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Diversification proves watchword for post-austerity department stores

Mainland department stores reinvent themselves as central government austerity drive starts to hit home.

Photo: Galeries Lafayette: reinvention via celebrity endorsement.
Galeries Lafayette: reinvention via celebrity endorsement.

One of the less remarked on casualties of the Chinese government's high-profile austerity drive has been the country's traditional state-owned department store sector. In Beijing, two such outlets – the Beijing Wangfujing Department Store (Group) Co Ltd and the Beijing Cuiwei Tower Co Ltd – have both been turning to new approaches and new markets in a bid to maintain their profitability.

Traditionally, group-buying and shopping card usage have been the mainstays of such outlets. Following the implementation of the current national policy, both of these traditional revenue streams have been considerably diminished. In a bid to make-up the shortfall, diversification has been the new watchword for many such establishments.

In the case of Wangfujing, its flagship store has been speedily refurbished as a more general-purpose shopping centre, offering both entertainment and catering facilities. While, previously, Wangfujing's most loyal shoppers (and cardholders) tended to be older consumers, the store is now actively wooing a younger age group, including the provision of a currently trendy fresh-juice vending machine.

Aside from this, the store is also seeking to work directly with manufacturers, missing out any traditional intermediaries. This is hoped to result in both cost savings and greater flexibility. As well as targetting younger consumers, it is also aiming to increase its appeal to the more mature female market. With this in mind, it is looking to increase its stock of age-appropriate items from other Asian territories, believing these to offer a bit fit than European/US imports.

Other than these more traditional department stores, high-end outlets – such as Galeries Lafayette – are also looking to reinvent themselves. In order to extend its appeal, Lafayette is currently looking to promote its exclusive brands through celebrity endorsements, bringing in such well-known faces as Laure Shang, Hu Bing and Danni Li to champion its current range.

An increasing number of department stores are also adopting an "O2O" (offline to online) business model. This has seen several of them promoting their physical store operations via either existing e-commerce platforms or through their own dedicated digital sites.

Rainbow, a Shenzhen-based department store chain, for instance, has launched its initial tranche of "Rainbow WeChat Stores", with its Shenzhen Guomao and Dongmen outlets both opening online. It is expected that the other 60 Rainbow stores across the country will ultimately follow suit.

Similarly, Wangfujing has also introduced a proprietary online shopping app. According to the company, its first outlets to go online will be its flagship store and its Shuang'an Department Store in Beijing. These will be followed by seven further outlets – two in Chengdu, two in Xining and one each in Changsha, Taiyuan and Daxing.

Vivian Yu, Beijing Office

Content provided by Picture: HKTDC Research
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