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Department stores in China November 2013

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Table of Contents

Introduction 3

Market overview 4

Competitive landscape 10

Major headwinds and challenges 14

Key highlights 19

Conclusion and implications 31

Appendix: Store location of major department stores in China 34

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Department stores in China 2013

Introduction

2013 has, so far, been another difficult year for China’s department store sector. Major

department store operators witnessed a significant slowdown in sales last year, and

growth should continue to slow over the coming year. The fierce competition from

shopping malls, specialty stores and online retailers is key. At the same time, the

concessionary model provided by many department store operators has led to poor

differentiation in the market, making it harder for operators to compete with retailers in a

variety of segments.

To survive in a highly competitive marketplace, some department store operators are

working hard to differentiate themselves. Major initiatives include enhancing in-store

experiences by launching new service offerings and incorporating more entertainment

elements and catering services. These also include refining market strategies and

segmentation in the market, developing private labels and increasing the proportion of

direct sales, while building synergies across various sales channels.

In this report, we take an overview of China’s department store sector and assess the

competitive landscape. There is also a review of the sector’s major challenges and latest

developments.

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Market overview

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Department store sales growth slackens off over 2012

Relatively weak economic sentiment, changing consumer shopping behavior and fierce

competition led to significant sales slowdowns for department stores in 2012. According

to China’s National Bureau of Statistics (NBS), total sales revenues for department

stores grew 0.8% to 325.2 billion yuan in 2012. Growth rates for sales declined by 20

percentage points (ppts) as compared with 2011 (see Exhibit 1).

Exhibit 1: Department store total sales revenues, 2003-2012

billion yuan %

Source: National Bureau of Statistics of China

China Commerce Association for General Commerce1 also reported that its 81

department store members’ total sales increased by 8.9% year-on-year (yoy) to 228.3

billion yuan in 2012 (see Exhibit 2); the growth rate was far lower than the average annual

growth rate of 16.5% recorded between 2006 and 2011.

Exhibit 2: Performance by 81 department store members of the China Commerce Association for General Commerce, 2011-2012

2011 2012 yoy changes %

Total sales of goods (million yuan) 209,586.0 228,274.5 8.9

Operational income (million yuan) 19,742.3 20,717.8 4.9

Operational expenses (million yuan) 19,991.8 22,062.5 10.4

Total profits (million yuan) 6,403.7 6,010.7 -6.1

Profit margins 3.9 3.1 -20.2

Operational area (sqm) 12,926,749 14,084,062 9.0

Source: China Commerce Association for General Commerce

1 Source: 2012 China Department Store Report

%

At the same time, it is believed that the new Chinese leadership’s eagerness to curb

government spending on luxury items has slowed gift-giving and posed a negative

impact on sales of high-end department stores.

Most department stores operate under a concessionary model

Currently, most department stores in China

adopt a concessionary business model. They

lease designated store areas to concessionaires

and rece ive a percentage of tota l sa les

proceeds from such arrangements.

Exhibit 3 shows concessionary rates for selected

department store operators. These have been

falling over recent years, particularly so in 1H13.

This was due partly to the fact that sales in

product categories carrying lower concessionary

rates – such as gold and jewellery – grew faster than those in other categories for 1H13;

there has also been an adjustment to accommodate new stores that command lower

rates or offer more promotional activities.

Exhibit 3: Concessionary rates for selected department stores, 2011-1H13

2011 2012 1H13

Golden Eagle 19.6% 18.6% 17.2%

Intime 17.2% 17.4% 17.3%

New World 18.5% 17.0% 17.8%

Parkson 18.7% 18.4% 17.6%

Source: Company annual reports and interim reports

By operating under the concessionary model, department store operators do not involve

themselves in brand operations and only control brand selection to a limited extent.

Furthermore, as department store operators rely on popular and major brands to attract

pedestrian traffic, the merchandise mix is poorly differentiated.

As shown in Exhibit 4, about 90% of selected department stores’ gross sales were

generated from concessionary deals; most attract only limited direct sales from

proprietary brands and brands which were directly purchased. Having said that, some

players have started to develop their own private labels, hoping that this will help increase

product differentiation.

&


Exhibit 4: Sales breakdown of selected department stores, 2012

Source: Company annual reports

#Note: Direct sales, concessionary sales, rental income and other income as a % of total gross sales processed; other income includes management fees and rentals

Stores engaged in multiple formats, tapping other business

sectors

Competition in China’s department store market is fierce, and

many department store operators are seeking to diversify

their income streams. Many players among the top 100 retail

chain operators (the “Top 100s”) in 2012 operate in other

retail formats that include supermarkets, convenience stores,

specialty stores, shopping malls and discount outlets.

At the same time, some have also tapped into other business

sectors such as food and beverage, commercial property,

logistics, finance, hotels and entertainment. For instance,

Dalian Dashang Group runs a specialist wine retailing business

and has over 100 chain stores located in cities in Liaoning,

Heilongjiang, Henan, Shandong, Sichuan, Shanxi, Guangxi provinces2 The group also

opened a movie theatre chain business in 2011 and its cinemas can be found in major

cities across the north-eastern part of China. Another example is Liaoning Xinglong

Big Family Business Group. It operates a holiday resort business in Panjin, Liaoning

province3. Shanghai Friendship Group Incorporated Company also owns Home Mart, a

home improvement chain retailer4.

It is noteworthy that when compared with foreign players, domestic department store

operators are more flexible in running other retail formats. Exhibit 5 shows the top 40

department store operators in 2012.

2 http://dsnew100.com/company2-2.php3 http://www.xinglongstore.com/cyqyjj.asp?news_id=717564 http://www.shfriendship.com.cn/introductOrg.asp

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Exhibit 5: Top 40 department store operators, 2012

