Trouble on the High Street

Retail has felt the full impact of the Covid pandemic but the resulting heightened struggle between different capitalist interests within the sector, and between big business and retail workers, reflects longer-term trends. IAIN DALTON reviews a new book on the retail industry.

Retail Therapy: Why the Retail Industry is Broken

By Mark Pilkington

Bloomsbury Business, 2020, £12-99

The past few years have seen carnage in the UK retail industry. After annual shop closures had grown by a thousand or so for the past few years, the outbreak of the Covid pandemic saw 11,120 chain store outlets closing between January and June 2020.

The US, the other epicentre of the current crisis in retailing, has faced a similar landslide of store closures and job losses. One particular feature is the widespread closures of shopping malls, which had been perhaps the most iconic symbol of American consumerism. Pilkington cites figures of 454 malls in the US which have closed or gone into serious decline, a significant proportion of the around 1,500 malls built between 1956 and 2005. He also cites Credit Suisse who suggest that only around 250 will still thrive in coming years.

Whilst mainly focused on the UK and US Pilkington also discusses retail in the rest of the world, demonstrating that much of the recent devastation is likely to hit there too – especially as shopping via apps on mobile phones develops, which accounts for a larger share of e-commerce in the neo-colonial world, as well as China, where mobile shopping has around a 90% share of e-commerce.

Pilkington, a former CEO of a number of brand and retail companies, is now a consultant advising on changes in the market, particularly the development of e-commerce. It is clear that with this book he is making the case for the changes he sees necessary for existing retailing chains to survive this current crisis.

The nature of retailing

Pilkington relates how retailing developed as part and parcel of the development of capitalism, and in particular the development of industrial capitalism. As he describes, “prior to this event, most of the population were far from rich and most of what they consumed they produced for themselves – they grew their own food, built their simple shelters, and made their own clothes. The items that they could not produce for themselves they bought or bartered locally. There were small-scale producers – local artisans – who carried out those tasks that were too specialised for the average person. They produced goods manually, in small batches, and at relatively high cost. There were a few shops, in large towns and cities, often catering for the wealthier in society; but not much retailing in the modern sense”.

These shops for the wealthy had been developed by the earliest capitalists, the merchants. As Marx describes in Capital, merchant capital can exist so long as there are commodities (goods produced for exchange) and money. The development of a retail industry came alongside the rise of the working class – as workers were working in the factories to produce commodities for sale on the market, no longer leaving time to produce the basic goods they needed for their own consumption – who required retailers to sell them basic goods from their wages.

The expansion of production led to vast quantities of goods being produced, with a lengthy supply chain including wholesale and retail developed to get mass produced goods to the customer, and to break down the economies of scale to a suitable amount to be purchased at each level. In doing so this helped cut down the circulation time of the commodities being manufactured so that capital could be reinvested at a faster rate.

Pilkington gives us glimpses of the ‘upside-down’ thinking that Marx alludes to of merchant capitalists when he describes that “with all the multiple layers of people involved in the supply chain, each organisation needed to add its own mark-up to the cost before passing it on”. In fact, as Pilkington points out, the word retail comes from the French ‘re-tailler’ meaning to cut again. Indeed, retailers make their profits by effectively taking a cut of the surplus value embedded within the commodity, as Marx explains: “The merchant’s sale price is higher than his purchase price not because it is above the total value, but rather because his purchase price is below this total value” (Capital, Volume Three, p400).

The changing shape of retail

Pilkington suggests that innovation in retail has been slow and that there have only been two major ones in the 200 years prior to e-commerce. It is on this basis that he claims the innovations associated with e-commerce are causing such a devastating crisis throughout the retail sector.

The first of these innovations he identifies was the combining of different stores together under one umbrella, in the form of department stores and also in the form of chain stores, which brought together similar types of stores in different locations and introduced efficiencies through centralising the supply of goods to these stores.

The second was the introduction of self-service shopping, with customers picking up items from display around a shop, as opposed to counter service, which meant more customers could be served per retail worker. This allowed for far bigger stores to become feasible, based on selling cheaper and making up the lost profit in funding this through selling greater volumes.

