By Daniel Hunter

The retail industry must adapt to the online reality or risk becoming obsolete, founder Fil Adams-Mercer said.

Mercer says retailers must embrace online commerce to survive.

"The rise of Internet commerce will spell the demise of more high street stores than the one in five cited in a recent retail industry report," he said.

High Street sales statistics in the month of August show people showed a surprise 0.9 percent fall compared to July.

"The guard is changing, just as it did during the Industrial Revolution more than a century ago. Many ‘brick-and-mortar' merchants, even on high street, will go the way of the buggy whip if they don't adapt," he said.

The report, Retail Futures 2018 Shop Numbers: Online and The High Street, was released in May by the Centre for Retail Research. The Nottingham-based organization provides research and analysis of the British, European and global retail and service industries.

The report concluded that given current consumer and retail trends, the number of U.K. retail stores will drop by 22 percent, from 281,930 to 222,000, by 2018. The closure of those 62,000 stores could result in the loss of as many as 316,000 jobs.

The report also forecast 164 retail firms could end up in administration by 2018, affecting another 22,600 stores and 140,000 jobs.

"The report states it's a ‘growing retail crisis,' and if anything, that's an understatement. These coming job losses won't be like those seen in recessions, where those jobs return when the economy improves," Mercer said.

"When those 456,000 jobs disappear, it will be forever. This is a sea change in the retail industry.

"It may only be 1.5 percent of the U.K. labour force but that's 1.5 percent that's never coming back."

The Centre's report states retailers' operating costs have increased 20 percent since 2006 but their sales have gone up only 12 percent.

Mercer said that statistic highlights not only changing consumer habits but the need for changing business models.

"Online stores can set up anywhere and save not only on rent and labour costs but also on business rates," he said.

"That makes it pretty clear. The trend is toward customers shopping online. Even if they don't buy the product online, they can check your competitors' prices on their smartphones without ever leaving your shop. The whole nature of retailing is changing."

Retailers need to adapt to this new reality and quickly, he said.

"Otherwise, we are heading toward an ‘American industrial park' model, with cinema complexes and fast food shops instead of retail shops providing quality goods and services that people want to buy and that create actual wealth," Mercer said.

"High street will become ‘Disney High Street,' recreations where we all sit around eating fast food and amusing ourselves with our smartphones while on the dole, remembering when we used to be a worldwide empire."

The report stated even retailers that retain some kind of brick-and-mortar presence need to analyse carefully how many stores to operate and where. They also need to merge those remaining stores with their websites, smartphone accessibility and social media.

The Centre's report stated store vacancy rates have increased from 5.4 percent in December 2008 to 14.1 percent in March 2013 and could reach 24 percent by 2018.

Consumer spending at high street stores is declining, from 50 percent in 2000 to a predicted 40.2 percent by 2014, according to the Centre's report. By contrast, online retailers are projected to make up 21.5 percent of retail sales by 2018. In 2006, that figure was 6.6 percent.

"This is where progress is taking us. We are becoming a "dot com" society with online retailers and consumers shopping from their smartphones. "Profit margins are so much healthier for online merchants than the traditional ‘brick-and-mortar' ones. They are not bogged down with business rates to pay and can sell their products from any tax-friendly environment or locale," Mercer said.

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