E-commerce forces change on China's high street

BEIJING - Brick-and-mortar shops? More like broken and mortal. Challenged by the online shopping frenzy, Chinese high streets are struggling.

In the Lafayette Gallery, which opened in 2013 on Beijing's bustling Xidan Street, shop assistants complained about not selling a single shirt in days. Although restaurants and theaters in the top two storeys are crowded with people, the clothing shops are getting very little business.

A woman from Lafayette's press department, upon seeing Xinhua's interview request, asked, "Will this be a favorable or unfavorable report? Because all press reports have been about us having no customers."

Such a gloomy outlook has become common among China's retailers, as e-commerce, which saw a year-on-year growth of 40 percent in the first five months of 2015, reshapes the country's business landscape.

The retail market is polarizing: Traditional department stores selling everything from food to footwear are seeing fewer visitors and closing, but one-stop shopping centers like Beijing's Joy City are thriving.

At two such department stores, Xidan Shopping Center, and Beijing Department Store on Wangfujing Street, visitors are scarce even on a weekend.

"Department stores are being sandwiched by high-end competition from larger shopping malls and price competition from online sellers," said Wu Bin, operation manager of Yintai Shopping Group, which runs a number of department stores.

"We used to put out clothes and shoes and people simply came to buy. Now, we have to woo them. It's like in a relationship; you have to let the customers like you, love you and come to see you," he said.

"People have started to go to shopping malls for fun and you have to provide fun. Chinese retailers cannot survive only by selling products," Wu added.

According to a report by the China Retailers' Association, 26 department stores closed in the first six months of 2015. China's top retailer, Wanda, alone closed 10 shops in different cities. Sources with the company said none of its shops opened after 2007 were profit-making.

In 2014, about 201 retailers closed across China, up 474 percent from the figure in 2013. The sales of China's top 97 retailers in 2014 dropped by 6 percent from the previous year. In 2014, 214,600 people worked in retailing in China, down 5.56 percent from 2013.

"China's retailers are facing a tough battle, an inevitable erosion of customers," said Chen Lipeng, a professor with the Capital University of Economics and Business.

"The retailers have to either replace the non-profit-making shops with entertainment and dining facilities and provide hearty individualized service or they could spend six to 10 years to build their brand to boost consumption," he said.

Going online

"We don't see the Internet as an enemy, but as a way to improve our services," Yan Qier, Joy City's promotions manager, told Xinhua.

Last year, the shopping center launched an online program based around a newsletter and promotions that allow it to gather customer data for analysis. Data on more than 30 million customer visits has been collected.

"We found that people who like shopping online also like shopping here, so we focus on special fashion offerings that are not easily found online," Yan said.

A McKinsey report from 2013 said China's online consumption has not simply replaced consumption that would have taken place offline. Rather, for each dollar spent online, around 40 cents is from incremental -- or new -- consumption, it said. Retailers are trying to get that money to be spent at brick-and-mortar stores.

"By profiling with this data, we better understand the needs of our customers," said Zhang Can, Joy City's development manager.

At the mall, if they want to eat at a restaurant, shoppers can get in line through a WeChat message and then go shopping. An alert will be sent to the shopper's phone when the table is ready.

"We try our best to get people to come here, bring them better experiences in dining, shopping even parking," Zhang said.