is being used by Amazon to make department stores obsolete.

Amazon offers prices that bricks-and-mortar shops can’t compete with.

The online shopping colossus operates from big warehouses on a city’s outskirts; high street shops pay much more rent so they can sell their merchandise in prime locations.

Being an online-only store puts Amazon at an advantage.

“As things stand, retailers pay a disproportionate share of business rates, effectively a tax on property,” argues Andrea Felsted in Bloomberg.

And with next day and same day delivery getting more and more common, high street shops have lost almost all of their advantages.

I mean shoppers don’t even have to get out of bed to shop these days! I don’t see how any physical store can compete with that kind of luxury.

“It’s not fair, the playing field is skewed,” the shopkeepers of 19th century Paris lamented when bigger, more powerful competitors came to town.

“It’s not fair, the playing field is skewed,” lament Fraser, Deb, Mark and Spencer in the present day, as online shopping websites put them out of business.

In fairness, some of the department stores’ grief towards Amazon is justified.

Industry lobby group British Retail Consortium claims store chains make up 5% of the economy but pay nearly a quarter of the Treasury’s overall business rates bill.

Amazon, on the other hand, somehow managed to make more money but pay less in tax – just £4.5m over about £2bn of UK sales.

That’s a tax rate of just 0.225% on turnover…

Had Zola lived in the 21st century, the protagonist in his story might have been named “Jeff Bezos”.

Amazon tax

Consumers cheered department stores when they first opened their doors and forgot about ordinary shopkeepers.

Likewise consumers aren’t going to come to the aid of department stores now they have been surpassed by Amazon.

Why should they? Shoppers are the big winner.

Once it was the big shopping mall that brought a carnival of consumer surplus. Now they have been beaten at their own game.

Nor have I read any social novels that stick up for the department stores’ birth right.

Fortunately there are still some people who are taking the plight of department stores seriously…

None other than the Chancellor of the Exchequer has thrown himself up as playing field leveller.

Just like Zola once feared what department stores might do to the small business owner, Philip Hammond feels uneasy thinking about what one giant online store could do to society.

He doesn’t want vibrant city centres to turn into concrete wastelands, so he’s looking into the possibility of introducing an “Amazon tax”.

“We want to ensure that the high street remains resilient, and we also make sure that taxation is fair between businesses doing business the traditional way, and those doing business online,” Hammond said a couple of weeks ago.

“We may have to look at temporary tax measures to rebalance the playing field until we can get international agreements sorted out.”

The Amazon tax (probably not the official name should Bezos take offence) is supposed to tax revenue of online companies instead of profits.

It would give the accountants of big tech companies less leeway to cheat the UK tax man by sending all their profits across the Irish Sea for more favourable treatment.

Making sure that Amazon pays more than 0.225% tax and relieving the burden of high street shops a little may be legitimate pursuits…

But will it be enough to save (f)ailing department stores?

“Let’s just get one thing straight. Amazon didn’t kill the British high street,” says Felsted.

The UK store chains that have collapsed this year did so because they didn’t have the right products at the right prices, invest enough in their businesses, or stay up to date with consumer trends.”

She points to Primark as an example of a physical store chain that is thriving because it has the right business model.

With online shopping growing more and more important, department stores have their work cut out for them. It’s going to take more than a few tax changes to turn the tide.

The 21st century Shoppers’ Paradise is no longer a physical place. It’s a website.

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