Other retailing format Sales value yoy Number of yoy Shopping Electronic Convenience Other major Ranking Enterprise (million yuan) change stores 2012 change Supermarket mall specialty store Outlet store operating business Place of origin 1 Shanghai Friendship Group Incorporated Company* 57,000.0 3.6% 49 14.0% !" Trading; Restaurant; Chinese Mainland Home improvement; Retailing 2 Dalian Dashang Group Co., Ltd.* 37,275.0 4.7% 170 0.0% ! ! ! Restaurant; Cinema; Chinese Mainland HOPSCA 3 Chongqing Department Store Co.,Ltd. 33,399.7 11.5% 286 5.5% ! ! Chinese Mainland 4 Yingzuo Group 32,031.2 16.3% 104 15.6% Chinese Mainland 5 Changchun Eurasia Group Co., Ltd. 24,145.0 21.3% 58 16.0% ! !" Chinese Mainland 6 Beijing Wangfujing Department Store (Group) Co., Ltd. 21,574.4 7.4% 28 12.0% ! ! Chinese Mainland 7 Rainbow Department Store Co., Ltd. 20,373.5 7.5% 59 15.7% ! " Chinese Mainland 8 Parkson Retail Group Ltd. 19,723.6 20.1% 48 4.3% Malaysia 9 Jiangsu Wenfeng Great World Chain Store Development Co., Ltd. 19,490.6 0.8% 995 0.5% ! ! ! Chinese Mainland 10 Golden Eagle Retail Group Limited 18,669.2 13.6% 28 7.7% ! Chinese Mainland 11 Hefei Department Store Group Co., Ltd. 16,900.0 14.2% 190 2.2% ! ! Hotel; Wine; Property Chinese Mainland development 12 Zhenghua Group 16,425.7 -8.2% 109 11.2% ! Chinese Mainland 13 Intime Department Store (Group) Co., Ltd. 16,308.7 19.3% 30 3.4% ! Chinese Mainland 14 New World Department Store China Ltd.* 16,000.0 3.2% 39 0.0% Hong Kong 15 Beijing Capital Retailing Group Co., Ltd. 14,374.3 4.4% 17 0.0% ! Chinese Mainland 16 Maoye International Holdings Ltd. 12,948.7 24.1% 39 2.6% Chinese Mainland 17 Beijing Caishikou Department Store Co., Ltd.* 12,700.0 8.9% 15 25.0% Chinese Mainland 18 Liaoning Xinglong Big Family Business Group 12,518.1 11.2% 30 0.0% ! ! ! ! Trading; Restaurant; Chinese Mainland Home improvement; Retailing; Trading; Commercial property; Hotel 19 Zhengzhou Dennis Department Store Co., Ltd. 12,200.0 13.0% 144 45.5% ! ! ! ! Chinese Mainland 20 Wanda Department Store Co., Ltd. 11,178.3 61.3% 57 42.5% Chinese Mainland 21 Shijiangzhuang Beiguo Group (department store part) 11,054.1 24.6% 198 48.9% ! ! Chinese Mainland 22 Anhui Commercial Capital Co.,Ltd. 10,992.9 5.0% 65 6.6% ! ! ! Chinese Mainland 23 Guangzhou Grandbuy Co., Ltd. 10,569.8 13.5% 30 3.4% ! ! Chinese Mainland 24 Liqun Group Co.,Ltd (department store part) 8,858.5 10.7% 35 6.1% ! ! ! Chinese Mainland 25 Hunan Friendship and Apollo Co., Ltd. 7,440.6 19.4% 8 14.3% ! ! ! Chinese Mainland 26 Nanjing Central Emporium Group Stocks Co., Ltd. 6,800.0 23.6% 8 14.3% ! Commercial property Chinese Mainland 27 PCD Stores (Group) Ltd.* 6,340.7 12.7% 16 23.1% ! Chinese Mainland 28 Jinan Hualian Commercial Group 6,113.3 11.1% 26 8.3% ! Hotel Chinese Mainland 29 Wuhan Zhongnan Commercial Group Co.,Ltd 5,770.2 8.2% 9 -10.0% Chinese Mainland 30 Beijing Cuiwei Plaza Shopping Center 5,556.6 2.6% 6 20.0% Chinese Mainland 31 Charter Group Holdings Limited 5,280.0 10.0% 4 33.3% Chinese Mainland 32 Handan Sunshine Department Store (Group) Co., Ltd. 5,212.0 13.1% 132 9.1% ! ! ! ! ! Chinese Mainland 33 Guangzhou Friendship Group Co., Ltd. 4,911.8 -1.7% 6 0.0% Chinese Mainland 34 Beijing Shunyi Guotai Commercial Building 4,618.5 2.4% 14 0.0% Chinese Mainland 35 Xinyulou Department Store Group Co., Ltd.* 4,200.0 11.1% 21 16.7% Chinese Mainland 36 Xiongfeng Group Co., Ltd. 3,295.3 15.0% 143 10.9% ! ! Chinese Mainland 37 Guangxi Nancheng Stores Joint-stock Co., Ltd. 3,262.5 8.6% 31 14.8% Chinese Mainland 38 Nanning Department Store Co. Ltd. 3,060.0 15.1% 9 0.0% ! ! Chinese Mainland 39 Shirble Department Store Holdings (China) Ltd. 2,389.4 -7.8% 22 29.4% Chinese Mainland 40 JiaHua Stores Holdings Ltd. 2,093.8 -2.8% 12 -36.8% Chinese Mainland Total 543,055.7 10.3% 3290 8.4%Source: CCFA, company websites, company annual reports, modified by Fung Business Intelligence Centre

*Estimated by CCFA

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Exhibit 5: Top 40 department store operators, 2012

Other retailing format Sales value yoy Number of yoy Shopping Electronic Convenience Other major Ranking Enterprise (million yuan) change stores 2012 change Supermarket mall specialty store Outlet store operating business Place of origin 1 Shanghai Friendship Group Incorporated Company* 57,000.0 3.6% 49 14.0% !" Trading; Restaurant; Chinese Mainland Home improvement; Retailing 2 Dalian Dashang Group Co., Ltd.* 37,275.0 4.7% 170 0.0% ! ! ! Restaurant; Cinema; Chinese Mainland HOPSCA 3 Chongqing Department Store Co.,Ltd. 33,399.7 11.5% 286 5.5% ! ! Chinese Mainland 4 Yingzuo Group 32,031.2 16.3% 104 15.6% Chinese Mainland 5 Changchun Eurasia Group Co., Ltd. 24,145.0 21.3% 58 16.0% ! !" Chinese Mainland 6 Beijing Wangfujing Department Store (Group) Co., Ltd. 21,574.4 7.4% 28 12.0% ! ! Chinese Mainland 7 Rainbow Department Store Co., Ltd. 20,373.5 7.5% 59 15.7% ! " Chinese Mainland 8 Parkson Retail Group Ltd. 19,723.6 20.1% 48 4.3% Malaysia 9 Jiangsu Wenfeng Great World Chain Store Development Co., Ltd. 19,490.6 0.8% 995 0.5% ! ! ! Chinese Mainland 10 Golden Eagle Retail Group Limited 18,669.2 13.6% 28 7.7% ! Chinese Mainland 11 Hefei Department Store Group Co., Ltd. 16,900.0 14.2% 190 2.2% ! ! Hotel; Wine; Property Chinese Mainland development 12 Zhenghua Group 16,425.7 -8.2% 109 11.2% ! Chinese Mainland 13 Intime Department Store (Group) Co., Ltd. 16,308.7 19.3% 30 3.4% ! Chinese Mainland 14 New World Department Store China Ltd.* 16,000.0 3.2% 39 0.0% Hong Kong 15 Beijing Capital Retailing Group Co., Ltd. 14,374.3 4.4% 17 0.0% ! Chinese Mainland 16 Maoye International Holdings Ltd. 12,948.7 24.1% 39 2.6% Chinese Mainland 17 Beijing Caishikou Department Store Co., Ltd.* 12,700.0 8.9% 15 25.0% Chinese Mainland 18 Liaoning Xinglong Big Family Business Group 12,518.1 11.2% 30 0.0% ! ! ! ! Trading; Restaurant; Chinese Mainland Home improvement; Retailing; Trading; Commercial property; Hotel 19 Zhengzhou Dennis Department Store Co., Ltd. 12,200.0 13.0% 144 45.5% ! ! ! ! Chinese Mainland 20 Wanda Department Store Co., Ltd. 11,178.3 61.3% 57 42.5% Chinese Mainland 21 Shijiangzhuang Beiguo Group (department store part) 11,054.1 24.6% 198 48.9% ! ! Chinese Mainland 22 Anhui Commercial Capital Co.,Ltd. 10,992.9 5.0% 65 6.6% ! ! ! Chinese Mainland 23 Guangzhou Grandbuy Co., Ltd. 10,569.8 13.5% 30 3.4% ! ! Chinese Mainland 24 Liqun Group Co.,Ltd (department store part) 8,858.5 10.7% 35 6.1% ! ! ! Chinese Mainland 25 Hunan Friendship and Apollo Co., Ltd. 7,440.6 19.4% 8 14.3% ! ! ! Chinese Mainland 26 Nanjing Central Emporium Group Stocks Co., Ltd. 6,800.0 23.6% 8 14.3% ! Commercial property Chinese Mainland 27 PCD Stores (Group) Ltd.* 6,340.7 12.7% 16 23.1% ! Chinese Mainland 28 Jinan Hualian Commercial Group 6,113.3 11.1% 26 8.3% ! Hotel Chinese Mainland 29 Wuhan Zhongnan Commercial Group Co.,Ltd 5,770.2 8.2% 9 -10.0% Chinese Mainland 30 Beijing Cuiwei Plaza Shopping Center 5,556.6 2.6% 6 20.0% Chinese Mainland 31 Charter Group Holdings Limited 5,280.0 10.0% 4 33.3% Chinese Mainland 32 Handan Sunshine Department Store (Group) Co., Ltd. 5,212.0 13.1% 132 9.1% ! ! ! ! ! Chinese Mainland 33 Guangzhou Friendship Group Co., Ltd. 4,911.8 -1.7% 6 0.0% Chinese Mainland 34 Beijing Shunyi Guotai Commercial Building 4,618.5 2.4% 14 0.0% Chinese Mainland 35 Xinyulou Department Store Group Co., Ltd.* 4,200.0 11.1% 21 16.7% Chinese Mainland 36 Xiongfeng Group Co., Ltd. 3,295.3 15.0% 143 10.9% ! ! Chinese Mainland 37 Guangxi Nancheng Stores Joint-stock Co., Ltd. 3,262.5 8.6% 31 14.8% Chinese Mainland 38 Nanning Department Store Co. Ltd. 3,060.0 15.1% 9 0.0% ! ! Chinese Mainland 39 Shirble Department Store Holdings (China) Ltd. 2,389.4 -7.8% 22 29.4% Chinese Mainland 40 JiaHua Stores Holdings Ltd. 2,093.8 -2.8% 12 -36.8% Chinese Mainland Total 543,055.7 10.3% 3290 8.4%Source: CCFA, company websites, company annual reports, modified by Fung Business Intelligence Centre