But whilst Pilkington is correct to point out the separation of production from circulation that massively expanded around the emergence of retail, he is wrong to suggest there is just a straight linear path of development. At various times the retail and production processes have been brought together or separated, depending on what helps speed up the circulation process in the context of other pressures.

Home delivery, for example, is not a new development. Milk was first delivered in 1880, four times a day on horse-drawn carts, due to the requirement to quickly transport it because of its perishability. However, the development of refrigeration, allowing it to be stored for longer, combined with the centralisation of retail through the supermarkets, allowed them to squeeze processors and farmers to undercut the delivery companies. The ending of retail price maintenance in the UK, where retailers could not sell products below manufacturers’ set prices, was an important part of giving power to the retailers to drive down prices.

There are also environmental costs, most of which are passed onto society. This includes the shift from counter service in shops to self-service (which saved costs through reducing staffing as less were needed to directly serve customers) which led to increased spending on packaging in order to get customers to pick one product over others. Alternatively, the mass use of vehicles to deliver parcels for online retailers, including many delivery drivers crisscrossing each other’s paths even sometimes for the same company, massively adds to vehicle emissions and congestion.

But of all these factors amongst the most important is the balance of class forces at each stage – the ability to access cheap labour can mean what could otherwise be costly intensive processes can be cheaper.

The late-1990s into the 2000s was a boom period for the retail industry, in part due to the expansion of cheap labour made available at that time. De-industrialisation played a role, alongside the weakening of the labour movement in countries like the UK.

But the collapse of Stalinism, in particular, brought a two-fold windfall to retail companies. Firstly the opening up of significant parts of the world to capitalism meant being able to move production to much lower wage economies. But conversely it also opened up new markets for western brands and retailers to sell in, or franchise their brands to.

The booming retail industry, with its steady income streams at the time, also made it ripe for takeovers by private equity firms and other speculators starting around 2000 onwards. By 2017 50% of the top 200 US retailers were owned by private equity firms whose “standard operating model”, Pilkington says, was “to cut costs, pile on debt and pay itself large dividends”.

A ‘crisis of consumption’

Throughout his book Pilkington emphasises that, as well as retail managers, investors and government, he wants retail employees to read it. Yet what he offers retail workers is very little.

His argument as to the importance of retail is in part based on the significant amount of employment it accounts for. In the UK, the largest supermarket chain, Tesco, is also the country’s largest private employer. There are around 1.5 million jobs in UK retail outlets, with a further three million dependent upon them.

Pilkington notes that “at its most fundamental, macro-economic level, the crisis in retailing is a crisis of consumption”, in particular pointing to the squeezed incomes, particularly amongst young people, as a result of casualisation of work and the ‘gig economy’.

However, what he proposes to deal with this is incredibly limited. Apart from pointing out that “reducing [university] fees and/or writing off part of the debt would help boost retail demand”, his other suggestions are reducing inheritance tax and stamp duty, in an effort to reverse the decline of young people becoming homeowners. In his opinion this is partly responsible for them having less appetite for consumption, as living at a parents’ home, or in a house of multiple occupancy, leaves less space to fill with items.

Yet measures that would directly boost workers’ disposable income such as increasing the minimum wage are opposed by Pilkington, who comments “it is laudable to try to raise the earnings of low paid workers, but for a retail industry already struggling with multiple challenges, it is another serious problem to deal with”. In other words, whilst like most capitalists he wants customers to have more money to spend, he doesn’t want any of it to come out of his profits!

But the primary reason is that both much of the new e-commerce he is championing, and traditional bricks and mortar retailing, relies on being able to very cheaply organise distribution, which relies precisely upon the cheap labour and gig economy that he also analyses as squeezing consumption.

The e-commerce revolution

Covid, the great accelerator, has hastened the trend towards the expansion of online retail and the decline of ‘bricks and mortar’ shops. In the UK the share of online retail has leapt from around 20% to almost 35% of the overall retail market.

