Official statistics suggest online channels now account for just over 10 per cent of the UK total, up from 4.4 per cent only five years ago. This January, the digital retailing revolution claimed its highest-profile victim yet, HMV. If there is one growth story we can count on, it is surely e-commerce.
Judging by stock prices, however, investors seem oddly complacent about the future of shops. Shares in mall owner Simon Property Group (us:SPG), the world's largest real estate investment trust, are 36 per cent above their 2007 high. The market value of Unibail-Rodamco (fr:UL) - Europe's answer to Simon Property and one of our most successful tips last year - has swelled to a 22 per cent premium over the company's book value. In the UK, investors have richly rewarded Hammerson (HMSO) for the decision to sell its London offices and focus on shops.
This apparent contradiction can partly be squared by the relative resilience of large malls. Company executives tirelessly repeat that it is high-street shops and small in-town arcades that have borne the brunt of the decline in physical retailing. As retailers shrink their store portfolios, they will be prepared to pay even more for flagship outlets in pan-regional malls such as the Trafford Centre in Manchester or Meadowhall near Sheffield - or so the narrative goes.
For some companies, the figures seem to bear this out. Unibail-Rodamco achieved like-for-like growth in net rental income of 4.2 per cent in its (mainly French) shopping centres last year. The comparable figure for Simon Property's US malls was even higher, at 4.8 per cent, reflecting the more buoyant US economy, while for Australian landlord Westfield (au:WDC) - the other big global player - it was 3.3 per cent.
But the UK companies struggle to match these numbers. Hammerson's underlying growth rate last year slowed to 2.1 per cent, with 3.6 per cent growth in its UK shopping centres offset by a weaker performance from retail parks and the French business. Intu (INTU), formerly Capital Shopping Centres, which operates almost exclusively in the UK, fared far worse, with a 2.7 per cent plunge in like-for-like rental income.
It is impossible to disentangle the impact of weak consumer spending in the UK from that of the internet's competitive threat. Tellingly, however, the landlords themselves are increasingly ditching the narrative of resilience in favour of one of adaptability.
In January, intu launched a digital strategy, the most radical features of which were a new transactional website - an online mall - and the rebranding of its existing physical centres (the Trafford Centre will become 'intu Trafford Centre', for example). The company gives every impression of copying Westfield - the only mall landlord that has successfully created a retail brand, and also the only one to have launched a digital mall (www.westfield.com.au) to complement its physical ones.
Hammerson has been more quietly active. In January it appointed its head of French operations, Jean-Philippe Mouton, to the board with a "special marketing hat" - a response in part to the upheaval unleashed by the internet, says Mr Mouton. The company, long considered the digital trailblazer among the UK mall landlords, has already upgraded its centres to include free wi-fi, smartphone-friendly websites, 'click-and-collect' services for the likes of Amazon and even, in its Aberdeen centre, a House of Fraser outlet with computer terminals rather than clothes. But Mr Mouton says he is still working on a comprehensive digital strategy and has yet to decide what kind of website - transactional or merely supportive - is appropriate.
Lucinda Bell, finance director of British Land (BLND), which owns half of Meadowhall, points out that the pace of technological change makes digital strategies "potentially a capital black hole". "You need to be responsive, you need to experiment. One initiative won't fix it all - things will evolve over time."
Two big unknowns lie at the heart of these strategic arguments. First, nobody knows what share of consumer spending the internet will eventually take. A recent report on multi-channel retailing by Jones Lang LaSalle, commissioned by the British Council of Shopping Centres, suggested 25 per cent by 2020. Axa Real Estate, the property arm of the French investment giant, reckons at least 30 per cent. In a doom-mongering document entitled 'Retail will never be the same again', research chief Alan Patterson predicted last month that online channels would capture 90 per cent of the future growth of retail sales in France, Germany and the UK. "Investors are erroneously pricing in a recovery in physical sales that is unlikely to occur."
The other unknown is what role, if any, shops will play in driving and supporting these online sales. The big landlords are now working hard to ensure it is a prominent one. But in embracing the internet, they are also entrenching its position - an uncomfortable paradox. They can, at least, be reassured that many shoppers enjoy shopping. Malls may no longer be the simplest place for consumers to procure goods, but with a little care they should have a bright enough future as leisure destinations.
Meanwhile, property investors can take comfort that e-commerce does not just operate in cyberspace, but also in big warehouses on the outskirts of key cities. Industrial property has long been the ugly sister of retail and offices. It may be due its time at the ball.