*Estimated by CCFA

)*

Competitive landscape

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Domestic players

Region-focused with strong local support

Most domestic department store operators are regional players, and they generally have

a better understanding of local consumers’ needs and stronger connections with local

suppliers and distributors. Moreover, many are state-owned and can obtain valuable

support from local governments.

…but some are seeking to widen their footprints

Having said that, some domestic department store players have been actively widening

their footprint over recent years. Wangfujing Department Store is a case in point. As of

June 2013, Wangfujing operated a total of 30 stores in China covering two municipalities

and 14 provinces. Intime Department Store, on the other hand, has announced plans to

open more stores in tier 3 and 4 cities across the country.

Foreign players

Expanding at a slower pace

Foreign department stores have been involved in the China market for many years and

have developed wider national footprint. Compared with domestic players, foreign stores

have not been doing well over recent years; some have either had to suspend aggressive

expansion plans and focus on revamping existing stores or close unprofitable stores and

withdraw from certain cities (see Exhibit 6). Increasing pressure from domestic players, a

lack of understanding of consumer needs and inadequate product differentiation are the

major reasons behind poor performances.

)!

Exhibit 6: Selected examples of foreign department store closures

Department

Store Store location City Closing date Opening date

Isetan Taiyuan Street branch Shenyang Jun-13 2008

Ito-Yokado Wangfujing branch Beijing Jan-13 Nov-05

New World Taizhou branch Taizhou, Jiangsu Nov-12 Jan-09

Ningbo branch Ningbo, Jiangsu Feb-12 Nov-04

AEON Chaoyang branch Beijing Mar-12 Jun-10

Parkson Shijiazhuang branch Shijiazhuang, Hebei Aug-13 2008

Dashizi branch Guiyang Jun-13 2000

Jinfenghuang branch Guiyang Dec-12 2008

Hongqiao branch Shanghai Aug-12 Dec-02

Source: News reports and company websites

… and with different approaches …

On the other hand, as Chinese consumers are becoming more sophisticated – especially

those in key cities – a number of foreign department store operators are keen to tap the

China market. To differentiate from existing players, the new ones are offering more innovative

and personalised shopping experiences and bringing in new products and brands.

For instance, Galeries Lafayette unveiled its first flagship store in Beijing in September

2013. Over 50% of the brands available in the store were introduced to China for the

first time, and some of the merchandise is exclusively owned by the Beijing store.

Galeries Lafayette also offers a free personal shopper service.

Another example is Lane Crawford. After failing to succeed in China seven years ago,

the high-end department store operator re-entered the mainland market by opening a

flagship store in Shanghai in September 2013. The new store sells a host of fashionable

products from apparel and lifestyle to cosmetics and home ware. To cater to more

discerning customers, Lane Crawford has put in place personal concierges on each floor

with a team of 65 personal stylists, trying to keep turn the business around.

)"


Exhibit 7 shows the store location for selected domestic and foreign department stores in

China.

Exhibit 7: Store location for selected department store operators in China

Wangfujing Department Store

New World Department Store

Rainbow Department Store

Parkson Department Store

Intime Department Store

Golden Eagle Department Store

Source: Company websites, complied by Fung Business Intelligence Centre

)#

Major headwinds and challenges

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Poor differentiation remains a major concern

Many department store operators have realised that relying largely on concessionary

sales has led to poor market differentiation. However, most are still reluctant to change

since under their concessionary model operators can reduce inventory risks and minimise

efforts to source their merchandise; brand owners and distributors will be attracted to

them and compete for the best in-store locations.

Cost pressure undermines players’ profitability

All department store operators face the challenge of rising operating costs. A survey

conducted by CCFA and Deloitte5 revealed that all 43 sampled department store

operators encountered rising cost pressures, with rentals, labour costs and utility fees

increasing by 17.3%, 14.8% and 18.6% respectively in 2012 (see Exhibit 8).

Exhibit 9 shows the cost components of the sampled department stores. Labour costs

constituted department stores’ highest expenditure, followed by rentals and utility fees.

Exhibit 8: Annual operational expense of sampled department stores

million yuan %

Source: CCFA and Deloitte: China Power of Retailing 2013

5 CCFA and Deloitte: China Power of Retailing 2013

)%

Exhibit 9: Cost composition of the sampled department stores

Source: CCFA and Deloitte: China Power of Retailing 2013

Increasing competition from counterparts in other retail segments

Department stores have been facing tougher competition

from retailers in other retail segments such as online retailing,

hypermarkets and discount out lets, as many Chinese

consumers still view the price of goods as their number one

priority. In particular, the rising popularity of online shopping

poses an increasing threat to department store players.

According to iResearch, the total transaction value of online

retailing rose to 454.8 billion yuan in 3Q2013, up 42.4% yoy,

and accounting for 7.8% of China’s total retail sales.

Hence, for certain product categories such as apparel, bags and accessories, consumer

electronics and cosmetics products, department stores serve largely as showrooms for

customers to touch and feel the products before they place an order online.

