The timing could not have been worse for retailers, which were already operating in a tough consumer environment. But they rallied together to win back footfall by launching a series of promotions, in-store events and Oxford Street's first pedestrianised shopping festival.
Their efforts, coupled with the passage of time, have helped bring about a spectacular recovery - in May, sales were up 14 per cent, according to the London Retail Sales Monitor.
But while external events have prompted retailers to act on decreasing shopper numbers, there is still more work to be done. A survey last month revealed overcrowding in the capital, poor signage and the congestion charge deter shoppers.
Twelve months after the attacks that emptied London, retailers are reflecting on lessons from the past year and turning their thoughts towards the future.
Debenhams chief executive Rob Templeman is proud of the way in which Oxford Street united to win back business with events such as the Oxford Street Festival, which closed the street to traffic. He says: 'Business was hit quite severely almost immediately after the bombings and stayed down for a number of weeks. The London Fights Back weekend marked the turning point.'
Throughout the year, Debenhams Oxford Street has fought to maximise customer traffic with events such as celebrity appearances and a mini-concert by pop group Westlife on the balcony of its store.
But boy bands aside, Templeman thinks fundamental improvements to Oxford Street's environment are needed if it is to live up to its billing as London's premier shopping street.
He says: 'It needs to become a more vibrant, fun place, not just a row of shops - look at Barcelona, you have got Las Ramblas, the food, the leisure ...'
He stresses that it should not merely be up to the street's tenants to spruce up the area. 'There is a will to make something happen, but the scale of it remains to be seen,' he says. 'It's not just retailers, it's Government. It's the most famous street in the UK and it needs some money spent on it.'
This view is supported by the findings of a study carried out by property agent Jones Lang LaSalle and the New West End Company, the lobbying and marketing group for the area's retailers and landlords.
The study identifies two distinct groups of London shoppers - the loyal and the lost. Loyal shoppers are young consumers who live and work in London. They shop spontaneously as a by-product of going out and socialising. Lost shoppers visit the area only once or twice a year. They are older and live in the suburbs or further afield. The challenge for retailers is to find a way to address the needs of both groups.
Loyal shoppers would benefit from opening hours more appropriate to a busy lifestyle, with places to sit and relax and a modern retail offer. Lost shoppers are deterred from the capital by overcrowding (63 per cent of all surveyed complained about being jostled on pavements), and lack of help in finding their way around. They are not willing to carry large amounts of shopping home on public transport. The number of shoppers preferring to shop in out-of-town shopping centres has risen by 8 percentage points in the past two years.
New West End Company believes there are many quick wins that can help solve these problems. Some of its suggestions include increasing pedestrian priority at junctions, encouraging the use of side streets (many of which are destinations in themselves), reducing street furniture and traders and promoting peripheral tube stations such as Bond Street.
New Look managing director of marketing, operations and international Carl McPhail says: 'It's about time we did something for Oxford Street. Many other European cities are beginning to work really hard at making it easier for people to walk down the street.'
However, like Templeman, he thinks change must be led by local government such as Westminster Council and the Mayor.
'What are the key things that attract people to London? It's royalty, but also shopping. Unless the Mayor creates an initiative to make Oxford Street and London more vibrant, we are going to have the same issues we have always had, arising from the range of different views and agendas,' McPhail argues.
New West End Company agrees that bigger issues such as transport and pedestrian needs are the remit of Transport For London (TFL), Westminster council and the Greater London Authority. In October, it will reveal an action plan it has drawn up with TFL and the council that will identify medium-term improvements, tackling issues such as buses and taxis.
The West End Retail Planning and Development Commission is also considering long-term improvements and is due to present a report for consideration by the Mayor in the next couple of months.
However, New West End Company warns that recovery is two-sided and retailers can also make quick wins through service initiatives. Chief executive Gary Reeves says: 'The research is also a call to retailers to tell them how they should be engaging with shoppers in their stores. There were a couple of points that came up - shoppers were put off by having to carry bags home on public transport and they wanted stores to stay open longer in the evening, so they are not so busy.' He adds that high-end baby store Mamas & Papas and Habitat ran exemplary home delivery schemes.
Among the study's suggestions as to how retailers can improve the shopper experience were more late-night openings, providing a home delivery service and even introducing valet parking for high-income groups.
In regenerating London, it is not only shoppers from the capital and home counties that must be considered: tourist organisation Visit London projects tourist spend in the capital will reach£9.8 billion this year.
Visit London chief executive and former Selfridges marketing director James Bidwell thinks the mix of retailers in the capital is paramount.
He says: 'Environment is absolutely critical, but London needs to compete as a destination. Post-7/7, the domestic market went very bad for a couple of months, although we got it back with some very aggressive marketing.'
He believes London's retail scene is being eroded by the dominance of ubiquitous national and international chains. 'We need to make sure our content is world class and that means we have to celebrate smaller retailers and ones that can make a point of difference,' he says.
'We need to have planning regimes which understand that diversity is a critical part of the landscape; it's not just about who can pay the largest amount of money. The Apple Store opening in Regent Street is a fantastic example - a world first, or first outside the States, in London. We should have one of those every two months to make it a true destination.'
The Crown Estate, which owns most of Regent Street, has recognised this need and is attracting international retailers with more flexible leases. After the success with The Apple Store, it has wooed international names such as Zara Home, high-end bag retailer Kipling and German fashion house Gerry Weber in the past year. H&M has also chosen the street as one of the 10 international locations in which it will open a high-end concept next year, and domestic retailers Mamas & Papas, Burberry and Habitat have all opened flagships on the street.
However, a street owned by one landlord is rare in the West End. It is much more difficult for neighbouring Oxford Street to pick and choose the retailers that can operate there, because it has hundreds of different landlords looking for short-term gain.
Refurbishments and openings are all helping to boost the recovery of the West End, according to Reeves. He says: 'Anecdotally, retailers have been saying that the West End has recovered. The sales figures have been positive since December last year and have shown healthy growth.
'It will be difficult to say whether the West End has fully recovered until December this year, when we can compare it to when it picked up last year. Obviously, we expect July's figures to be better than last July, but that is coming from a low base.
He adds: 'The fact that retailers are investing in their stores is a sign that they believe the West End is recovering. John Lewis is undergoing a massive refit, and Selfridges is investing in its store. Next has also been refurbished.'
There may be some dispute as to who should take the lead, but there is no doubt that retailers and government are both striving to make post-7/7 London a more attractive place to shop. Encouragingly, safety did not feature highly in New West End's survey as a reason to stay away from the area.
This shows the attitude of shoppers was vital in ensuring the West End did not succumb to the climate of anxiety that the terrorists tried to create. And it is only right that the consumer's decision be rewarded with a first-class shopping experience.
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