(Economic Observation) Will department stores disappear?

  China News Agency, Beijing, February 23 (Reporter Pang Wuji) Department stores, once synonymous with fashion and high-end, seem to be gradually fading out of the retail market competition.

  A report released by the Shell Research Institute said that after entering the 21st century, more and more shopping centers entered the market and gradually eroded the market share originally belonging to department stores.

In the past 20 years, the volume of new department stores in China has been relatively limited. Many of the former benchmark properties have been poorly managed, acquired, or transformed into office buildings or other commercial forms. Department stores are facing great challenges in transformation.

  In recent years, news of the bankruptcy of department stores has been heard endlessly, and even industry giants have often seen defeats in competition with e-commerce and shopping centers.

In February this year, the real estate under the name of Changshu No.1 Department Store Co., Ltd. in Jiangsu Province was sold at a bankruptcy auction at a reserve price of 78 million yuan (RMB, the same below).

This time-honored "commercial signboard" has announced the closure of the store at the end of 2019, and has successively auctioned assets.

In August last year, the former Chengdu high-end retail industry representative and fashion landmark Meilicheng Department Store declared bankruptcy.

Ningbo Cotai Department Store, which has created many "firsts" in Ningbo, has been left out in the cold and inaccessible in the past two years.

  The development challenge of the department store industry is not limited to China.

In May 2020, Neiman Marcus, an American luxury department store group, and JCPenney, a 118-year-old department store, successively filed for bankruptcy protection.

A few months later, Kohl's, another major department store chain in the United States, said it would cut about 15% of its staff to control spending.

In Singapore, the 160-year-old Robinson Department Store lost to the impact of the epidemic. In October last year, it announced its liquidation and closed two stores in the Kirin Building and the Raffles City Shopping Center.

  Behind the decline in popularity of department stores and the lack of prosperity is the continued low growth rate of department store business sales in recent years.

  According to data from the National Bureau of Statistics, in the comparison of the cumulative growth rate of retail sales of supermarkets, department stores, specialty stores and specialty stores above designated size, the sales growth rate of department stores has been at a relatively low level. The cumulative growth rate of each quarter in 2020 It is the bottom of the ranking.

According to the prediction of the Shell Research Institute, in 2021, the proportion of sales of the national department store business in the commercial retail industry will still be low.

  The new crown epidemic and the home quarantine policy are undoubtedly worse for department stores that rely heavily on the flow of people.

According to a survey report issued by the China Department Store Business Association, due to the impact of the new crown epidemic, the average sales of 50 department store companies during the 2020 Spring Festival were less than 15% of the same period last year.

  Will the department store format disappear?

  This year's Spring Festival, a wave of quality consumption has injected new vitality into the department store industry.

According to data from the China National Commercial Information Center, from February 11 to 17, the retail sales of 100 key large-scale retail enterprises (mainly department stores) across the country increased by 130% year-on-year compared to the previous Spring Festival week.

The retail sales of gold, silver and jewellery increased by 541.7% year-on-year; the retail sales of clothing increased by 238.7% year-on-year; the retail sales of cosmetics and daily necessities increased by 177.8% and 171.6% respectively.

The long-lost consumer flow flows into physical commerce.

  At the same time, although the product line of shopping malls has almost fully covered the market, there has always been a department store format in the top luxury shopping malls with the highest consumption levels.

For example, SKP, a well-known luxury brand mall in Beijing, is known as the "world's most profitable mall". In 2020, Beijing SKP's annual sales reached 17.7 billion yuan, surpassing Harrods in the United Kingdom for the first time and aspiring to become the world's "store king".

  The China Department Store Commerce Association pointed out in a report that on the consumer side, China actually has the need to increase quality consumption. The key to meeting these needs is the supply side.

The report suggests that department stores need to pay attention to three points: First, differentiation. Companies with outstanding highlights in the whole year of 2020 have all done their work on differentiation, such as SKP, New World Daimaru, and Hangzhou Tower.

The structural dividend of the Chinese population is still outstanding. A good brand positioning is a prerequisite for excellent operation.

  The second is experience, which not only reflects the advantages of offline interaction and on-site services, but also makes full use of data-based methods to extend service time and space.

  The third is product power, including brand portfolio, product prices, product services, etc., so that customers feel value for money.

  The Shell Research Institute report believes that the business model of China's department store business is mainly based on joint operation, and the proportion of self-operation is very low.

From the perspective of increasing turnover, the department store industry can increase the proportion of self-employment under the premise of controlling costs and risks, build its own and exclusive agency brands, and reduce agency costs while enriching the business portfolio.

In addition, as digitalization has fully entered people’s lives today, the department store industry also needs to embrace the Internet and complete the integration of online and offline resources.

In addition to the transformation, the report believes that the direct transformation and renovation of old department stores in the core area may be more urgent.