Rapid growth in Chinese department store market
While department stores in China have faced ever increasing competition from other retail channels in recent years, new research from Mintel reveals the sector is flourishing.
Reflecting the increased wealth of Chinese consumers – and the increased disposable income this has brought – China’s department store retail market doubled in value over the last six years, from 315 billion yuan in 2007, to 683 billion yuan in 2012.
Around a third (30 per cent) of urban Chinese shoppers now shop at a department store once a week or more, with a further quarter (24 per cent) shopping there two to three times a month.
“Department stores in China have not only survived within the context of the country’s recent rapid economic development, but many have flourished, including several department store chains,” said Matthew Crabbe, director of Asia Pacific Research at Mintel.
“Yet the market space they fill increasingly has to compete with other retail formats, such as specialist chains, hypermarkets and supermarkets, and growing numbers of new destination shopping malls and retail parks. This is making the competitive landscape increasingly difficult for department stores, and much harder for them to sustain their levels of interest among China’s shoppers.”
Crabbe said the department stores sector is adapting to the changes in the Chinese retail market brought about by the rapid growth in the domestic consumer economy.
“This is a process that will need to continue as the domestic economy grows, the retail market diversifies and the influence of online retailing becomes stronger,” he said.
“Department stores cannot rest on reputation alone, and need to continually innovate in order to sustain consumer interest. In such an increasingly competitive market, it will be the companies that are quick to adapt and innovate that will survive, while many stores and chains that fail to keep up with the changes will almost certainly go under.”
Driving this growth, clothing tops the list of items purchased at department stores with 92 per cent of those who shop in them purchasing a clothing item. This is followed by accessories (77 per cent), footwear (72 per cent), personal care products (71 per cent) and houseware products (60 per cent). In addition, menswear items (68 per cent) just edges womenswear items (67 per cent) in terms of next most purchased items.
Looking to the future, online retail also offers strong growth potential, with some 97 per cent of urban Chinese consumers now claiming to browse online department stores, but demand for items appears to vary.
Over the past six months, half (50 per cent) of consumers who shopped at online department stores purchased shoes, almost one in two (48 per cent) womenswear and 45 per cent menswear – a further 35 per cent purchased cosmetics, skincare and fragrances and 35 per cent sports clothing, footwear and equipment.
Mintel’s research also shows that online apparel sales, as a proportion of the total Chinee apparel market, has increased from just two per cent in 2008 to 21 per cent in 2012.
“Online retailing is growing fast in China, and while online retailing offers opportunities for department stores to reach more consumers, they need to find a distinct niche within the online market. Focusing on the service reliability and brand quality of the core lines that make their physical stores successful can translate into added security and trustworthiness for online consumers.”