A 21st century phoenix will rise out of the ashes of C&A

The demise of C&A in the UK is a retail story, an internet story and a high street story. Of the three, though, the last is the most interesting, for the changing high street is a mirror reflecting a grand shift in the way we live and work.

The demise of C&A in the UK is a retail story, an internet story and a high street story. Of the three, though, the last is the most interesting, for the changing high street is a mirror reflecting a grand shift in the way we live and work.

The retail story is really more of the same: an established retailer losing touch with its customers. There are a string of precursors, particularly among the department stores (remember Gamages?) but more recently it has become a disease of the chain stores too. In the case of C&A, despite owning (often freehold) some of the best high street sites in Britain, it has failed to connect with its audience. On the Continent, it remains successful, but something has gone irretrievably wrong here.

But this is not new. Ten years ago Marks & Spencer and Sainsbury's were the two most admired British retailers. Both misread their markets and both are now in trouble. C&A is different only in the sense that as a privately owned company it has not been subject to the same level of scrutiny as its quoted rivals - and maybe not been forced to react as quickly as they to a deterioration in its performance.

Retailers have found themselves in tough times before, but the internet is playing a part. What has happened so far is objectively not nearly as significant as, say, rationing during and after the Second World War or the development of out-of-town supermarkets, and maybe less significant than the great inflation of the 1970s. But while online retailing is still in its infancy, it will change the entire nature of retailing in three ways: it creates a new distribution mechanism; it enables better price comparisons; and it will probably reinforce the decline in the prices in the shops over and beyond the general deflation that is taking place.

This last consequence is very important. Shops hold stocks. In a world of inflation carrying stocks is expensive because of associated high interest rates but at least the general price level underpins the value of the stocks. Sure, you buy duff goods and have to get rid of them in the sales. But there is always the new range and it will go at a higher price than the last.

If, however, next year's range is going to retail for a lower price than the present one, holding more stock than you ideally want becomes quite frightening. Not only do you have to discount even more to clear the old range; unless you can increase volumes significantly the new range will yield less cash.

The result is a change of mindset: clever, nimble retailers can cope, just as they coped with rationing, the great inflation or other seismic shifts that they have encountered. Retailers that are less nimble cope rather badly.

But I suspect that for most people the change in the high street is the aspect of the retail revolution that will most change our lives. Over the last two decades the high street has already changed dramatically, with small local stores replaced by chains and "duty" shopping (groceries and the like) moving to out-of-town shopping centres. But while there have been practical and environmental benefits for most of us - not having to bring cars into the centre of towns for example - as far as the texture of the high street is concerned the downside has been more evident that the up. It is always depressing to see a long-established family grocer replaced by yet another charity shop.

Expect over the next two decades to see more of the upside. What, for example, will happen to the space liberated by C&A? Some, of course, will be retained in retail use, but the focus will be on selling services rather than goods. Those services will trend upmarket, as incomes rise, and many will be in the entertainment and leisure sectors. High streets will shift from selling things to selling fun.

But they won't just be places to buy. Expect increasingly them to become places to live. Just as 1960s office blocks can be successfully turned into dwellings, expect the market to find other uses for unwanted retail space. These will include hotels as well as flats, and probably more of the new trend for dwellings associated with work-space.

Just as medieval shopkeepers lived above the shop, expect more and more service industry workers to need space that is central and doubles as living and working areas. The more that people move into city centres the nicer places these will come to be.

The trend back towards living over the shop looks like being one of the great social changes of the first half of this century. Cutting out community gives an enormous social and economic benefit. Most of the time saved by shorter working hours during the 20th century was taken up by longer commuting times. The new communications technologies allow much more home working - about 4 per cent of British workers now operate at least part-time from home. But homes have to be bigger, and since some personal interaction is still needed, they have to be more central.

The hardest thing to recognise when there is a business failure - and I cannot see any other way of describing what is happening to C&A - resources are liberated. Good people are free to get other jobs, though of course the process of change can be unsettling, unpleasant, even alarming. Good sites are liberated - free to be pushed into other use. That can also be unsettling, but given strong general demand in the economy, there is no reason why it should be unpleasant.

The big issue is surely this. The more than we can shift the buying of goods out of high streets the more they can return to their earlier functions of being places where people live, meet each other, buy and sell various services. The trick from now on will be to encourage this process of regeneration to take place.