Department Stores' Net Profit Shrinking Industry Needs Urgent Transformation

In the new retail ecological environment, facing the drastic changes of the domestic retail pattern, the good days of the once boundless department store industry can only become a history now. The only way to face the department store industry is to accelerate the pace of adjustment, constantly introduce innovation mode, and enhance attraction and competitiveness from many angles. Otherwise, more and more enterprises will not be able to continue their business operations or even go bankrupt.

　 17 department stores net profit shrank

Xinhua reported the 2013 annual report of the large chain retail group, Xinhua's first annual loss.

In 2013, the company achieved operating income of 7 billion 380 million yuan, an increase of 10.77% over the same period last year, but its net profit was -2.36 billion yuan, a sharp decrease of -248.11% compared with the same period last year, with a basic earnings per share of -0.44 yuan.

Like many clothing retail brands, commercial retail businesses are closing in to varying degrees. During the period, Xinhua opened 14 new stores and shut down 16. By the end of 2013, the total number of Xinhua stores was 121, of which 8 were department stores, 1 were department stores and 112 were supermarkets.

It is not only the Xinhua city that has experienced "cold winter". Regional chain store "leading" Nanning department store 2013 annual report shows that during the period, the company realized revenue of 2 billion 895 million yuan, an increase of 9.60% over the same period, but the total profit was 29 million 715 thousand and 700 yuan, a sharp decrease of 63.37% compared with the same period last year. Net profit was 16 million 965 thousand and 600 yuan, a sharp decrease of -73.66% compared to the same period last year.

The loss of Shenzhen year old department store in 2013 also amounted to 219 million yuan.

According to the statistics of China Unicom, the total sales volume of 41 listed department stores in 2013 has reached 297 billion 413 million yuan, with an average growth rate of 8.3%, lower than that of the total retail sales of social consumer goods, and net profit increased by 11.2% over the same period. Among them, 17 enterprises appeared net profit shrink; 12 supermarket business revenue grew 9.6% year-on-year, net profit fell -16.7% compared with the same period last year, 7 performance year-on-year decline.

　 The operation of "leading" listed companies is still the same. Let alone "small shrimp"?

Worse still, 2013 may not be the worst. The "cold winter" continued in 2014, and the chill deepened.

According to the China National Business Information Center, in January 2014 and February, the number of retail sales of 100 major large retail enterprises increased by 1.5% over the same period last year, down -5.3% from the same period in 2013, down 7.5 percentage points from the average growth rate in 2013, the lowest level since April 2008. Among them, the total retail sales of clothing decreased by -1.3%, while the year-on-year and the average growth rate were 5%. The volume of clothing retail sales declined by -5.3%, the growth rate dropped by 7.3 percentage points from the same period last year, representing a 8.7 percentage point decrease from the previous year's average growth rate.

　　 Pressure on the top of the "three big mountains"

There are many factors that affect the profit of the traditional retail industry, including the department store industry.

　　 Artificial, property costs rise hard to "digest"

From the internal factors of the industry, the first thing to bear is the continuous rigid rise of property costs and labor costs. The rising prices of various factors have forced the operation cost of enterprises to continue to rise and can not be digested.

In the face of such a sharp decline in performance, Xinhua has hint at the risks it is facing, the rising cost of labor, and the renewal of rental and rental rents in the lease of operating premises. Among them, labor cost is always the most rigid cost expenditure of chain supermarkets. According to the national "12th Five-Year plan" to increase the income of the residents, the rising labor cost is an inevitable trend. In the long run, the gradual increase of labor costs will bring greater pressure to the company's business performance.

Nanning department store said that one of the main reasons for the decline in profits was that the company further increased the scale and intensity of the sales promotion and seized the market share. The cost of advertising and promotion and other costs increased considerably. In addition, due to the growth of new store market and the depreciation and amortization of fixed assets, the overall cost and cost of the company increased, and the gross profit margin decreased.

