I. Overview of the present situation of the department store industry
In 2023, with the gradual recovery of the consumer market, the department store retail industry continued to recover. According to the report released by China Department Store Business Association and Li Feng Research Center of Fengshi Group, 76.6% of sample enterprises achieved year-on-year growth, and 70.7% of sample enterprises saw year-on-year growth in net profit. However, compared with Ole, which focuses on high cost performance, and new shopping centers that provide diverse experiences, the pace of recovery of department stores is relatively lagging behind. For example, Wangfujing Group's revenue in the first three quarters was about 9.265 billion yuan, up 9.44% year-on-year, but the operating income of department stores was basically the same year-on-year, obviously lagging behind its Ole and shopping center formats.
At the same time, the department store industry presents the characteristics of increasing differentiation among enterprises. Some enterprises, such as Chongqing Department Store and Wangfujing Group, saw their revenues and net profits increase year-on-year. However, some enterprises even suffered losses. In terms of passenger flow, the passenger flow of 70.1% sample enterprises in 2023 was lower than that in 2019; In terms of sales, the sales scale of 64.9% sample enterprises has not yet recovered to the level of 2019.
In addition, since the beginning of this year, many time-honored department stores have closed. According to statistics, in 2024, up to now, 10 old department stores have announced the closure of their stores, of which the youngest has been operating for 11 years, while the oldest has been operating for nearly 70 years. The main reason for closing the store is the huge operating pressure behind the expiration of the lease. For example, Isetan in Meilong Town lost 376 million yen in operating profit from March to November 2023. About 70% of the department store's passenger flow did not exceed the level of 2019. Although gold, jewelry, cosmetics and other categories are important support for the sales of department store retail enterprises, the sales volume in the past two years has been sluggish.
Second, the recovery situation and challenges coexist
(1) Overall recovery of performance
Statistics from the National Bureau of Statistics show that in the first three quarters of 2023, the national economy continued to recover and the vitality of the consumer market increased. The three quarterly reports released by a number of department store retail listed companies show that the performance of most enterprises is recovering, such as Chongqing Department Store, Hefei Department Store, Xinhua Department Store and other enterprises' revenue and net profit in the first three quarters increased year-on-year. Taking Wangfujing Group as an example, the third quarterly report in 2023 showed that the company's revenue in the first three quarters was about 9.265 billion yuan, up 9.44% year-on-year. However, in terms of business formats, the overall recovery of department stores was weak, and the operating income was basically the same year-on-year, obviously lagging behind its Ole and shopping center formats. At the same time, some enterprises have the situation of "increasing income without increasing profits", and their net profit has dropped year-on-year, with the highest drop even exceeding 35%. This shows that although the department store format shows signs of recovery, it still faces great challenges.
(B) the plight of traditional department stores
Since the beginning of this year, traditional department stores have faced many difficulties. On the one hand, many stores have closed down due to the expiration of property leases, poor management and adjustment of business strategies. Such as 30-year-old Shanghai Pacific Department Store Xuhui Store and 26-year-old Shanghai Landmark Plaza. Before the news of the official closing of the store came out, many old shops had already faded out of consumers' sight. On the other hand, traditional department stores are abandoned by consumers because of their single format, outdated facilities and outdated brands. Ms. Yu, a post-1995 consumer, said that shopping is mainly about spending money on meals, drinking milk tea and watching movies. Most brands can be bought in online stores, and the discount is even greater. Compared with traditional department stores, she prefers to go to more fashionable shopping centers. According to the Report on the Development of China Department Store Retail Industry from 2021 to 2022 issued by China Department Store Business Association, there are about 8,000 department stores in China at present, and the sales of enterprises with good individual experience and high positioning, as well as those with multi-format development, are flat or even slightly better than in 2021. But on the whole, traditional department stores still need to accelerate the pace of transformation to adapt to market changes and consumer demand.
