In the past 3 months this year, 10 old department stores have been "killed", what is the problem with the old department stores?

Text | Jiang Han's vision

Every holiday, going to the department store, whether it is shopping or walking the baby, is the common choice of many urban parents, but just recently, some media statistics found that there have been 10 old department stores closed for more than 3 months this year, what is the problem of the old department store?

In 3 months this year, 10 old department stores were "killed".

According to the report of the first financial news, the first financial reporter came to the Isetan department store in Shanghai Meilong Town, and the flow of people in the store was not large, and many counters in the whole venue had discounted information, with discounts ranging from 1% to 8% off. Recently, Isetan Department Store in Meilong Town issued a notice saying that due to the expiration of the lease of Isetan in Meilong Town, Shanghai, it will terminate business on June 30, 2024. And this has also triggered the above-mentioned clearance discount activities.

Not only Meilong Town Isetan, but many department stores have begun to "leave". For example, Shenyang Isetan withdrew from the market, Shanghai Pacific Department Store and 600 stores were closed one after another, Xianning Yintai Department Store and Guangzhou Panyu Friendship Shopping Center were closed on March 31, Tianjin Isetan Nanjing Road Store and Tianjin Binhai New Area Isetan will be closed on April 14 and April 27 respectively.

According to incomplete statistics from One View Commerce, at least 35 department stores will close in 2022. According to the statistics of the Retail Research Center of Lianshang.com, 21 department stores nationwide will be closed in 2023, including Pacific Department Store, Aeon, Parkson, Jiebai, Ocean Department Store, New World Department Store, etc.

It is worth noting that the latest statistics from Lianshang.com show that so far in 2024, 10 old department stores have announced the closure of stores, of which 5 will be completely closed and withdrawn, and the other 5 will be upgraded or completely demolished and rebuilt. Among the 10 department stores that have closed stores, the youngest is Isetan in Binhai New Area, Tianjin, which has been in operation for 11 years, while Shanghai 600 and Shanghai Women's Products Store, which were announced to be demolished and rebuilt, were established in 1952 and 1956 respectively and have been in operation for nearly 70 years, and Tianjin Isetan Nanjing Road Store, Guangzhou Panyu Friendship Shopping Center and Shanghai Huilian Commercial Building have also been in operation for more than 30 years.

According to the "2023-2024 China Department Store Retail Industry Development Report" (hereinafter referred to as the "Report") jointly authored by the China Department Store Commerce Association and the Fung Group Li & Fung Research Center, the total retail sales of consumer goods in China will reach 471495 billion yuan in 2023, a year-on-year increase of 7.2%. Among them, retail sales of goods increased by 5.8%, and catering revenue increased by 20.4%. In terms of business formats, among the retail units above designated size, the retail sales of department stores, convenience stores, specialty stores, and brand stores increased by 8.8 percent, 7.5 percent, 4.9 percent, and 4.5 percent respectively over the previous year, while the retail sales of supermarkets decreased by 0.4 percent over the previous year. Due to the negative growth of the epidemic in 2022, the department store format has a low base, and it will recover significantly in 2023; The growth rate of the supermarket format continued to slow down, and it will show negative growth for the first time in 2023.

What's wrong with the old department stores?

In the first three months of this year, a number of old department stores with a long history in China announced the closure of stores, which attracted widespread attention. Once a symbol of the city's prosperity, these old department stores are now obsolete from the market. So, what exactly is causing their decline?

First of all, the problem of old department stores is not surprising in the era of e-commerce. For the past few decades, department stores have been the main place for people to shop. With the popularity of the Internet and the rise of e-commerce platforms, consumers' shopping habits have changed radically. On the one hand, the rise of e-commerce has revolutionized the way consumers shop. In the past, consumers had to go to a department store in person to pick up and buy products. With the popularization of the Internet, e-commerce platforms have sprung up, providing consumers with more convenient and abundant shopping options. With just a few clicks on their computer or mobile phone, consumers can browse through a variety of product information, compare prices, and complete a purchase. Moreover, compared with traditional department stores, e-commerce can be said to have nearly unlimited shelves, and nearly zero cost shopping scenes, in this regard, the limited choice of old department stores and high rent, water and electricity costs, make it difficult to have enough cost advantages in the era of e-commerce. This shift in shopping has led to a significant drop in traffic and sales in traditional department stores.

