CCAGM-2017-2018年中国百货零售业发展报告（英文）-2018.3-48页-2mb

Summary of China's Department Stores Report 2017-2018

Core Content

This report provides an overview of the performance and transformation trends in China's department store sector from 2017 to 2018, highlighting the impact of supply-side reforms, e-commerce growth, and the rise of the "New Retail" concept. It outlines the sector's efforts in adapting to changing consumer behavior, leveraging technology, and exploring new business models to remain competitive in a rapidly evolving market.

Main Points and Key Trends

1. Market Overview

• Stable Growth in Retail Sales:

  • Retail sales of consumer goods grew by 10.2% yoy in 2017, reaching 36.6 trillion yuan.
  • Consumption has been the main driver of GDP growth for four consecutive years, contributing 58.8% to GDP growth in 2017.
  • Department store sales increased by 9.10% yoy to 715,513.61 million yuan, though net profits dropped by 10.15%.

• Consumption Upgrading:

  • Chinese consumers are increasingly less price-sensitive and prefer higher quality and more personalized products and services.
  • Millennials (post-80s, post-90s, post-00s) are the major driving force behind the consumer market, accounting for 65% of consumption growth.

• Government Support:

  • The government has implemented policies to stimulate domestic consumption, including lowering import tariffs on selected consumer goods.
  • Emphasis is placed on innovation and new retail formats to meet the needs of modern consumers.

2. Key Trends in the Department Store Sector

• Omni-channel Retailing:

  • O2O integration has become a mainstream strategy.
  • 86.3% of department stores have started deploying O2O strategies, up from 45.4% in 2016.
  • 54.8% have launched e-commerce businesses, with most using their own platforms or a mix of both.
  • Mobile apps are increasingly used, with 37.0% of surveyed operators having launched them, offering features like marketing, sales, and customer services.

• Diversification of Retail Formats:

  • Department store operators are expanding into supermarkets, hypermarkets, and convenience stores.
  • New formats like Hema Xiansheng, YH Super Species, Sp@ce, and RISO are emerging, emphasizing integration of online and offline channels.

• Enhanced Self-operated Businesses:

  • Operators are developing private labels and multi-brand shops to improve product uniqueness and profit margins.
  • This allows greater control over the supply chain and enhances long-term competitiveness.

• Supply Chain Optimization:

  • There is a strong push towards digital transformation of supply chains to improve efficiency and reduce costs.
  • Strategic alliances and partnerships with supply chain stakeholders are being formed to enhance competitiveness.

• Integration with Internet/E-commerce Companies:

  • Traditional retailers are collaborating with Internet giants like Alibaba and Tencent to improve their business ecosystems.
  • Examples include Bailian Group’s partnership with Alibaba and Better Life’s collaboration with Tencent and JD.com.

• Organizational Restructuring:

  • Companies are reorganizing to improve operational efficiency, including introducing new departments, streamlining administrative processes, and adopting result-oriented management philosophies.
  • Employee stock ownership plans and franchisee joint-venture projects are being used to enhance employee motivation and business flexibility.

Major Challenges

• Transformation Requires Mindset and Mechanism Shifts:

  • The shift to new retail models requires fundamental changes in business strategies and operational structures.

• Supply Chain Integration:

  • Effective transformation depends on integrating supply chains, which remains a challenge for many operators.

• Obstacles to Direct Sales:

  • Despite the benefits, direct sales models face challenges in execution and profitability.

Implications and Conclusion

• Adaptation to Consumption Upgrading:

  • Retailers must enrich product offerings and enhance customer experience to meet the demands of modern consumers.

• O2O Retailing and Innovation:

  • Continuous innovation in business models and the adoption of O2O strategies are essential for survival and growth.

• Focus on the Basics of Retailing:

  • Despite digital advancements, the fundamentals of retailing—such as customer service, product quality, and store environment—remain critical.

• Future Outlook:

  • The sector is expected to continue evolving with new retail formats and technologies.
  • The government's support for innovation and consumption growth will further drive the sector's development.

Conclusion

The department store sector in China is undergoing significant transformation in response to economic changes, consumer behavior shifts, and technological advancements. While challenges remain, the sector is showing signs of recovery and growth, particularly through the adoption of omni-channel strategies, supply chain optimization, and integration with e-commerce platforms. The future of the sector lies in its ability to innovate, adapt, and focus on delivering high-quality, personalized experiences to meet the evolving needs of Chinese consumers.