Abstract:The department store industry in mainland China has entered a stage of stable development. Although the epidemic has had a certain impact on the department store industry in 2022, with the growth rate of domestic department store merchandise sales falling by 16.3% year-on-year, on the whole, the industry has gradually returned to the normal development track, and the growth rate of merchandise sales of China's department stores in 2023 will increase by 8.8% year-on-year. At present, the mainland department store format is dominated by the joint operation model, which has the significant advantage of being asset-light, which will not accumulate funds on commodities and can maintain low labor costs. However, there are also obvious shortcomings in the joint operation model, that is, it seriously weakens the company's ability to operate goods. Therefore, the self-procurement and self-operation model is regarded as one of the important directions for the transformation and development of the industry, which marks the goal of enterprises moving towards the goal of having stronger commodity management capabilities. However, at present, the progress of this change is relatively slow, and it still needs to be promoted by joint efforts within and outside the industry.
1. Definitions and Classification
Department stores are large retail stores that handle a wide range of goods, including clothing, home appliances, and daily necessities. According to the "Classification of Retail Formats" drafted by the General Administration of Quality Supervision, Inspection and Quarantine of the People's Republic of China and the Standardization Administration of the People's Republic of China, department stores can be divided into the following three types: high-end department stores, fashion department stores and mass department stores.
Second, industry policies
1. Competent authorities and regulatory system
The mainland adopts a regulatory model that combines national macro-control and industry self-discipline for the department store industry. The National Development and Reform Commission, the Ministry of Commerce and the competent departments of commerce at all levels under it shall formulate relevant industrial policies and development plans to regulate and guide the operation and development of the department store industry. The General Administration of Quality Supervision, Inspection and Quarantine of the People's Republic of China and its subordinate Standardization Administration are responsible for establishing national standards for the industry. The Ministry of Commerce, the Health and Family Planning Commission, the State Administration of Press, Publication, Radio, Film and Television and other ministries and commissions shall establish administrative licensing or filing management systems for the retail circulation of special commodities in accordance with relevant laws and regulations. National industry organizations such as the China General Chamber of Commerce, the China Association of Department Store Commerce, and the China Chain Store & Franchise Association are mainly responsible for industry self-discipline, communication, coordination, supervision, and protection of the legitimate rights and interests of enterprises.
2. Industry-related policies
Recently, the state has actively introduced policies to promote the development of the department store industry. In August 2023, the Ministry of Commerce and other nine departments issued the "Three-Year Action Plan for County Commerce (2023-2025)", proposing to encourage county shopping malls and large supermarkets to extend services to towns and towns, lay out facilities such as front warehouses and logistics warehousing, and improve the marketing, recycling and maintenance network of home appliances, furniture and home decoration. Build a community life circle with perfect commercial services, strengthen the promotion of rural commercial development, and promote integrated development. The policy will further expand the market coverage of the department store industry, and at the same time, it will also help improve the supply chain efficiency and logistics level of the department store industry, improve the shopping experience of consumers, and through the integration of urban and rural commercial resources, department stores can open up a broader market space and achieve sustainable development.
Third, the development process
The development of the global department store industry has gone through four main stages. In the late 19th and early 20th centuries, department stores originated in Europe and first appeared in the late 19th and early 20th centuries. At that time, department stores were mainly characterized by a wide range of goods and services, attracting urban middle-class and upper-class consumers. In the mid-20th century, with the acceleration of industrialization and urbanization, department stores sprang up rapidly across the globe. During this period, department stores began to expand to offer a wider variety of goods and introduce more sales promotions. From the second half of the 20th century to the beginning of the 21st century, after experiencing the previous stage of vigorous development, department stores began to face intensified market competition and diversification of consumer demand. Some department stores began to expand blindly, pursuing "big and complete", resulting in market saturation and homogeneous competition. In this context, department stores began to adjust and change, and explore new business models and service methods. In the 21st century, with the rise of the Internet and e-commerce, traditional department stores are facing great challenges. In order to adapt to market changes and consumer demand, department stores have begun to strengthen the integration of online and offline, and promote digital transformation and innovative development. At the same time, department stores are also actively exploring diversification, expanding business areas and service scope, and improving consumer experience.
Fourth, industry barriers
1. Supply chain management and commodity procurement
The development of China's department store industry is inseparable from the global supply chain, and with the continuous change of consumer demand and the continuous expansion of commodity categories, department store enterprises need to establish an efficient supply chain management system to ensure timely update of goods and reasonable control of inventory. However, the establishment of a strong supply chain management system requires a lot of human, material and financial resources, including the establishment of a global procurement network, the establishment of close cooperation with suppliers, and the realization of digital management of the supply chain, etc., which are a huge test of enterprise resources and management capabilities.
2. Brand competition and market positioning
There are fierce brand competition and market positioning barriers in China's department store industry. First of all, large international department store groups such as LV and Hermes already occupy a large share of the Chinese market, and have strong brand influence and loyal consumer groups. Secondly, well-known domestic department stores such as Beijing Huamao and Shanghai New World have also formed a certain market position through years of accumulation, and have a certain brand loyalty and market reputation. The competitiveness and market positioning of these brands constitute a barrier for new entrants, and there are more costs and risks to pay in competing with these companies.
3. Technological innovation and consumer experience
With the rapid development of the Internet and mobile payment technology, China's department store industry is facing the transformation and upgrading of technological innovation and consumer experience. On the one hand, this puts traditional department stores under pressure for digital transformation, and on the other hand, it also provides more opportunities and challenges for new entrants. In China's current department store market, consumers are increasingly demanding consumer experience and personalized services, and these need to rely on technological innovation and data analysis capabilities.
Fifth, the industrial chain
1. Analysis of the industry chain
The upstream of the department store industry chain is mainly composed of commercial real estate development and commodity suppliers, among which the commodities include clothes, shoes, fresh food, home furnishings, electronic products, etc., the middle of the industry chain is composed of department store operating enterprises, and the downstream of the industrial chain is consumers.
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