Shopping habits: Blockbuster is heading the way of Woolworths and MFI

The slow demise of the video rental business is another result of the internet. With it, ironically, we may be losing much more

Blockbuster appears to be on an inevitable decline (Alamy)

"I think it's a pity," says the man in Willesden Blockbuster, north-west London. He is carrying a stack of six cut-price DVDs – among them Saw IV, The Hurt Locker, and 13 Going On 30 – and an enormous bag of popcorn. His name is Tony and he's been using the shop for nearly 20 years. "I'm on Netflix now, yeah," he goes on, a little awkwardly. "I got it for Breaking Bad. It's good. But you can't get snacks."

Unfortunately, popcorn and Haribo have not been enough to save Blockbuster, which is inching ever closer to the inevitable conclusion of its terminal disease. After a brief flurry of groundless optimism when the chain's remaining 264 British stores were bought by a private equity company earlier this year, the inescapable reality of a business model rendered irrelevant by the internet has hit home. Now the chain has entered administration for a second time: 72 branches are closing this week. Barring the sudden and surprising extinction of high-speed downloads, the rest cannot be very far behind.

The Willesden branch is one of this round of casualties. Tony is the first customer for about 45 minutes one weekday afternoon, and he admits he hasn't been in for a while. The "CLOSING DOWN SALE" signs that lured him do not, it must be said, trigger an immediate sense of mourning. It could easily be argued that Blockbuster's demise is a simple example of capitalism at its merciless, customer-oriented best: the chain has not been slaughtered by a competitor with deeper pockets, after all, but by an ingenious idea that has rendered it obsolete. Its mouldy old carpets, clinical lighting scheme and cramped, vertiginously high display units would be anathema to your average 21st-century customer-experience engineer. Think, in contrast, of Netflix's elegant, algorithmically unimpeachable interface. The difference between the two is the story of what has happened to our shopping experience in the past decade.

Grim though it is, a whiff of nostalgia clings to the place, at least for me. I well remember trips to the Andover branch as a teenager in the late Nineties, the video rental emporium's golden era, when the VHS tapes in their standard-issue white boxes didn't look comically enormous, and the internet was still hardly more than a curiosity. Terminally indecisive, I could easily spend half an hour in there, unwilling to choose a film until I had considered every option. (I would occasionally delve into the foreign tapes, but that was mostly in the hope of chancing upon something a bit racier than the wholesome Hollywood offerings that made up the rest of the selection.)

The layout, the colour scheme, the basic principle that you have to bring the movie back on time: nothing much has changed. The only really notable difference is that in those days, the place was rammed. In 2000, Blockbuster's American parent company, bloated and complacent from the spoils of such success, turned down the chance to buy Netflix for $50m. Today, it is worth an extraordinary $20bn.

In Willesden, Karim, who has worked for the chain for about two years, is sitting on a step at the back of the store next to a pile of discarded banners featuring ever more desperate price promotions. He has been taking advantage of the lull – not, he admits, unusual these days – to use his smartphone. There seems something particularly brutal and debilitating about losing your job in this way: when your employer goes under, the object of your justified resentment vanishes, like the lover who dumps you with a note left on the kitchen table. But Karim insists that there's a silver lining. "I needed a little push to get out of it," he says. "Retail isn't for me any more. Retail's dead."

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The first British branch of Blockbuster opened on south London's Walworth Road in 1989. It was an early foreign adventure for an American business that had started up in Dallas, Texas, four years earlier, when a successful computer programmer named David Cook noticed the limited selection on offer in your typical neighbourhood video rental place and invested $800,000 to open his first branch. It proceeded to roll over everything in front of it on both sides of the Atlantic, ultimately making the idea of the staff of knowledgeable, committed enthusiasts running the local video store as quaint as their counterparts in the record business. The garish signage, the pimpled teenagers behind the counter, the tendency to the lowest common denominator, sterility as a kind of ideology: this was a blunderbuss of a business model, film as fast food. It was also unbelievably successful. At its peak, Blockbuster had 9,000 branches in America alone.

There were many, many junctures when the seeds for its downfall were sown: as so often with the death of a seemingly indomitable business, the most remarkable thing about Blockbuster is just how many opportunities it turned down to save itself, remaining doggedly committed to a model that was obviously approaching extinction. If you had to pick a single moment that damned the company, though, you would probably pick the mythical occasion that a software entrepreneur called Reed Hastings realised that he hadn't returned his tape of Apollo 13 on time. The oversight cost him an eye-watering $40; festering over the expense on a treadmill a little later, it occurred to him that the gym had a better business model. Soon afterwards, Netflix – with its monthly subscription and abolition of the late fee – was born.

Stories such as this one feature in the obsolescence of many old ways of doing business. Being an enthusiastic adherent of most of the new models, I can hardly complain about them. Like everybody else I know, as well as watching more and more of my box sets on Netflix, I buy my music through iTunes, get my groceries delivered, and, in an obviously but inevitably self-destructive act, read a lot of my news for free. In a scary portent, I sometimes read on a Kindle. There is little doubt about the benefits of each of these means of consumption. They are cheaper. They are more efficient. They are more convenient. They make you feel like the master of your domain from the comfort of your front room, summoning information and entertainment and sustenance with the panache and complacency of a Roman emperor.

Blockbuster's slow death, nonetheless, gives me pause. Going through my Netflix suggestions the other day, and marvelling at the hyper-specific categories it was offering me – recently parodied by The Daily Mash: what are you in the mood for, "Upbeat Nocturnal Mammal Docu-Romance" or "Fanciful Tramp Comedy"? – I thought about all the films I wasn't happening upon. Whether by accident or design, Netflix makes it creepily difficult to simply browse its full catalogue, almost as if it doesn't trust leaving you to your own devices. The algorithm's brilliance is also its curse: it learns exactly what you like and gives you more and more and more of it. The problem with such an algorithm, of course, is that it is self-fulfilling. If all you show me are whimsical indy romantic comedies, how am I ever going to discover my unplumbed potential as a fan of foreign fantasy horror flicks?

So it is with the Kindle, on which device the problem is most apparent when you are dragged out of your usual comfort zone by circumstance. A few weeks ago, I was deeply confused to be sent an email reminding me of the great offers available on books by Jeremy Clarkson, Ann Widdecombe and Daniel Hannan. The mystery evaporated only when I remembered that for a work assignment I had recently downloaded Nigel Farage's autobiography, Flying Free.

Now, I am perfectly happy not to be confronted too often with the works of Mr Clarkson and co. But it must be said that the venerable bookshop, like your local Blockbuster, has the benefit of occasionally putting something entirely unexpected in front of you: a piece of work that aligns not at all with the data your purchases have produced, but very strangely and precisely and happily with the mood that you happen to be in. It's these serendipitous moments that drag us into audiences and communities where we might not expect to belong; without them, even the algorithms will eventually run out of steam. As time goes by, I notice more and more that the internet is advising me to watch and read and listen to things that I already know.

The Walworth Road branch of Blockbuster closed last year. When the last example of that familiar signage disappears from our high streets, it will feel strange for a moment, and then completely normal, just as it did with Woolworths and MFI. In Willesden, Karim is used to the idea already. He is using his smartphone to browse his iTunes collection, and he's excited about the future. "My friend's dad is an estate agent. He says I can shadow him," he explains. "I've learned my lesson. No one's ever going to buy their house on the internet."