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China's retail firms are closing stores

CCTV.com

09-29-2016 09:01 BJT

Retailers are closing department stores in China. Is it because of the competition from e-commerce? Or other deeper rooted problems in the retail sector?

Malaysian retailer Parkson is closing down its forth store this year in China.

It used to have the most stores in China among foreign retailers. But shrinking profit is killing its businesses.

Its net profit dropped 58%, 34% and 174% anually in the past three years.

And it is just one of the cases in a systemic decline.

According to data compiled by CCTV, more than a third of the listed retailers saw their Chinese net profit plunge by more than a half.

"Some retailers have been closing shops with no plan to open new ones. Some companies shut down more shops than open new ones. Overall, profit growth is rare and profit decline is the norm," said Wang Yongping, researcher of All Real Estate Chamber of Commerce.

Is the e-commerce sector stealing profits from bricks and mortars?
Analysts say, the high growth rate among e-tailers is from a low base. It will give tech savvy consumers in China better choices, but will not kill physical stores, which make up the bulk of the industry.

"The retail sales in China last year was 30 trillion yuan. Only 4 trillion yuan of that went to e-commerce, only 12% of the total sales. How can we say that bricks and mortars is dying given these numbers," said Wang Yongping.

So what is shaking up the industry?--- Consumer experience, something that traditional department stores are lack of.

That is why shopping malls are embracing its golden era, featuring shopping, dining, recreation and sports.

"These two levels are for leisure and dining, and are sales champions. They rake in 30 percent more customers for us, making twice the sales revenues per customer than any other level. They have attracted customers with good purchasing power, and those customers tend to shop on other levels after their meals here," said director of COFCO Wen Juan.

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