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Silver linings in Covid-19 crisis for China’s department stores

Chinese department stores’ long-term outlook remains positive despite being greatly impacted by Covid-19, with increases recorded in corporate gross profit margin, net profit margin and customer unit price.

Recent survey figures from Fung Business Intelligence show total sales of responding department stores last year reached US$109.45 billion, up 2.8 per cent year on year, with physical stores increasing in number by 1.3 per cent. Many stores hit new sales records, listing double-digit growth in May.

The analysis comes from a new Fung Business Intelligence paper, “China’s Department Stores Report 2019–2020”, released in partnership with the China Commerce Association for General Merchandise. The report takes financial data from 103 Chinese department store operators from late November last year through to late May, analysing macroeconomic data to gauge the sector’s performance.

According to the report, the effort put in by the sector in recent years to improve quality of traded goods and services has built a firm platform for future growth. Operators have fast-tracked their omnichannel strategies in response to the challenge of the coronavirus pandemic, integrating offline and online consumption scenes. Many explored live-stream, short videos and WeChat groups as new sales avenues.

The report revealed that 75 per cent of surveyed department store operators use social media as a marketing and promotional platform, chiefly WeChat. And 78.9 per cent have already fitted technology elements such as virtual dressing mirror/fitting room, customer service robot, self-service cashier and real (AR) & virtual reality (VR) shopping experience to their physical stores, with close to 80 per cent confirming that these technology elements have helped to improve customer traffic and sales.

“Challenges and opportunities always co-exist,” said Fung Business Intelligence VP Teresa Lam.

“Despite the slowing growth of China’s department store sector, the outbreak of Covid-19 has enabled department store operators to see where they sit in today’s market reality, restrategise and get ready for the upcoming opportunities in a post-pandemic world. I believe Hong Kong’s department store players can learn from them.”

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