Business / Industries

Department stores wheel out big guns in retail battle

By HE WEI in Shanghai (China Daily) Updated: 2012-11-17 00:35

Traditional department stores are flexing their muscles to regain their place on the retail battlefield, as the breakneck growth of e-commerce takes its toll.

The risks faced by bricks-and-mortar retailers have recently been amplified by a string of somber sales figures, especially after online vendors, fueled by the Singles' Day bonanza on Nov 11, delivered an enviable performance over the past weekend.

Department stores wheel out big guns in retail battle

A department store in Zhengzhou, capital of Henan province, offers a 52 percent discount on Nov 11, Singles' Day, to compete with e-commerce giants such as Alibaba Group Holding Ltd that used the occasion to promote their sales with deep price cuts. Provided to China Daily

That day, e-commerce giant Alibaba Group Holding Ltd alone generated 19.1 billion yuan ($3.06 billion) in sales, triple the combined revenue of around 5,000 retail outlets in Shanghai during the eight-day National Day holidays in early October.

During the holidays, from Sept 30 to Oct 7, the nation's 100 major retailers saw their sales increase by 8.49 percent year-on-year, according to China National Commercial Information Center.

This was a rare occurrence of growth since the introduction of the Golden Week more than a decade ago.

But problems are likely to loom larger for traditional retailers as online merchants sprint ahead. Driven by an urgent desire to boost their sales, stores are jostling to offer the deepest discounts to drum up consumer interest.

Feeling the pinch due to the e-commerce boom, Hong Kong-headquartered New World Department Store China Ltd has stepped up promoting its annual discount gala in Shanghai more than a month earlier than previous years.

Likewise, the three outlets of Pacific Department Store Co Ltd in Shanghai plan to knock up to 50 percent off women's sweaters and offer special discounts on jewelry and cosmetics.

According to the company, the 17-day long promotion aims to expand its consumer base and retain customers by encouraging shoppers to register for a membership card that entitles them to discount coupons.

The move is, put bluntly, to tackle the growing challenges posed by the exploding development of e-commerce, said Yan Chengda, deputy general manager of the company.

"Clothes are generally the least immune items to pressure from the thriving online business, so we are offering deep discounts," Yan added.

Meanwhile, Pacific has added categories like accessories, which require more customer engagement, because Yan said department stores have an edge over their virtual rivals in the interaction they provide between customers and shop assistants.

In general, however, e-commerce has dealt the heaviest blow to apparel retailers, notably sportswear companies, said Han Weiwen, a Shanghai-based partner with consultancy Bain & Co.

"The apparel industry's stellar growth rate in China has come to an end. It is not going to enjoy double-digit growth again," he told China Daily.

Anta Sports Products Ltd opened 229 new stores in 2011, only one-third of those opened in 2010. Peak Sport Products Co Ltd has lowered its growth target to single-digits and shut 500 stores nationwide in 2012, said Zeng Xiang, a manager at Bain.

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