At the same time, specialty stores increasingly appeal to customers as they can provide

more personalized services and a unique shopping experience. Specialty stores have

been expanding aggressively over recent years, driven primarily by the rapid expansion of

local specialty retailers and an increasing number of international apparel players entering

the China market. Some examples include Topshop, Forever 21 and Hollister. The rise

of this specialty store segment also poses an increasing threat to the overall department

store sector.

)&


Problems arising from online and offline integration

Threatened by pure “click” retailers, many department store operators have launched

their own online platforms. However, nearly all online players are making a loss. This is

largely attributable to the fact that most traditional department store operators do not

have a powerful enough and transparent database to support their online operations.

In order to capture and analyse consumer data and understand customers’ shopping

preferences, department store operators need to invest considerably more in upgrading

their IT systems. Some industry experts believe that it can cost as much as 1 billion yuan

in the first three months to set up an online infrastructure. Hence, the payback period is

lengthy.

Moreover, since stores’ online and offline channels are often operated by different teams,

conflicts can arise and affect online product choice.

Lack of professional buyers

As mentioned earlier, some department store players are seeking ways to differentiate

themselves; increasing the proportion of private labels and direct sales merchandise

is often the strategy they adopt. A prerequisite is to recruit experienced buyers. This is

certainly a challenge faced by many players.

One example is in the apparel merchandise sector where experienced buyers not

only need to have an in-depth knowledge of fabrics and upcoming fashion trends but

also need good negotiation skills to deal with brand owners and distributors. Usually

it takes at least three years to nurture a junior buyer and around eight years to train a

merchandise manager. However, some department store operators are not willing to

invest the time and money to train their buyers: They worry that the buyers they train will

move to another company in view of the country-wide shortage of experienced in-house

buying personnel.

Impact of anti-gifting policy on department stores is evident

China’s new leadership has increased efforts to curb corruption. The new regulations

prohibit government agencies from purchasing luxury goods for gifting. It is expected that

the government’s anti-gifting campaign will hit the sales of high-end goods and affect the

profitability of high-end department stores.

)'

Furthermore, since a significant percentage of total sales of many Chinese department

stores come through the prepaid card channel, sales of high-end department stores have

already been negatively affected by the regulations put forth by the State Council in 2011;

these require prepaid card issuers to register the identities of customers with purchases

of 10,000 yuan or more. Prepaid card purchases are likely to be deterred by the extra

hurdles that have been imposed. As shown in Exhibit 10, it is notable that same store

sales growth (SSSG) for major department stores has been decelerating since 2011.

Exhibit 10: SSSG for selected department stores

Source: Deutsche Bank

)(


Key highlights

!*

Enhancing the in-store experience

To survive in a highly competitive market, some

department store operators differentiate themselves

by launching new service offerings and incorporating

more entertainment features and catering services,

hoping to provide a more personalized shopping

experience. Examples include spas, beauty and hair

salons, kid’s playgrounds and lifestyle cafés. Such

offerings are designed to not only attract customers

but keep them in the stores longer.

This type of “department store plus shopping mall”

business model is becoming increasingly popular. For

example, Shimao Department Store has revamped its

store in Fuzhou by reducing its floor area for apparel

retailing from 80% to 20%, and increasing the floor

areas for catering and entertainment to 20% and 60%

respectively6. Sogo Department Store in Beijing is

reportedly intending to rent out part of its floor space to

tenants and operate under the shopping mall format7.

Meanwhile, Golden Eagle Department Store is eager

to turn some of its existing stores into“lifestyle” outlets by adding entertainment facilities

such as cinemas and ice-skating rinks, as well as other services amenities such as food

and beverage offerings and children’s educational facilities.

6 http://fj.house.sina.com.cn/news/2013-08-16/084776188.shtml7 http://www.bjbusiness.com.cn/site1/bjsb/html/2013-10/09/content_230168.htm?div=-1

!)


Refining market strategies and segmenting the market

Some department store operators have refined their market strategies to cater to

specific customer demographics. For instance, Rainbow Department Store owns two

retail brands: “Rainbow” targets the mass market while “Dream-on” targets high-end

customers. Dalian Dashang has also opened Kingson Department Store to attract trendy

youngsters, while its Mykal Department Store targets the high-end market.

Some industry experts believe that department stores with distinct themes and

positioning, and those with refined strategies will be the clear winners amid intensified

competition.

Developing private labels and

increasing the proportion of direct

sales

Almost every department store operator realises the

importance of increasing the proportion of direct sales

merchandise and developing private brands. Although it

takes times to train a professional buyer and requires a

large investment to develop private labels or launch proprietary brands, some department

store operators are actively working in this direction. It is expected to take a lengthy

period of time to for them to reap the benefits.

For example of pro jects underway, New Wor ld

Department Store introduced an exclusive lifestyle home

ware collection, LOL (or Love Original Life) in its stores.

Ito Yakado Department Store launched private labels

pbi (or petit bonheur inatendu) ,a apparel collection,

and IYB, a homeware collection in China. Wangfujing

Department Store is reportedly to launch its f irst

collection of private labels by the end of 2013.

!!

Strengthening merchandise categories

To stand out from competitors, some department

s to re ope ra to r s have s t a r t ed t o deve l op

“uniqueness” by focusing on certain categories,

hoping to differentiate themselves and attract

different customer groups. Realising that customers

now pay more attention to home decorations,

Wuhan Zhongbai Commercial Group has teamed

up with home product designers from Japan,

Taiwan and Hong Kong to offer unique collections.

At the same time, eyeing an increasingly elderly population, Guangzhou Guangbai has

launched a comprehensive range of products and services aimed specifically at an older

clientele.

Building synergies across sales channels

Over recent years, department store

players have been facing a growing

threat from pure “cl ick” retai lers.

Having said that, many department

store operators bel ieve that both

online platforms and physical stores

can co-exist; customers now not only

go for lower prices but also shopping convenience and experience. Some department

store operators are actively working on online and offline integration plans.

!"


9 A popular Chinese micro-blogging site10 A multi-media communication mobile phone application which also provide services include social sharing,

gaming, making payment, etc.11 http://www.intime.com.cn/zgs/2013/20131018gsdt.pdf

Department store operators are starting to look more deeply at “omni-channel retailing”,

and trying to pull together multi- and cross- channel offerings, including physical stores,

online platforms, mobile platforms, and social media, in the hope of providing seamless

cross-channel experience for customers.

Intime Department Store is one of the forerunners trying to develop a strategy that can

seamlessly integrate all sales channels while taking into consideration the entire customer

experience. Intime set up its online platform, Yintai.com in late 2010. It has also launched

its flagship store on Tmall, with more than 300 brands and 60,000 SKUs. The retailer

has launched two mobile apps for consumers to shop via their smart phones. Like many

other retailers, Intime is using Sina Weibo9 and WeChat10 to reach out to customers.

To achieve better online and offline integration, Intime shares client database between

the online and offline platforms; it also carries out promotions on the two fronts. Cross-

utilization of its large VIP customer database enables Intime to provide tailor-made

services for each VIP customer.

Recently, Intime sought to further integrate its online and offline business by forming

a strategic partnership with Tmall,

whereby the retailer participated in

China’s Single Days event11. Intime

redecorated and updated its online

store at Tmall and its 35 physical

stores also supported the Single Day’s

event by displaying cartoon boards

demonstrating Tmall image and posters; customers could purchase Intime’s online

products at Tmall by screening product codes when shopping in Intime’s physical stores.

