Abstract
This recently updated report includes:
- The total, regional and sector value for retail sales, including
urban/rural and food/non-food splits, up to the end of 2009;
- Statistical data on leading retailer market financials in China up to
first half 2009;
- Market data for numbers of outlets, total and average store total and
retail sales, total and average store sales area; total and average staff,
purchasing, net and gross profits;
- Value forecast retail market, up to 2014;
- Key current issues, and discursive analysis of the key factors affecting
the market;
- SWOT analysis
- Profiles of the leading department store retail companies active in China,
with financial data up to H1 2009 in most cases.
- Overview of China' s demographics and macroeconomics.
Executive Summary
Despite vociferous complaints by many leading department store retailers about
weakening sales, the sector is actually performing very well, and sales growth
in the sector has outstripped growth in both total retail sales and sales in
the supermarkets/hypermarkets sector.
What many of the department stores are really complaining about is weakening
profits due to increased competition. This competition comes both from the
increased number of department stores that have opened up in China' s cities,
but also from the rising strength of specialist retailers, particularly in the
clothing sectors, such as sportswear, outdoor wear, mid-range fashion,
cosmetics and electronics and appliances. This growth in competition from the
specialist stores has resulted in a more recent decline in significance of the
department stores sector since 2008, dropping back below 30% of total retail
sales.
The growth in competition is hurting many department stores that had relied
upon a continuation of the status quo in the market, and which had therefore
failed to adapt to a rapidly changing competitive landscape. This has meant
that many key department stores have not improved their efficiency, or
invested back into keeping their stores current and refreshed in order to
maintain customer appeal, and have therefore lost customers to newer and more
exciting retail concepts coming into the market to compete on core product
lines.
This has made it harder for many to maintain profitability, even though sales
revenues have continued to grow, as, in order to reinvigorate consumer
interest in their stores, and push shopper footfall figures into their stores,
they have had to run high discount sales over longer periods. This has not
only hit short-term profits, but as consumers have become used to the lower
prices, due to the extended nature of the discount periods, so they have found
it harder to stop giving discounts, or end sales promotion periods.
This failure to control marketing campaigns has meant that profits have
remained low at many stores, and revenues have only been maintained at many
key outlets due to the retailers squeezing their suppliers and concessions for
more "service" and "management" fees to have their products in these stores.
However, the exclusivity of many of these department stores is being
challenged by the specialist retailers, and it is now becoming increasingly
hard for the department stores to continue to justify these fees, which will
most likely mean that they either become more efficient retailers, and improve
their core business profits, or they will face falling revenues due to
suppliers not agreeing to additional fees, because they can increasingly get
better deals elsewhere.
Things are looking bright for Hong Kong-listed department store retailers. The
five Hong Kong-listed retailers Maoye, Golden Eagle, Parkson, Intime and New
World Department Store were able to record slightly higher net profit than
their 28 China-listed peers in 2008, reflecting the higher profitability of
the department stores listed on the Hong Kong Stock Exchange.
Although the total net profit generated by the five Hong Kong-listed
department stores fell to RMB1,245.85m in the first half of 2009, they were
still able to generate 70.63% of the total net profit produced by the 28
China-listed department store retailers without having their bottom line
substantially propped up by profit generated from supermarket, hypermarket,
real estate and other businesses.
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