Rejuvenate the commercial competitiveness of department stores

As a traditional retail channel, department stores used to be “high, large, and high” in the memory of Chinese citizens. However, in the past few years, the domestic department store industry is no longer: sales growth has been exhausted, and profit levels have been declining. Faced with difficulties and challenges, the department store industry is seeking transformation and breakthroughs in many aspects such as the shopping mall environment, commodity service portfolio, business model, real estate strategy, and new technology applications. “The Chinese consumer market still has huge room for development. In the foreseeable future, China’s retail market will continue to maintain double-digit growth. Department stores want to emerge from the current predicament and it is imperative to enhance and rejuvenate the core competitiveness of the department store industry. In an interview with reporters, Chen Zhongwei, head of the China region and executive director of the CB Richard Ellis Research Department, suggested that “a department store can start from the three aspects of store network expansion, business model optimization, and new technology application.”

According to Chen Zhongwei’s analysis, domestic department stores are facing various internal and external difficulties. For department stores, the rapid development of China’s economy and retail industry is both a great opportunity and means a rapidly changing internal and external environment. This is also a change in the retail industry. The origins of various external difficulties and difficulties encountered by the department stores in China. First, the difficulties of department stores are: slowdown of domestic economic growth and slowdown in total retail sales; rise of diversified retail formats and continuous escalation of business competition; rapid development of online shopping impacts physical retailers, in which traditional department stores are affected. Larger; rising costs of personnel and rentals further squeezed the profitability of the department store industry. The internal worries of department stores are: With the proliferation of social goods and the increasingly diversified consumer experience, the limited operating area of ​​the department store industry has objectively constrained the further development of the department store industry; the domestic department store industry has a long history of the joint venture model. Over-reliance leads to weakening of its merchandising capabilities, profit margins are eroded by rising operating costs and powerlessness; lack of self-employment capacity is also one of the reasons for the domestic department store's 1,000 stores.

Faced with the situation of internal and diplomatic difficulties, the voice of the reform of the traditional department store industry has been rising in recent years. According to CB Richard Ellis statistics, the main countermeasures for department store companies are: shopping malls in department stores, self-employed businesses, increasing the proportion of self-owned properties, and online and offline business linkages. Chen Zhongwei’s proposal is that department stores must be upgraded and actively responded to, first of all, department store shopping malls: shopping centers are gradually becoming consumers’ preferred consumer places due to their rich business mix and good shopping environment. The relatively simple traditional department store industry hopes to create a kind of shopping experience similar to shopping centers through the expansion of shopping malls, the introduction of fashion brand flagship stores, and the addition of shopping malls to experience elements.

Self-employed business is an innovative path that can be explored. The experience of foreign well-known department stores shows that mature self-employed businesses can often provide department stores with more lucrative profits. Therefore, self-operated businesses are regarded by local department stores as a good way to get out of difficulties and increase investment in recent years.

Raising the proportion of self-owned property is a good recipe. CB Richard Ellis's research data shows that the annual rental growth of high-quality shops in major cities across the country has reached a compound annual growth rate of 6.0% over the past decade, and the rent has been rising year by year. In order to control rising rental costs, some department stores have increased the proportion of self-owned properties through development or project acquisition; some department stores have begun to initiate online and offline business linkage. As online shopping prospered in China, they began to pay attention and test the construction of water online platforms. Department stores hope to build online shopping platforms while satisfying consumers' online browsing, online inspection, and online ordering "blanket" purchases, locking consumers in certain closed sales loops.

At the time of the e-commerce wave and the transformation of China's department store industry, many department stores have proposed the creation of "boutique department stores," with a large number of mid-to-low-end products filled with misplaced online shopping. For this problem, Chu Xiangjun, senior director of CB Richard Ellis China Business Services Department, believes: “Simple pursuit of high-end products does not fundamentally address the homogeneity issue of the Thousand Stores; in contrast, the focus is to tap the needs of our target customers. With the precise positioning, selected unique products, meticulous service, channel access through the whole life cycle, carefully-built shopping environment, and technological advancement, the 'boutique department store' should be the future of department store industry. The direction of development."

Chu Xiangrong made three suggestions: First, it is necessary to expand the store network and expand the chain. Due to the short development time and the “partitioning” of local department stores, domestic department stores rarely establish a truly national network. At the same time, the development of shopping centers in recent years has caused shopping centers to overtake the department store industry in the importance of retail channels. Therefore, the department store industry should speed up the layout of the country in order to consolidate the advantages of channel scale and expand the chain effect. Department store expansion store network can follow the path of endogenous expansion and extension. In the implementation of endogenous expansion, it is recommended that department stores adopt a two-wheel drive real estate strategy of leasing and self-sustaining stores in order to balance the scale, capital, and business risks they face in the expansion process. The expansion of the extension has enabled department stores to use mergers to quickly break market barriers and increase market share.

Second, we must deepen joint ventures and gradually develop self-employment. Self-employment ability is the core business capability that enables department stores to differentiate themselves from shopping centers. The manpower, capital, and business resources required for self-employment have to be accumulated and nurtured over a long period of time. Therefore, within a relatively long period of time, through the “single product management” to strengthen its own product management and operating capabilities, deepening the joint venture will continue to It is the mainstream business model choice in the rapid development of domestic department stores. The highly profitable consideration of self-operated business is the buyout, the risk of operation and funding of the goods, as well as the training of design, buyer, sales, and management teams. The development of self-supporting capabilities of the domestic department store industry will be a gradual and long-term process.

Third, introduce new technologies and create omnichannel retail. The large-scale application of new technologies, such as e-commerce and mobile Internet, is an irreversible change. While it has impacted on physical retail sales, it also makes it possible to integrate online and offline omni-channel retail models. CB Richard Ellis recommends that department stores, which are traditional physical retail terminals, should firmly base themselves on their own store network and brand advantages, from localization and liveliness, service and online services, to mobile, online, Multi-level physical store omni-channel retail.