!#

Exhibit 11: Multi-channel strategies of selected department stores

Physical store Online Mobile Social media Department Brand Online Online platform Application Function Social Function Multi-channelstore proposition platform brand media initiatives propositionIntime Mid- to high-end yintai.com High-end to Yintai.com For mobile purchase WeChat; Weibo Marketing and Fully integrate online and luxury ; Flash sales promotion offline stores. yintai.tmall.com High-end to Intime flash sales For mobile purchase WeChat; Weibo Marketing and luxury ; Flash sales promotionGolden Eagle Mid- to high-end goodee.cn Marketing and Goodee mobile Provide personalized WeChat; Weibo Marketing and n/a promotion and distinguished promotion service information Parkson Mid- to high-end parkson.com.cn Mid- to high-end Zizhong store Marketing and WeChat; Weibo Marketing and n/a promotion promotion Wangfujing Mid- to high-end store Mid- to high-end Wangfujing mobile Marketing and WeChat; Weibo Marketing and Working with IBM to study and wangfujing.com promotion promotion propose how to develop multi-channel/omni-channel retailing. Rainbow Mid- to high-end tianhong.cn Mid-end None None WeChat; Weibo WeChat purchase Teamed up with Tencent to launch pre-paid cards to Store allow customers to top-up and pay with WeChat accounts for online and offline purchases.New World Mid- to high-end xinbaigo.com Mid-end New World mobile For mobile purchase WeChat; Weibo Marketing and Teamed up with Tencent to launch promotion; pre-paid cards allowing customers Making payment to pay, refill, accumulate and use through WeChat VIP points and receive store promotions via WeChat accounts.Better Life Mid- to high-end None None None None WeChat; Weibo Marketing and Launching online platform; planning promotion to fully integrate online and offline stores. Maoye Mid- to high-end None None None None WeChat; Weibo WeChat purchase Teamed up with Tencent to allow customers to purchase and pay online via WeChat accounts and pick up at offline stores. Source: Company websites, modified by Fung Business Intelligence Centre

!$


Exhibit 11: Multi-channel strategies of selected department stores

Physical store Online Mobile Social media Department Brand Online Online platform Application Function Social Function Multi-channelstore proposition platform brand media initiatives propositionIntime Mid- to high-end yintai.com High-end to Yintai.com For mobile purchase WeChat; Weibo Marketing and Fully integrate online and luxury ; Flash sales promotion offline stores. yintai.tmall.com High-end to Intime flash sales For mobile purchase WeChat; Weibo Marketing and luxury ; Flash sales promotionGolden Eagle Mid- to high-end goodee.cn Marketing and Goodee mobile Provide personalized WeChat; Weibo Marketing and n/a promotion and distinguished promotion service information Parkson Mid- to high-end parkson.com.cn Mid- to high-end Zizhong store Marketing and WeChat; Weibo Marketing and n/a promotion promotion Wangfujing Mid- to high-end store Mid- to high-end Wangfujing mobile Marketing and WeChat; Weibo Marketing and Working with IBM to study and wangfujing.com promotion promotion propose how to develop multi-channel/omni-channel retailing. Rainbow Mid- to high-end tianhong.cn Mid-end None None WeChat; Weibo WeChat purchase Teamed up with Tencent to launch pre-paid cards to Store allow customers to top-up and pay with WeChat accounts for online and offline purchases.New World Mid- to high-end xinbaigo.com Mid-end New World mobile For mobile purchase WeChat; Weibo Marketing and Teamed up with Tencent to launch promotion; pre-paid cards allowing customers Making payment to pay, refill, accumulate and use through WeChat VIP points and receive store promotions via WeChat accounts.Better Life Mid- to high-end None None None None WeChat; Weibo Marketing and Launching online platform; planning promotion to fully integrate online and offline stores. Maoye Mid- to high-end None None None None WeChat; Weibo WeChat purchase Teamed up with Tencent to allow customers to purchase and pay online via WeChat accounts and pick up at offline stores. Source: Company websites, modified by Fung Business Intelligence Centre

!%

M&A activities continue to accelerate

Over recent years, rising numbers of mergers and acquisitions (M&A) between

department store operators have been noted in China. For many players, M&A is a fast

way to expand their footprint and step into other retailing formats. Exhibit 12 lists the

major M&A activities in China’s department store sector over 2012 through 2013.

One prominent case was the acquisition of PCD Stores by Wangfujing Department Store

earlier this year. Wangfujing Department Store acquired PCD Stores, which operates 18

department stores and three discount outlets in China, with a view to expanding market

share and geographical coverage in the country; Wangfujing will now also be able to tap

into a discount outlet retailing format and increase its proportion of self-owned properties.

Exhibit 12: Major M&A deals in China’s department store sector, 2012-2013

Deal Deal

announcement value

Bidding company Target company date (US$ million)

Beijing Cuiwei Tower Co.,Ltd. Beijing Modern Plaza; 17-Sep-13 n/a

Beijing Ganjiakou Plaza

New World Department Store Shanghai Huizi Department Store 16-Oct-13 47

Beijing Wangfujing International PCD Stores Group., Ltd. 24-Jan-13 257

Commercial Development Co., Ltd.

Baoji Retailing Century Sunshine Commercial 28-Aug-12 21

19.73% of total share

Nanjing Central Emporium (Group) Lianyungang Central Department 15-May-12 1

Stocks Co., Ltd. Store

Source: China Venture; related news reports

!&


Tier 3 and 4 cities are on the radar of department store players

Lower-tier cities have shown huge growth potential over recent years. According to

McKinsey12, smaller cities with populations of less than 1.5 million will become China’ s

major driving force over the coming years and can form formidable clusters with huge

economic potential. It is estimated that this grouping will contribute 40% of China’s total

urban GDP growth through 2030. McKinsey13 has also forecast that the proportion of

China’s middle class households in Tier 3 and 4 cities will comprise 40% in 2022, up

from 18% in 2002.

Many players have already made forays into tier 3 and 4 cities and will continue to pursue

their aggressive expansion in such cities. For instance, over 80% of Golden Eagle and

Intime’s pipeline stores are located in lower tier cities (Exhibit 13 and Exhibit 14)

Exhibit 13: Golden Eagle Department Store- pipeline stores

Store Province Date

Changzhou Jiahong Additional Jiangsu 2013

Xian Shaanxi 2013

Nanjing XJK Phase2 iangsu 2014

Kunshan Jiangsu 2014

Yancheng Jiangsu 2014

Nantong Jiangsu 2014

Hefei Jiangsu 2014

Danyang Jiangsu 2014-2015

Jiangning (Nanjing) Jiangsu 2015

Ma’anshan Anhui 2015

Wujiang Jiangsu 2015

Xuzhou Additional Jiangsu 2016

Hexi (Nanjing) Jiangsu 2016

Suzhou Flagship Jiangsu 2016

Changzhou #3 Jiangsu 2016

Changzhou #4 Jiangsu 2016

Source: Morgan Stanley, CIMB

12 McKinsey Insights China: What’s Next for China?13 McKinsey - Mapping China's Middle Class

!'

