The shopping forecast

TWENTY-ONE YEARS ago, when I was a slip of a girl leaving industrial Lancashire for college in the south, Sainsbury's was the height of retail sophistication. It had foodstuffs I had never seen in the Co-op: pasta, chilli powder and other exotica. And then there were those rather stylish brown and orange uniforms the staff wore instead of overalls.

The fact that Sainsbury's is only just shedding its brown and orange sums up its problems. What was cutting-edge in 1978 is now dated and tired. Even worse, the company's new strategy for improving declining profits at its supermarkets seems to involve switching from Seventies colours to a modish blue and a rippling orange and, copying a gimmick from Asda, forcing its staff to wear baseball caps.

The mental image of shelf-stackers wearing their caps back to front, William Hague fashion, hardly inspires confidence in Sainsbury's cunning plan to regain its rank as number one purveyor of groceries to the nation.

This comes hard on the heels of the troubles of another tired old titan of the high street, Marks & Spencer, and you have to wonder whether some fundamental change in our shopping habits is taking place. The answer is yes, and it spells trouble for many other British retailers. The traditional high street is on its last legs.

Part of the explanation is the obvious one - e-commerce. Although still tiny, it will grow explosively as more and more households install computers and modems, and people get over their initial concerns about security and reliability. Sainsbury's big rival, Tesco, got into online ordering and home delivery early, and its experiment has been a success.

As digital shopping gains in popularity, we shall start to make greater demands on our analogue shopping experiences. It is not that if it can't be delivered to our doorstep we shall all want to spend a day at Bluewater - the shopping centre as theme park. But customers will require something extra from retailers. And this goes beyond the commonplace that shopping must be a form of entertainment.

For the trend has already started to reshape the nation's town centres, where banks and cafes are now the most numerous outlets. The new stores opening up in these places sell life's little luxuries: health foods, candles, mobile phone accessories. It's rather pleasant and Continental - people saunter around instead of scooting along head down and carrier bags in hand; and, if the rain lets up, they sit at tables along the pavements.

The surviving shops will have to change, too. Take books, for example. Ordering online is the easiest and cheapest way to buy a book you know you want. But if you want to browse, in search of serendipitous choices, you may prefer a book superstore with thousands and thousands of titles and a cafe, or the little local bookshop where the owner knows what you like and can recommend something suitable.

It is the basic town-centre stores that stand to lose out. They will pay the price for years of slipshod service from staff who don't care to interrupt their chats to serve a customer, don't know whether they have the right size or colour and can't work the computerised tills.

The utterly dismal quality of service in one of the country's biggest service industries helps explain the enormous appeal of dealing with a computer instead. The electronic sales assistant on my desk is faster, more reliable and far politer.

Online shopping does not even need to grow enormously to pose a threat to more conventional outlets. Just a little competition will have a big impact on the ability of retailers to charge their conventionally large mark-ups. The Government is investigating why prices consumers have to pay in the UK are higher than in other countries, starting with car dealers and supermarkets.

Sainsbury's rivals, such as Asda and Tesco, have been far more aggressive about charging low prices for selected goods. However, the British Retail Consortium is trying to rebut the accusation of over-charging by claiming that there has been barely any increase in the price of many of the most popular goods sold on Britain's high streets. Given the extent to which these are imported, it would be a scandal if prices were rising - the strong pound has in fact cut the wholesale prices paid by retailers, yet little of that decline has been passed on to consumers.

Even in the case of computers and peripherals, where high street prices have fallen, customers have not enjoyed the full extent of the reductions. More than ever it makes sense to shop for a computer over the Internet or even in the US. The cost saving on a new laptop could pay for a cheap flight to New York.

The fact remains that the gap between prices paid by retailers and the prices they charge is higher in Britain than elsewhere. And retail price inflation, although low, has not fallen to the extent that could have been expected.

It is hard to shrug off the suspicion that, if customers had not become more demanding thanks to an awareness that goods can be bought more cheaply online or overseas, shops would be trying to get away with price rises.

Challenge them on this, and retailers will say that their other costs are higher here, especially land and rents. This is true, but it underlines the extent to which competitive pressures are likely to bear down on the great names of British retailing. If price comparisons are becoming more transparent, because of e-shopping or even the introduction of the euro, stores will be unable to cover these higher costs and sustain their profit margins by charging their captive customers a higher price.

They will have to cut costs so prices can stay ultra-competitive or lure consumers away from rivals by offering a better service - or do both. Sainsbury's is axing a total of 1,800 jobs to save money, a possibly risky move for a business whose future depends on the quality of service.

Like other retailers, it will also have to stop spending so much on property. The mad rush to build ever more out-of-town centres has slammed headlong into a brick wall. A few years ago it was received wisdom that British supermarkets had higher profit margins than, say, their French counterparts because customers would pay more to shop in bright and stylish surroundings rather than the tin sheds so common across the Channel. But now those low-cost supermarches look to have been more long-sighted than their British counterparts.

Poor old Sainsbury's has the worst of both worlds, with its old-fashioned brown and orange stores and high costs too. Like M&S, it assumed it would remain the retailer of choice to middle-class Britain by right, and not by constant effort in an increasingly competitive world. But the better- heeled the consumer, the more demanding.

It is not enough to stock rocket and balsamic vinegar. You must sell it as cheaply as the upstart down the street, with impeccable service to boot. Those baseball caps had better symbolise more than just a change of image at Sainsbury's.