China’s malls adapt to survive online shopping onslaught

Yesterday’s Singles’ Day saw China’s e-commerce industry set another stunning sales record – sending shivers through China’s thousands of malls and department stores.
In Zhuangsheng Sogo, a high-
end department store in central Beijing’s Xicheng District, promotion posters hang on the walls and windows. A few customers wander among the ground floor stands, outnumbered by shop assistants, who chat or play with their smartphones. Floors two to four are closed for refurbishment.
This year has seen a growing number of conventional retailers retreat from the market. As of June 30, nine major retailers, including Dalian Wanda, Parkson, and Marks & Spencer, shut down at least 25 stores in Beijing, Shanghai, Guangzhou and other cities.
Commerce Ministry spokesman Shen Danyang said in a news briefing on Nov. 4 that retail stores face increasing pressure from the booming online shopping sector, with some stores closing or canceling their leases.
According to the National Bureau of Statistics, total retail sales of consumer goods in the first nine months of 2015 totaled 21.6 trillion yuan (USD 3.4 trillion), up 10.5 percent year on year. The value of online sales in the same period reached 2.6 trillion yuan, up 36.2 percent and accounting for 12 percent of total retail sales of consumer goods.
Nielsen’s Global E-commerce and the New Retail Survey in April said several factors are at play. Rapid urbanization and high population density make the home delivery model economically viable, particularly when coupled with low labor costs. In addition, booming smartphone ownership and usage have created huge mobile commerce opportunities.
To cope with the challenge of online shopping, many department stores launched promotions one week before Singles’ Day. Some offered big discounts; others welcomed customers to try on clothes and shoes even if they buy them online. Suning, one of biggest home appliance retailers in China, has joined the online promotions in partnership with Alibaba.
Analysts say online shopping has disrupted the conventional come-buy-go mode for goods such as home appliances, electronics and off-the-rack clothes. Shoppers no longer need to go to the store if an online service can deliver the goods to their home for the same or less cost.
In Zhuangsheng Sogo, floor six is the most crowded area, with bars, a food plaza and children’s playground. Liu Hailing, a mother watching her boy playing, says her son likes coming here every night. Sometimes they buy toys and clothes for him. “We probably wouldn’t come here if it weren’t for this playground,” Liu says.
In Xidan’s Joy City, a large mall and entertainment complex just a kilometer from Zhuangsheng Sogo, crowds flow in and out. A long escalator in the entrance takes them direct to floor six – the food plaza. Floors six to eight have dozens of restaurants, bars and snack stalls, while floors nine and ten have a video game center, a gym and a movie theater. Most people come here to eat first, then watch a movie, play games, or do some shopping on floors one to five on the way out.
The combination of food, entertainment and shopping is a big advantage over online shops, and is probably the future for China’s conventional retailers.
According to the National Bureau of Statistics, total retail sales of consumer goods volume in 2014 hit 26.24 trillion yuan, with catering at 2.78 trillion yuan and online retailing at 2.79 trillion yuan.
Wang Jianlin, head of real estate giant Dalian Wanda, arguably one of China’s richest people, said the retail market should aim at “experience consumption”, which will account for two thirds of the total consumption market. The future Wanda complex would be 80 percent dining, entertainment and cultural consumption, and the other 20 percent conventional shops. Xinhua