Exhibit 14: Intime Department Store - pipeline stores

Store Province Date

Hangzhou Hubin Zhejiang 2H 2013

Hangzhou Chengxi Zhejiang 2H 2013

Tangshan Xinhua phase II Hubei 2H 2013

Hefei Intime City Anhui 2H 2013

Haining Intime City Zhejiang 2H 2013

Huzhou Aishan Zhejiang 2H 2013

Wuhan Wuluo Intime City Hubei 2014

Hangzhou Zhongda Zhejiang 2014

Liuzhou Intime City Guangxi 2014

Wenzhou Yueqing Zhejiang 2014

Baotou Gaoxin Inner Mongolia 2014

Shaoxing Haiman City Zhejiang 2014

Huzhou Dongwu Zhejiang 2014

Wenling Intime City Zhejiang n/a

Baoji Intime City Shanxi n/a

Wuhao Wuluo Hubei n/a

Wuhu Intime City Anhui n/a

Taizhou Jiaojiang Zhejiang n/a

Source: Haitong report, 21 March 2013

In diversification, the shopping mall format is gaining in

popularity

As previously mentioned, many department store operators are diversifying their retail

businesses by engaging in multiple formats. In particular, the shopping mall format is

favoured by department store operators and investors. Some store operators have

started to do this by either actively investing in commercial properties or working with

property developers to develop and operate their own shopping malls. For instance,

Wangfujing Department Store formed a joint venture with Taubman Asia14, a renowned

international real estate player engaged in developing and managing shopping malls,

to develop malls in China; the first project will be located in Xi’an. Intime Department

Store is also actively developing shopping malls, representing nearly 50% of Intime’s

pipeline projects15. The retailer’s latest shopping mall, Yintai City, began trial operations in

September and attracted more than 200,000 shoppers16.

14 http://xa.winshang.com/news-171002.html15 Haitong research report, 21 March 201316 http://news.winshang.com/news-189528.html

!(


Shopping malls are winning appeal, but the investment boom has led to some

oversupply

Shopping malls are increasingly the preferred places to visit and shop, so many property

developers or department store operators in China are eyeing the commercial property

market. However, the investment boom fuelled by this interest in the sector has led to an

oversupply of shopping malls in certain cities.

According to CBRE17, China was by far the most active shopping mall market in the

world in terms of mall space completed. In 2012, seven cities among the global top 10

most active shopping mall markets are in China (see Exhibit 15 below). Also, among

CBRE’s 180 surveyed cities, half of all shopping centre space under construction is

located in China.

Exhibit 15: Top ten most active shopping centre developments, 2012

Source: CBRE research, April 2013

Note: Cities with more than 100,000 sq m of new shopping centre space in 2012

As indicated in a report18 by Deloitte and CCFA, as at the end of 2011, China had a

total of 2,812 shopping centres open for business, with an aggregate total commercial

building floor space of 177 million sqm. The total commercial building floor space for

shopping malls is expected to reach 250 million sqm by the end of 2013.

Facing intensified competition, many retailers are slowing expansion plans and focusing

on revamping their existing stores. As a result, shopping mall vacancy rates in China

remain high. According to Knight Frank19, in 1H13, the average vacancy rate in China’s

tier 1 cities reached 8.1%, up 0.2ppt yoy; at the same time, the average vacancy rate in

China’s tier 2 cities was 9.7%, a fall of 1.3ppt compared with that of 1H12.

17 CBRE Global Viewpoint, April 201318 Mall China Information Centre, Deloitte, China Chain Store and Franchise Association19 Knight Frank: 1H 2013 China Retail Property Market Watch

"*

Due to the softening retail market, an oversupply of commercial properties is likely to

continue over the coming year and developers will find it difficult to recruit new shopping

mall tenants.

Exhibit 16: Vacancy rates in prime shopping malls in China, 1H13

Source: Knights Frank – 1H 2013 China Retail Market

")


Conclusion and implications

"!

Competition is fierce in China’s department store sector. To cover this, both existing and

potential department store operators are advised to keep a close eye on the following

issues:

Department store or shopping mall? The content matters

It is observed that when Chinese consumers shop at physical stores, they are generally

looking for a chance to bond with family or friends. Hence, the right proportion of

catering, shopping and entertainment facilities is one of the most important elements

for success. The increasing popularity of shopping malls is partly attributable to their

successful tenant mix. Most feature various retail brands, but now also include a host of

restaurants that offer an international cuisine, cinemas and spas, kids playground, and so

on.

Department store operators are advised to select the tenant mix carefully to maximise

foot traffic.

Supply chain management is a must

Nowadays, more and more department store operators realize the drawbacks of the

concessionary model – low profits, poor differentiation of brands and products, and

low customer loyalty to name but a few. They are now aiming to adopt a differentiated

business model by direct merchandise sales and by launching private labels.

To be successful, department store operators need to have an in-depth knowledge of

supply chain management and build up an enhanced management system. On the one

hand, this allows retailers to source, make order, and arrange delivery with manufacturers

in a more efficient and transparent way when developing their private label products.

On the other hand, a sound supply chain management system also allows department

stores to share inventory and sales information between individual stores, and thus

enables retailers to better assess customer demand for their direct merchandise products

or private labels.

At the end of the day, customer is the king – omni-channel

approaches

Today, Chinese consumers are becoming more discerning and they treasure the

shopping experience more than ever before. At the same time, they are more familiar at

optimizing their shopping experience across different channels, including physical stores,

online platforms and social media. Tech-savvy Chinese consumers prefer to obtain

""


product information and peer feedback from Sina Weibo or WeChat prior to buying the

product; they like to shop anytime, anywhere and on any device. After placing the order,

they expect retailers to accept a variety of payment methods. When it comes to product

delivery or refund, they expect this to be done easily. The newly-purchased product is

expected to be delivered to a specified address or picked up at a customer’s preferred

store or pick-up locker; when there is a need for a refund or exchange, they prefer to do

this with minimum effort, by either bringing it back to store of their choice or by having

someone pick up and deliver the product back to the store for them.

To win in today’s highly competitive marketplace, department store operators need

to take account of consumers’ rapidly evolving shopping preferences, and to explore

various aspects of an omni-channel strategy.

Capturing the Big Data

Indeed, omni-channel strategies are likely to work only if department store operators

can seamlessly track and share customers’ shopping habits across all sales channels

in a timely manner. The appropriate use of Big Data allows operators to spot trends

and better adapt to consumers’ changing needs. Moreover, they can adjust product

and service offerings to suit customers’ changing needs. The key is to have in place

an advanced information technology system that can access and share customer

information across all channels.