Undoubtedly, this has been aided by new technologies that overcome some of the more traditional obstacles to home shopping. One of the advantages of being in a store is being able to directly examine objects – but things like Alternate Reality, allowing people for example to visualise what make up would look like on their face, or what items of furniture would look like in their homes, have overcome some of this. Technologies such as this, which can easily be implemented through devices that are already in mass usage like mobile phones, will have a lasting impact.

But there are goods whose essential qualities are not so easily demonstrated, such as smells. Whilst Pilkington reports on devices which could maybe overcome this such as ‘olfactory speakers’, they will only make a difference to retail habits if they become of more widespread use and are incorporated into our day-to-day technology.

There is also large concentration in online retail. In China, the top three e-commerce retailers (Alibaba, and Pinduoduo) dominate around 90% of the online retail market. In the US, Amazon and its two main competitors (Shopify and eBay) account for 50% of the online retail market. But even here physical sales still predominate. Pilkington gives figures of 25% of retail sales in China being online ( suggests only 20.7% as of 2019) whilst only accounting for 11% in the US.

Pilkington seems to overstate his case on occasion, backed up by one-sided citing of statistics, such as one survey suggesting only 9% of clothing shoppers prefer shopping in store to online. However, this was commissioned in 2015 by a firm specialising in creating personalised online sales experiences for companies. On the other hand a 2017 survey by Imprint Plus, a name badge manufacturer, showed that 86% preferred to buy food in store, whilst 60% preferred to buy clothing in store. Whilst almost all surveys in these areas are conducted by companies with a vested interest in results that promote their own products, the latter survey does highlight the barriers that can exist to online sales especially in certain categories of commodities.

Whither retail?

For Pilkington, the future of retail is one of ‘lean stores’ used for ‘customer acquisition’ whose shopping experiences are in the main served by e-commerce. They will do this through using new technologies that can replace the benefits of in person shopping. It is clear from how uncritically Pilkington deals with these trends that he expects a linear development and growth of e-commerce models.

Rather than a recipe to save the retail industry and with it retail jobs, however, Pilkington is effectively advising retail bosses and investors to ‘cannibalise themselves’ and use their current physical presence and dominance in sales to build their new e-commerce retail model, whilst discarding much of their current workforce. An example of what this means has been demonstrated by Argos, who are closing the vast majority of their standalone stores, to be replaced with collection points in Sainsbury’s stores, accompanied by thousands of job losses – this is the reality of Pilkington’s cannibalisation model.

Retail under capitalism has always been a site of struggle over the distribution of surplus value between different sections of the capitalist class and between the capitalists and the working class, including retail workers. The historical battles against the truck system, in which wages were paid in kind or in scrip only exchangeable in company shops, and the development of the cooperative movement as one of the earliest forms of working class organisation, illustrate this. In part the reason why retail bosses like Pilkington can now develop a perspective that would be so ruinous to the prospects of retail workers has been because of the passivity of the leadership of the unions representing them. They have been locked into ‘partnership’ working with the bosses, now rebranded by Paddy Lillis, the general secretary of the Union of Shop, Distributive and Allied Workers (USDAW), as ‘tripartite’ working.

This has been especially demonstrated throughout the Covid pandemic where they have largely capitulated to the interests of the employers. Joint statements such as that between USDAW and the British Retail Consortium may have had good safety measures on paper but there has been very little in terms of collective organising to ensure they were enforced. Leaving individual reps to fight on their own, the result has been that such safety measures have been quite limited in stores.

Retail workers need a union leadership armed with an independent strategy to defend their interests. This starts with refusing to accept the diktats of the bosses, driven by their need to pursue their profits at all costs. Vital to this is a different, socialist, vision of how society could be re-organised.

Rather than the new technologies driving e-commerce being job destroyers, they could potentially make the lives of retail workers, and the wider working class, far easier. This could lead to automation being used to reduce the working week with no loss of pay for example.

But the necessary prerequisite for this is that these decisions are made democratically by workers organisations, who can plan how to utilise such developments to organise the production of goods and services to meet their needs.