Third, the road to innovation and development
(1) Accurate positioning
Traditional department stores are pursuing the "big and complete" business strategy from the past, and gradually turning to focus on the lifestyle of target customers and make accurate positioning. For example, Beijing Saite+Shopping Center, as a representative of old high-end department stores, once became the benchmark of high-end commerce in China. However, with the changes in consumption patterns and the rise of new shopping centers, the aura gradually faded. After the renovation, Saite+Shopping Center has been transformed into an exquisite dining gathering place, with the introduction of a number of first-class restaurants with Black Pearl and Michelin list, with life service formats such as gym, KTV, hairdressing, etc., and the linkage of multiple art IPS, rich theme activities and works of art, with a super interactive atmosphere and immersive experience atmosphere. It is positioned as a "new social gathering place in Beijing CBD", focusing on the demand of high-end business customers around for high-end consumption experience, and the catering industry accounts for more than 60%, making up for the lack of catering social atmosphere in the area.
Beijing Chang 'an Shopping Mall is positioned as a "community life center" for aging transformation, focusing on the consumption, life and health needs of the surrounding elderly residents, and introducing community canteens, aging classes, health stations, etc. to create a "silver-haired gold street" shared space for the elderly residents. Through accurate positioning, these old department stores have returned to consumers' field of vision with a new look, and they are no longer "one thousand stores".
(B) Diversified innovation model
The "department store+"model presents a trend of letting a hundred flowers blossom. Taking Yongning Store in Wangfujing, Xi 'an as an example, the project has changed from a traditional department store to "experience is king", transcending the constraints of traditional commercial boundaries, reshaping the ecology through effective allocation of resources, and providing citizens and tourists with a leisure and social "micro-holiday" destination.
In terms of building commercial projects with the theme of secondary culture, Shanghai No.1 Department Store Hall C, Shanghai Bailian ZX Creative Fun Field, Beijing Wangfujing Joy Shopping Center and other projects choose to enhance the "secondary concentration" of shopping malls, and focus on introducing new faces such as animation surroundings, art brands, trendy play, cards and IP joint restaurants, and transform themselves into new trend landmarks. China's secondary content industry is booming, the scale of consumers continues to grow, and the proportion of young consumers is high, which has great consumption potential in the future. This diversified innovative development model has brought new opportunities and vitality to traditional department stores.
(C) enhance the shopping experience
Traditional department stores have increased their shopping experience and introduced experience formats. For example, 21% of the area of Aeon Dream City Jiangxia Store is used to strengthen the experience format, create a super-large entertainment experience area, build a leisure life exchange space, and introduce popular catering. Creating more indoor entertainment and leisure space will help to prolong the customer's detention time, thus increasing sales.
In addition, traditional department stores also hold various activities to enhance the shopping experience. For example, Zhenghongcheng carries out accurate positioning, personalized recommendation and multi-channel full-scene access to consumers through data analysis, consumer behavior analysis, market trend analysis, etc., with the "Zhenghongcheng+"WeChat applet as an important carrier, and through new marketing portals such as 50% discount food cards, discount coupons, screenplay and number reservation, it builds a new one-stop marketing ecology to attract consumers to shop.
The transformation of old department stores "new species" is also constantly innovating and developing. For example, in the new era, Nanjing Xinbai is facing the development of the Internet and the iterative upgrading of new consumption trends, accelerating the pace of rejuvenation. In 2018, Nanjing Xinbai built an international beauty salon in department stores, and international first-and second-tier beauty brands such as Snow Show, biotherm, Lancome and Dior successively settled in. In the same year, we launched the member digitization project, built the new top 100 data centers, accurately grasped the consumer demand of members, and maximized the value of members. In 2019, the central store launched the micro-mall "Xinbai Shopping", which combined with empowering brand merchants to build an omni-channel marketing scene, broke through the time and space constraints of physical retail, and further helped the digital transformation of Xinbai Central Store. In 2021, Nanjing Xinbai Center Store completed the largest and most complicated renovation and renovation project since 1997, covering the second to eighth floors of the center store, totaling 28,000 square meters.
Fourth, explore the business model