"#

Appendix: Store location of major department stores in China Beijing Jiangsu Shanghai Wangfujing Wenfeng Golden Beijing Shijiangzhuang Liqun Nanjing Wuhan Beijing Handan Shirble Friendship Changchun Department Rainbow Parkson Great World Eagle Hefei Intime New World Beijing Maoye Caishikou Zhengzhou Wanda Beiguo Anhui Group Hunan Central PCD Jinan Zhongnan Cuiwei Charter Sunshine Guangzhou Xinyulou Nanning Department JiaHua Group Eurasia Store Department Retail Chainstore Retail Department Department Department Capital International Department Liaoning Dennis Department Group Commercial Guangzhou Co.,Ltd Friendship Emporium Stores Hualian Commercial Plaza Group Department Friendship Department Xiongfeng Department Store Stores Incorporatd Yinzuo Group (Group) Store Group Development Group Store Group Zhenghua Store (Group) Store China Retailing Holdings Store Xinglong Department Store (Department Capital Grandbuy (Department and Apollo Group Stocks (Group) Commercial Group Shopping Holdings Store (Group) Group Store Group Group Store Holdings Holdings City Province Company Group Co., Ltd. Co., Ltd. Co., Ltd. Ltd. Co., Ltd. Eagle Co., Ltd. Group Co., Ltd. Limited Group Ltd. Co., Ltd. Big Family Store Co., Ltd. store part) co.,Ltd. Co., Ltd. store part) Co., Ltd. Co., Ltd. Ltd.* Group Co.,Ltd Center Limited Co., Ltd. Co., Ltd. Co., Ltd.* Co., Ltd. Co. Ltd. (China) Ltd. Limited SouthGuangzhou Guangdong 1 2 13 5 Shenzhen Guangdong 26 6 14 9Dongguan Guangdong 7 1 1Huizhou Guangdong 2 1 Shantou Guangdong 1 Zhuhai Guangdong 1 Shunde Guangdong Zhaoqing Guangdong 1 Jieyang Guangdong 1 Zhongshan Guangdong Heyuan Guangdong 1 Maoming Guangdong 1 Foshang Guangdong 1 1 2Zhanjiang Guangdong 1 1 Conghua Guangdong 1 Zengcheng Guangdong 1 Guigang Guangxi 1 Nanning Guangxi 1 2 1 3 2Wuzhou Guangxi Liuzhou Guangxi Yulin Guangxi Hechi Guangxi Baise Guangxi Yizhou Guangxi Guigang Guangxi Guilin Guangxi Xiamen Fujian 3 2 5 Fuzhou Fujian 1 1 2 Yongan Fujian 1 Jinjiang Fujian 1 Zhangzhou Fujian 1 Putian Fujian 1 Ningde Fujian 1 Quanzhou Fujian 1 1 East Shanghai 22 4 1 1 10 3 Hangzhou Zhejiang 1 9 Huzhou Zhejiang 1 1 Jiaxing Zhejiang 1 1 Changshu Zhejiang 1 Ningbo Zhejiang 1 5 2 2 Zhoushan Zhejiang 1 Wenzhou Zhejiang 1 1 Jinhua Zhejiang 3 Cixi Zhejiang 1 Yiwu Zhejiang 1 Zhuji Zhejiang 1 Shengzhou Zhejiang Shaoxing Zhejiang 1 1 1 1 Nanjing Jiangsu 4 1 2 2 Suzhou Jiangsu 2 1 Wuxi jiangsu 2 1 3 Nantong Jiangsu 7 1 Lianyungang Jiangsu 1 Yangzhou Jiangsu 2 Xuzhou Jiangsu 2 1 1 Jining Jiangsu 1 Taizhou Jiangsu Taizhou Jiangsu 1 1 1 Huaian Jiangsu 1 1 1 Yancheng Jiangsu 1 1 1 Changzhou Jiangsu 1 2 1 1

"$


Appendix: Store location of major department stores in China Beijing Jiangsu Shanghai Wangfujing Wenfeng Golden Beijing Shijiangzhuang Liqun Nanjing Wuhan Beijing Handan Shirble Friendship Changchun Department Rainbow Parkson Great World Eagle Hefei Intime New World Beijing Maoye Caishikou Zhengzhou Wanda Beiguo Anhui Group Hunan Central PCD Jinan Zhongnan Cuiwei Charter Sunshine Guangzhou Xinyulou Nanning Department JiaHua Group Eurasia Store Department Retail Chainstore Retail Department Department Department Capital International Department Liaoning Dennis Department Group Commercial Guangzhou Co.,Ltd Friendship Emporium Stores Hualian Commercial Plaza Group Department Friendship Department Xiongfeng Department Store Stores Incorporatd Yinzuo Group (Group) Store Group Development Group Store Group Zhenghua Store (Group) Store China Retailing Holdings Store Xinglong Department Store (Department Capital Grandbuy (Department and Apollo Group Stocks (Group) Commercial Group Shopping Holdings Store (Group) Group Store Group Group Store Holdings Holdings City Province Company Group Co., Ltd. Co., Ltd. Co., Ltd. Ltd. Co., Ltd. Eagle Co., Ltd. Group Co., Ltd. Limited Group Ltd. Co., Ltd. Big Family Store Co., Ltd. store part) co.,Ltd. Co., Ltd. store part) Co., Ltd. Co., Ltd. Ltd.* Group Co.,Ltd Center Limited Co., Ltd. Co., Ltd. Co., Ltd.* Co., Ltd. Co. Ltd. (China) Ltd. Limited SouthGuangzhou Guangdong 1 2 13 5 Shenzhen Guangdong 26 6 14 9Dongguan Guangdong 7 1 1Huizhou Guangdong 2 1 Shantou Guangdong 1 Zhuhai Guangdong 1 Shunde Guangdong Zhaoqing Guangdong 1 Jieyang Guangdong 1 Zhongshan Guangdong Heyuan Guangdong 1 Maoming Guangdong 1 Foshang Guangdong 1 1 2Zhanjiang Guangdong 1 1 Conghua Guangdong 1 Zengcheng Guangdong 1 Guigang Guangxi 1 Nanning Guangxi 1 2 1 3 2Wuzhou Guangxi Liuzhou Guangxi Yulin Guangxi Hechi Guangxi Baise Guangxi Yizhou Guangxi Guigang Guangxi Guilin Guangxi Xiamen Fujian 3 2 5 Fuzhou Fujian 1 1 2 Yongan Fujian 1 Jinjiang Fujian 1 Zhangzhou Fujian 1 Putian Fujian 1 Ningde Fujian 1 Quanzhou Fujian 1 1 East Shanghai 22 4 1 1 10 3 Hangzhou Zhejiang 1 9 Huzhou Zhejiang 1 1 Jiaxing Zhejiang 1 1 Changshu Zhejiang 1 Ningbo Zhejiang 1 5 2 2 Zhoushan Zhejiang 1 Wenzhou Zhejiang 1 1 Jinhua Zhejiang 3 Cixi Zhejiang 1 Yiwu Zhejiang 1 Zhuji Zhejiang 1 Shengzhou Zhejiang Shaoxing Zhejiang 1 1 1 1 Nanjing Jiangsu 4 1 2 2 Suzhou Jiangsu 2 1 Wuxi jiangsu 2 1 3 Nantong Jiangsu 7 1 Lianyungang Jiangsu 1 Yangzhou Jiangsu 2 Xuzhou Jiangsu 2 1 1 Jining Jiangsu 1 Taizhou Jiangsu Taizhou Jiangsu 1 1 1 Huaian Jiangsu 1 1 1 Yancheng Jiangsu 1 1 1 Changzhou Jiangsu 1 2 1 1