On the other hand, the rise of just-in-time retail has further exacerbated the predicament of the old department store industry. With its fast and convenient characteristics, instant retail meets the needs of consumers for instant consumption. Consumers can place orders through mobile apps or mini programs, and the goods can be delivered to consumers in a short time. This way of shopping not only saves consumers time, but also provides a more personalized service. In contrast, the shopping experience of traditional department stores is relatively lagging behind, unable to meet consumers' needs for immediacy and personalization.

Second, the past few years have seen a dramatic change in the way consumers behave. In recent years, the emergence of public health events has had a profound impact on consumers' consumption habits. In the midst of this global challenge, consumer shopping behavior has undergone rapid and significant changes, and the old department store industry has been hit like never before.

The public health crisis has led to a cautious attitude towards offline shopping. During this special period, people have reduced the frequency of visits to crowded places such as department stores due to health and safety concerns. At the same time, online shopping platforms are favored by consumers because of their contactless and low-risk characteristics. In this context, even the elderly and children have quickly learned to use e-commerce platforms to shop in this "food grabbing" trend, which has further accelerated the loss of old department store consumers.

At the same time, social public health events have driven consumers to pursue greater convenience and immediacy. In special periods, people's demand for daily necessities is more urgent, and higher requirements are also put forward for the convenience and immediacy of shopping. Old department stores are often unable to meet these needs because they have many deficiencies in terms of product variety, inventory management, and logistics and distribution. In contrast, e-commerce platforms and instant retail platforms are better able to meet these needs of consumers, thereby attracting more consumers.

And, from a consumer behavior perspective, many consumers have maintained their online shopping habits even after the public health pandemic has eased, which has been a huge shock to traditional department stores.

Third, the obsolescence of the old department store itself has also gradually lost its market. The reason why old department stores are named "old" is not only because they have a long history, but also because they are relatively backward in terms of business model and consumer experience. Many old department stores have been open for more than ten years or even decades, and their decoration is often relatively old, and the proportion of stores is also relatively traditional, mainly focusing on traditional goods such as clothing and household department stores. However, with the changes of the times and the upgrading of consumer demand, this traditional business model has been difficult to meet the needs of modern consumers.

Modern consumers pay more attention to the shopping experience, and they are no longer only looking for the practicality of goods, but also the comfort, convenience and fun of the shopping process. New retail shopping malls often focus on catering, parent-child, fitness, etc., providing a one-stop shopping experience to meet the diversified and personalized needs of consumers. In contrast, old department stores are stretched thin in this regard, lacking highlights and features to attract consumers.

In addition, the old department store also has deficiencies in brand image and cultural atmosphere creation. The new shopping mall focuses on creating a unique brand image and cultural atmosphere, and attracts the attention and participation of consumers by holding various cultural events and marketing activities. However, old department stores often lack awareness and investment in this area, making them gradually lose their advantage in market competition.

Fourth, the elimination of old department stores is undoubtedly the inevitable result of the law of the market. In today's ever-changing consumer retail market, the phenomenon of old department stores gradually withdrawing from the stage of history is not accidental, but the inevitable result of consumers voting with their feet and the law of market adaptability.

Consumers are the main body of the market, and their needs and preferences determine the direction of the market. In this era of rapid change, consumers' shopping behaviors and consumption perceptions are constantly evolving. They are increasingly focusing on shopping experience, personalization and diversification, and the traditional business model of old department stores has been unable to meet these needs. In contrast, the new new retail shopping mall has attracted a large number of consumers with its rich product variety, comfortable shopping environment and personalized service. As a result, consumers are more likely to choose new shopping malls over older department stores, which has led to a decline in foot traffic and sales in old department stores.

The competition in the market is fierce, and survival of the fittest and survival of the fittest are the iron laws of the market. Due to the lag of the business model and the lack of innovation, the old department store has gradually lost its advantage in the market competition. Some emerging retail companies have quickly seized market share with flexible business models, innovative technological means and keen market insight. These emerging companies are able to better meet the needs of consumers and provide better services and experiences, so they have won the favor of consumers and the recognition of the market.

It can be said that the problems faced by old department stores are multifaceted, including the influence of external environmental factors and the limitations of their own business models. In the face of increasingly fierce competition and changing consumer demand, old department stores need to actively seek the road of transformation and innovation, in this era only innovation can develop, and only continuous change can occupy a place in the future market.