The Labour Party was created as the political wing of the labour movement, which itself had the aim of redressing the imbalance of power held by the owners of capital, through the use of solidarity & collectivism.
The imbalance of power held by the owners of capital still prevails - as does the need for a political movement to fight this. Indeed, after years of progress, since the 1980's the balance has swung back toward the owners of capital. Not all of it is government policy; much has to do with globalisation & the increased mobility of labour. But the Labour Party long gave up any pretence that it fights for better equalisation of power & redistribution of wealth.
Therefore, it's already lost much of its raison d'etre. It's tried to reshape itself as a party that's 'not as c*ntish as the Tories', which is better than the alternative - but it's lost a very substantial chunk of its support through doing so. Bliar managed to initially retain most Labour support to add to the swathes of new Labour voters - but that was more because people on the left just wanted any change from the nightmare of two decades of Tory rule. In successive elections, NuLabour lost votes from the left.
Labour's issue now is being able to attract votes from the Tories/Lib Dems (and back from UKIP, although I think UKIP have had their peak), whilst not alienating voters from the other end (the left).
With a coherent narrative to pull policy together, a less EU-slavish stance, keeping more contentious policy out of the headlights & short of detail (read the Tories' £12bn welfare cuts, which the media allowed them to keep off the agenda & undetailed), and a good leader-deputy leader broad appeal, they could recapture the sort of support of those people who vote Tory but whilst holding their nose and ignoring their conscience.