09 Apr 2021 • Insights
How China’s department stores continue to thrive
Despite being the least bankable retail typology in many western capitals, Chinese consumers continue to support these one-stop luxury shopping meccas.
If you’re living in London or New York, a walk down any of your city’s major shopping streets would tell you one very short story about the future of the department store: there isn’t one. In the former, stalwarts like John Lewis are shutting or downsizing stores (with the Oxford Street flagship due to partly become office space. . .), while household names like Debenhams will soon disappear completely. In the latter, key players like Barneys and Lord & Taylor succumbed even before the events of last year, while JCPenney didn’t make it past the spring and Neiman Marcus vacated premises only 16 months after it opened its first Manhattan location in Hudson Yards.
If you’re living in Beijing or Chongqing, however, it’s a different story entirely. A new report by Fung Business Intelligence and China Commerce Association for General Merchandise (CCCGM) shows that Chinese consumers maintain a high amount of interest in the typology. In fact, it reveals that a shift towards more domestic luxury consumption due to the pandemic has really bulwarked the sector, with leading locations like Beijing’s Shin Kong Place generating 17.7 billion yuan in sales last year, while Shanghai’s Plaza 66 saw a 60 per cent year-over-year increase in revenue. Here are three key takeaways.
Improvement over expansion
CCCGM’s research found that new department store openings decreased significantly last year, but that didn’t mean a lack of investment in real estate assets by operators. There were around 37 major transformation and upgrading projects across China’s department store industry – equating to some four million sq-m – a figure close to double that seen in 2018. They point to examples such as the 118-year-old Beijing Dong’an Market, which will reopen in the autumn as a ‘fashion-themed district’ with a more curated product mix; Beijing Cuiwei Tower Co Ltd’s redevelopment of its Zhongguancun and Dingcheng properties towards a greater community focus and fashion-forward retail offer; and Rainbow Digital Commercial Co Ltd’s portfolio-wide creation of themed areas that focus on experiential shopping.
Experience takes precedence
Indeed that focus on increasing the experiential quota is universal, with 45.8 per cent of surveyed department-store operators reporting that they have added more such elements in their properties compared to a year ago. Key future additions that operators would like to add include increased F&D facilities (61.5%) and more space for art and cultural events and exhibitions (61.5%), while greater provision for children was on the agenda for just over half (52.5%). Notably, experiential retail space remains an untapped opportunity, with almost half of respondents (47.7%) revealing that this accounted for less than 10 per cent of their shop's floor space. Only 7 per cent of operators offer more than 30 per cent of their footprint to experience-based shopping elements.
Technology adds real value
A significant area of capital outlay for operators needing to wring as much value out of each visitor at a time of inconsistent footfall, department stores have been increasingly leveraging new tech tools such as facial recognition, AI, robotics, and VR, both to improve their on-ground offer and to beef up their CRM capabilities. This has paid dividends, with 70 per cent of those surveyed reporting that adoption of new technologies had directly led to both more foot traffic and conversions. Almost 80 per cent plan to continue integrating new in-store technologies over the next year. One case study CCCGM singles out is Guangzhou International Grand City, which has deployed a combination of artificial intelligence, big data and interactive displays. This has allowed it to create a technology-driven membership system that assesses customer shopping habits in order to personalize promotions, something they claim has lead to a significant rise in in-store sales.
Cover image: Joy Breeze, Grandjoy’s latest mall brand, opened its first department store in Beijing’s Daxing district at the end of 2020, targeting the 25-45-year-old urban middle class. Image: courtesy Joy Breeze.