5 department stores were closed in 6 years, and the transformation of the old shopping mall Tianhe City suffered a setback

Source of this article: Times Weekly Author: Li Xinting

Guangdong Guangdong Teemall (hereinafter referred to as "Teemall Mall"), which once relied on Guangzhou Teemall Shopping Center to start the first year of China's shopping malls, has failed to withstand the industry cycle.

Recently, according to the notice issued by the official WeChat public account of Guangdong Tianhe City Commercial, due to the expiration of the lease contract of the shopping mall, Guangzhou Tianhe City Department Store Dongpu Store will cease to operate after the end of business on December 31, 2023.

This is the second store that Tianhe City Department Store has closed in Guangzhou this year. As of the end of 2017, the number of stores in Teemall was 9, but since then, Teemall Department Store has closed a number of department stores. After the closure of the Dongpu store, there are only 4 stores left in operation of Tianhe City Department Store, setting a new low in the number of stores in Tianhe City Department Store in recent years.

The continuous contraction of the business format of Tianhe City Department Store is the epitome of the iteration of the current offline consumption format.

Under the impact of e-commerce, in recent years, traditional department store brands with old space design and poor consumer experience have withdrawn from the public eye. At the same time, new shopping malls that focus more on experiential formats such as catering and trendy toys also continue to attack. Between advance and retreat, Tianhe City is also striving to renew its own business format.

On December 7, on the business operation of Tianhe City Department Store and shopping center, a reporter from Times Weekly called and sent a letter to Guangdong Investment (00270. HK), which did not receive a reply as of press time.

Tianhe City Department Store Dongpu Store Photo by a reporter from Times Weekly

Closed 5 stores in 6 years

The Dongpu store of Tianhe City Department Store, which recently issued a notice of closure, has been open for nearly 12 years, but in terms of "qualifications", it is still slightly inferior to the Beijing Road store of Tianhe City Department Store, which closed at the beginning of the year.

On March 26, due to the need for strategic adjustment, Tianhe City Department Store Beijing Road Store was closed for business. The store opened on September 26, 2008, and had been in operation for nearly 15 years at the time of closure.

In addition, in recent years, the scale of Tianhe City Department Store has continued to shrink. As of December 31, 2017, the number of stores in Teemall was 9. Since then, including the two stores closed this year, the Guangdong Yangzhonghui store, the Dongguan store and the Foshan Nanhai store have also been closed.

The continuous store closure is directly reflected in the weak performance of Tianhe City Department Store in recent years.

According to the financial report of Guangdong Investment, from 2015 to 2019, the annual revenue of Tianhe City Department Store declined as a whole. In 2019, the annual revenue of Tianhe City Department Store was HK$665 million, down 7.2% year-on-year, and the pre-tax profit was HK$230 million, down 2.3% year-on-year.

According to the latest financial report, in the first three quarters of 2023, the revenue of Tianhe City Department Store was 592 million yuan, a year-on-year decrease of 0.7%, and the pre-tax profit decreased by 84.8% to HK $23.787 million due to the fair value loss of investment properties and the income generated by the shortening of the lease period of the department store during the period.

Tianhe City Department Store Dongpu Store Photo by a reporter from Times Weekly

The continuous decline of Tianhe City Department Store is the embodiment of the current dilemma of the traditional department store format.

The rise of e-commerce in recent years has had a huge impact on physical commerce. On December 6, Lai Yang, a member of the Expert Committee of the China General Chamber of Commerce and executive vice president of the Beijing Business Economics Association, told the Times Weekly reporter that in the era of cloud consumption, consumption has become a general trend to break the restrictions of time and space. Traditional department stores sell goods in stores, and labor costs, rental costs, offline channel costs, inventory costs, etc. need to be converted into product pricing, so commodity prices are high.

"In contrast, online stores have low product costs, a variety of choices, and convenient delivery. As a result, the opportunity for consumers to go to traditional department stores for rigid shopping needs is now tending to zero. Lai Yang analyzed.

On the same day, a commercial real estate operator told the Times Weekly reporter that the biggest problem of traditional department stores is that the format is single and the space design has lagged behind the times.

"Traditional department stores are highly focused on retail, with limited supporting and catering formats, and there are almost no categories with special novel experiences, which are out of the current consumption hotspots, and the catering formats are often limited to small shops on the street, lacking quality and special catering categories. At the same time, since traditional department stores generally do not have atriums, customers will feel limited in terms of in-store activities, art displays, and customer service. The operator said.

The performance of the shopping mall sector fluctuated

While the traditional department store format is declining rapidly, the offline consumption format has also ushered in a breakthrough.

Lai Yang told the Times reporter that people's offline consumption behavior has shifted from meeting rigid needs to experiential consumption. Nowadays, consumers' main demand for offline commerce has shifted to social, or to discover some new and interesting products.

"The presence of retail in offline formats has declined significantly, and catering, leisure, culture and entertainment have become the key to driving offline consumption. Offline businesses that have made breakthroughs and innovations in this area have performed well, but those that are still based on traditional models will be more and more difficult to survive. Lai Yang said.

Therefore, in recent years, new shopping malls that pay more attention to providing "experience" are continuing to rise, and GDI has also widely deployed shopping malls across the country.

In 2017, 2020 and 2022, GDI invested in Tianjin, Panyu, Guangzhou and Shenzhen. At the beginning of 2022, the Beijing Road store of Tianhe City Shopping Center also announced that the business area will continue to expand.

In the operation of shopping malls, GDH Teemall is struggling to catch up with the consumption trend.

In July this year, the Guangzhou Tianhe City Shopping Center located in Sports West held a Pokémon-themed exhibition Source: Guangzhou Tianhe City's official Weibo

Opened in 2017, Tianjin Teemall Shopping Mall is positioned as a one-stop "home of urban pleasure", not only introducing diversified formats such as trendy clothing, cultural tourism experience, indoor entertainment, etc., but also increasing the proportion of food and beverage formats to 30%, while Panyu Teemall Mall, which opened in 2020, has introduced brands covering retail, catering, entertainment, education and other formats, providing a variety of experiences such as home aesthetics, trendy skin care and beauty, and trendy toys.

Shenzhen Tianhe City, which opened at the end of 2022, has been organically integrated with the Golden Beer Factory, which was renovated from the ruins of Jinwei Brewery, and introduced the chain pub brand Jumping Sea Tavern, which has become popular among young people in recent years, and KUDDO COFFEE, a local coffee brand in Shenzhen.

Despite a lot of efforts in terms of operations, GDH Teemall's performance has not improved significantly. In the first three quarters of this year, the total revenue of the GDH Teemall shopping mall segment also declined.

What's more, the average occupancy rate of the Teemall shopping mall, which is the core pillar of GDH Teemall's business, has also declined in recent years. From 2019 to 2021, the average occupancy rate of Teemall shopping malls was 99.9%, however, in 2022 and the first three quarters of 2023, this indicator was 99.4% and 99.3%, respectively.

With the rapid development of the offline consumption environment, whether Tianhe City can catch up with the trend with the format of the business in a timely manner?