Reporter Ding Ding

Cameraman Qian Xiaoxin

Production Lu Junhong, Jiang Sunyin

Intern Sun Haixin How long has it been since you last visited a department store? If you need to buy something, would you go to a department store? Who do you think is responsible for the current dismal state of department stores? What's your answer? Most people might say, online shopping is cheap and convenient, so why go to department stores? Of course, e-commerce has crushed the department store retail industry! Facing this question, Yuan Yafei, chairman of Sanpower Group, has a completely different answer. He says, "Those who say e-commerce has crushed traditional department stores are talking nonsense! It's the department store industry that has ruined itself!" This was a particularly brilliant speech, with constant applause. The speaker on stage was Yuan Yafei, chairman of Sanpower Group. He controls a business empire with assets exceeding 100 billion yuan, and owns several listed companies including Hongtu Gaoke, Nanjing Xinbai, Wanwei International, Jinpeng Yuankang, and Futong Dianke. Seated in the audience were agents of various brands and practitioners in the department store industry. "C.banner, where are you? Look, those British imported leather shoes, with such good leather and craftsmanship, sell for only over 1,000 yuan a pair. What about you? Your shoes sell for 3,000 to 4,000 yuan?" At this, the audience burst into laughter. There was a reason for the laughter. Yuan Yafei's Nanjing Xinbai acquired 89% of the shares of the British old-line department store House of Fraser in 2014. This brand was born in 1849, and its Jollys store in the garden city of Bath is famous for being the "Queen's dressing room." On the day of Yuan Yafei's speech, British HOF officially landed in China, bringing various British niche brands to Nanjing; and C.banner is also a Jiangsu enterprise, listed in Hong Kong, with its main business in "women's shoes." As a strategic partner of Sanpower Group, it acquired the famous British toy store Hamleys. Besides business cooperation, it is said that Yuan Yafei is also the brother-in-law of C.banner's chairman Chen Yixi (unconfirmed). So, one of their own continued to expose the other's shortcomings. Yuan Yafei said, "C.banner's shoes priced at 800 yuan are sold at the original price in the first week; discounted in the second week; and with coupons in the third week. In the end, each pair is actually sold at 400 yuan. But the company is happy for two reasons: first, it calculates performance based on the 800 yuan sales amount; second, the coupons form a chain of interests. But customers born in the 80s and 90s have changed. If the price is too high, they turn around and leave, rather than bargain. Unlike people of our generation, who like to bargain!" At this, the audience fell silent instantly. Yes, in Yuan Yafei's view, this is one of the reasons why traditional department stores are declining: inflated prices, and homogenized products, services, and experiences. These have nothing to do with e-commerce! In the past long period, almost every city had one or two places specifically named "Department Store Building," with dazzling arrays of goods and lively scenes, which were memories for several generations of Chinese people. In recent years, however, news of department store buildings closing down has been overwhelming. Describing physical retail as "dim" is already polite. According to data from the National Bureau of Statistics, in the first three quarters of this year, online retail sales nationwide increased by 26.1% year-on-year, while retail sales of traditional retail formats increased by 7% year-on-year, with the growth rates of supermarkets and department stores falling by 0.2 and 2.1 percentage points respectively compared to the same period last year. Moreover, a set of data from the Institute of Commercial Economics at Beijing Technology and Business University shows that from 2012 to 2015, 138 department stores closed nationwide, 262 supermarkets closed, and 6,209 sports brand stores closed. These closures of department stores and shopping centers are also seen as a microcosm of the wave of closures in China's physical commodity trading markets. Let's look at the semi-annual reports of those listed companies. More than 30% of listed companies in the commercial retail industry saw net profit declines of over 50% in the first half of the year; more than 60% of listed department store retail companies saw net profit declines year-on-year. So, is the decline in physical retail performance because people are not buying things? Of course not. The retail sales of 50 key large retail enterprises nationwide fell by 3.1% year-on-year in the first half of this year. Contrasting with the decline are two growths: one is that total social retail sales are still growing, and the other is that online shopping and mobile shopping markets still show outstanding growth. Let's also look at the amount Chinese people spend overseas each year, which has reached 1.5 trillion yuan, buying, buying, buying in Europe, the United States, and Japan! (Thinking that the New Year is coming soon, the scene of overseas shopping with crowds of people is really too beautiful to look at directly.) Domestically, the rapid development of e-commerce is simply because it meets two consumer needs: convenience and essential demand. The cost of e-commerce is not low; besides the cost of the goods themselves, e-commerce also has inventory, labor, and logistics costs. The reason we think e-commerce prices are low is just because the price tags in physical stores are too high. Therefore, department stores themselves must change. How? A long time ago, department stores operated on a "lease and joint operation" model, where retail only provided a shopping venue; now, it's time to provide scenarios! What is a scenario? That is, using internet means, through high cost-performance products, combined with various resources, to create precise services and ecosystems. At physical stores, you can not only eat and drink, but also entertain, learn and train, purchase financial products, and do all kinds of things you can think of! Content is king! (Writing this, I suddenly think of traditional media. Was it really new media that crushed you? It feels like the same logic!) Of course, in Yuan Yafei's words, this is also "easy to say, hard to do." So, should more than 8,000 department stores continue to engage in internal friction? Join forces and integrate! Predictions say that by 2020, pure online retail will account for about 18%-20% of total social retail sales, meaning that more than 80% of transactions will still occur offline. The space for physical retail is there; it depends on how you seize it. Source: Ding Ding Observation -END-