Data show that rent and labor costs already account for more than 60% of the operating cost of department stores, and there is no way to digest them.

Ding Liguo, a senior retail expert, pointed out that labor costs now have two digit growth every year, which is a headache for many retailers.

Rent is another big pain. Many stores are now at the stage of 10 or 15 years of lease renewal. According to the current market conditions, the rental of stores will increase by 20%-30% every year, while most of the retail entities are mainly operated by leasing. If they are difficult to lease, they may be faced with the risk of closing stores, even if they are faced with the risk of high rental costs. Similarly, expansion will lead to cost loading and new market maturity.

Under such circumstances, there is a paradox in the current department store industry: if goods do not rise in price, they will see losses, and consumers will shift to electricity providers when prices rise. Cost is difficult to digest, which is one of the difficult reasons for business operation.

　 Oversupply of retail industry management model Lack of innovation

On the other hand, the disorderly expansion of the commercial real estate industry aggravates the fierce competition, and the retail business itself lacks innovation and homogenization. Over the past few years, the expansion of commercial real estate in various parts of the country has led to the phenomenon of oversupply in some parts of the retail industry, and the concentration of industries needs to be improved.

From a deeper perspective, department stores The homogenization of "old problems" has been criticized for many years, and there is still a sense of "thousand shops and one side". Some brands in the department store's occupancy rate is as high as 75%, which makes people feel like visiting a family. Experts believe that although the industry is generally aware of the serious phenomenon of brand similarity, taking into account the introduction of brand and cultivate customers are faced with higher operating costs and time costs, so store managers are still very cautious about business innovation.

　　 The electricity supplier has partitioned the store "cake".

from External competition In terms of environment, the biggest competition "enemy" of the entity department store is the aggressive "electricity supplier" to "divide up" the physical retail market.

Many retailers closed in 2013, resulting in a significant decrease in the number of physical retail outlets than in 2012. Meanwhile, the number of online shoppers is increasing, and the electricity supplier continues to expand the retail "cake".

McKinsey, a market consultancy, reported in 2013 that by analyzing the consumption models of 266 cities in China, the consumption of $1 was replaced by $0.6 of physical store consumption, of which $0.4 was incremental consumption created by the new business. From the point of view of commodities, "less ladies dress" in department stores is one of the most affected categories. In 2013, sales of two categories of clothing, textiles and cosmetics in department stores decreased by 3.3% and 2.5% respectively over the same period. In this regard, all department stores that reported their performance have focused on annual reports.

Xinhua believes that e-commerce, as an advanced mode of trade in commercial trade, has a huge impact on the traditional retail industry's concept and behavior. The vigorous development of the electricity supplier will replace some of the traditional retail channels' market share, which will bring certain impact to the traditional retail enterprises including the company, and cause the transformation of the market structure and sales mode.

Another company pointed out that the Internet broke the asymmetry of information, fully met the personalized needs of consumers, and provided consumers with great convenience. For the retail industry, the biggest change brought by the Internet is changing the habits of consumers, subverting the status of retailers and consumers, and making the era of "consumer centric" coming quickly. Consumers in the mobile Internet era pursue comprehensive value enhancement, personalized and full channel experience, product decision-making participation and shopping efficiency improvement. The retail industry is undergoing a major and far-reaching transformation. The transformation of the traditional retail business mode is imminent.

The head of the Wangfujing group also said that China's department store retailing during the transformation period is faced with three major difficulties, namely, slower economic growth, intensified cross-border competition and rising costs. Under the influence of macroeconomic slowdown and policy, domestic and international growth has slowed down, and revenue growth has been sluggish. The cross-border operation and industry disorderly development brought by the Internet have caused fierce competition in the market, raising the gross margin level and prolonging the incubation period of new stores. The price increases and competition brought about by macroeconomic transformation have led to the rapid rise of social costs and the limited cost compression space, which has brought pressure on the continuous operation of profitable shops.