"%

Beijing Jiangsu Shanghai Wangfujing Wenfeng Golden Beijing Shijiangzhuang Liqun Nanjing Wuhan Beijing Handan Shirble Friendship Changchun Department Rainbow Parkson Great World Eagle Hefei Intime New World Beijing Maoye Caishikou Zhengzhou Wanda Beiguo Anhui Group Hunan Central PCD Jinan Zhongnan Cuiwei Charter Sunshine Guangzhou Xinyulou Nanning Department JiaHua Group Eurasia Store Department Retail Chainstore Retail Department Department Department Capital International Department Liaoning Dennis Department Group Commercial Guangzhou Co.,Ltd Friendship Emporium Stores Hualian Commercial Plaza Group Department Friendship Department Xiongfeng Department Store Stores Incorporatd Yinzuo Group (Group) Store Group Development Group Store Group Zhenghua Store (Group) Store China Retailing Holdings Store Xinglong Department Store (Department Capital Grandbuy (Department and Apollo Group Stocks (Group) Commercial Group Shopping Holdings Store (Group) Group Store Group Group Store Holdings Holdings City Province Company Group Co., Ltd. Co., Ltd. Co., Ltd. Ltd. Co., Ltd. Eagle Co., Ltd. Group Co., Ltd. Limited Group Ltd. Co., Ltd. Big Family Store Co., Ltd. store part) co.,Ltd. Co., Ltd. store part) Co., Ltd. Co., Ltd. Ltd.* Group Co.,Ltd Center Limited Co., Ltd. Co., Ltd. Co., Ltd.* Co., Ltd. Co. Ltd. (China) Ltd. Limited Suqian Jiangsu 1 Zhenjiang Jiangsu 1 Liyang Jiangsu 1 Jintan Jiangsu Kunshan Jiangsu 1 Jiangyin Jiangsu 1 Taicang Jiangsu 1 Hefei Anhui 2 3 7 1 1 2 Ma'anshan Anhui Bangbu Anhui 3 1 1 Tongling Anhui 1 Huangshan Anhui 1 Huainan Anhui 1 1 Liu'an Anhui 1 1 Haozhou Anhui 1 1 Chaohu Anhui 1 1 Wuhu Anhui 1 1 Shucheng Anhui Xuancheng Anhui 1 Huoqui Anhui 1 Chuzhou Anhui 1 Chizhou Anhui 1 Ningguo Anhui 1 Suzhou Anhui 1 Wuwei Anhui 1 Yeji Anhui 1 Nanling Anhui 1 Huaibei Anhui 1 North Beijing - 6 3 3 2 6 8 13 1 1 5 1 Tianjin - 1 1 1 1 Hohhot Inner Mongolia 1 1 Baotou Inner Mongolia 2 1 Erdos Inner Mongolia 1 Taiyuan Shanxi 1 1 1 1 Qingdao Shandong 1 2 9 1 Yantai Shandong 1 13 Weihai Shandong 5 1 Zibo Shandong 6 1 5 2 Linyi Shandong 4 1 Jinan Shandong 7 1 1 1 3 Dongying Shandong 5 1 1 Laiwu Shandong 2 Taian Shandong 5 Binzhou Shandong 6 Rizhao Shandong 2 Tengzhou Shandong Anqiu Shandong Weifang Shandong 3 1 Heze Shandong 1 Xintai Shandong Liaocheng Shandong 2 Xingtai Shandong Qufu Shandong Zhangqiu Shandong 1 Jining Shandong Dezhou Shandong 2 Zaozhuang Shandong Hebi Shandong Leling Shandong Kenli Shandong 1 Niaonan Shandong 2 Jimo Shandong 1 Laizhou Shandong 2 Rongcheng Shandong 1 Jiaozhou Shandong 1 Laixi Shandong 1

"&


Beijing Jiangsu Shanghai Wangfujing Wenfeng Golden Beijing Shijiangzhuang Liqun Nanjing Wuhan Beijing Handan Shirble Friendship Changchun Department Rainbow Parkson Great World Eagle Hefei Intime New World Beijing Maoye Caishikou Zhengzhou Wanda Beiguo Anhui Group Hunan Central PCD Jinan Zhongnan Cuiwei Charter Sunshine Guangzhou Xinyulou Nanning Department JiaHua Group Eurasia Store Department Retail Chainstore Retail Department Department Department Capital International Department Liaoning Dennis Department Group Commercial Guangzhou Co.,Ltd Friendship Emporium Stores Hualian Commercial Plaza Group Department Friendship Department Xiongfeng Department Store Stores Incorporatd Yinzuo Group (Group) Store Group Development Group Store Group Zhenghua Store (Group) Store China Retailing Holdings Store Xinglong Department Store (Department Capital Grandbuy (Department and Apollo Group Stocks (Group) Commercial Group Shopping Holdings Store (Group) Group Store Group Group Store Holdings Holdings City Province Company Group Co., Ltd. Co., Ltd. Co., Ltd. Ltd. Co., Ltd. Eagle Co., Ltd. Group Co., Ltd. Limited Group Ltd. Co., Ltd. Big Family Store Co., Ltd. store part) co.,Ltd. Co., Ltd. store part) Co., Ltd. Co., Ltd. Ltd.* Group Co.,Ltd Center Limited Co., Ltd. Co., Ltd. Co., Ltd.* Co., Ltd. Co. Ltd. (China) Ltd. Limited Suqian Jiangsu 1 Zhenjiang Jiangsu 1 Liyang Jiangsu 1 Jintan Jiangsu Kunshan Jiangsu 1 Jiangyin Jiangsu 1 Taicang Jiangsu 1 Hefei Anhui 2 3 7 1 1 2 Ma'anshan Anhui Bangbu Anhui 3 1 1 Tongling Anhui 1 Huangshan Anhui 1 Huainan Anhui 1 1 Liu'an Anhui 1 1 Haozhou Anhui 1 1 Chaohu Anhui 1 1 Wuhu Anhui 1 1 Shucheng Anhui Xuancheng Anhui 1 Huoqui Anhui 1 Chuzhou Anhui 1 Chizhou Anhui 1 Ningguo Anhui 1 Suzhou Anhui 1 Wuwei Anhui 1 Yeji Anhui 1 Nanling Anhui 1 Huaibei Anhui 1 North Beijing - 6 3 3 2 6 8 13 1 1 5 1 Tianjin - 1 1 1 1 Hohhot Inner Mongolia 1 1 Baotou Inner Mongolia 2 1 Erdos Inner Mongolia 1 Taiyuan Shanxi 1 1 1 1 Qingdao Shandong 1 2 9 1 Yantai Shandong 1 13 Weihai Shandong 5 1 Zibo Shandong 6 1 5 2 Linyi Shandong 4 1 Jinan Shandong 7 1 1 1 3 Dongying Shandong 5 1 1 Laiwu Shandong 2 Taian Shandong 5 Binzhou Shandong 6 Rizhao Shandong 2 Tengzhou Shandong Anqiu Shandong Weifang Shandong 3 1 Heze Shandong 1 Xintai Shandong Liaocheng Shandong 2 Xingtai Shandong Qufu Shandong Zhangqiu Shandong 1 Jining Shandong Dezhou Shandong 2 Zaozhuang Shandong Hebi Shandong Leling Shandong Kenli Shandong 1 Niaonan Shandong 2 Jimo Shandong 1 Laizhou Shandong 2 Rongcheng Shandong 1 Jiaozhou Shandong 1 Laixi Shandong 1

"'

Beijing Jiangsu Shanghai Wangfujing Wenfeng Golden Beijing Shijiangzhuang Liqun Nanjing Wuhan Beijing Handan Shirble Friendship Changchun Department Rainbow Parkson Great World Eagle Hefei Intime New World Beijing Maoye Caishikou Zhengzhou Wanda Beiguo Anhui Group Hunan Central PCD Jinan Zhongnan Cuiwei Charter Sunshine Guangzhou Xinyulou Nanning Department JiaHua Group Eurasia Store Department Retail Chainstore Retail Department Department Department Capital International Department Liaoning Dennis Department Group Commercial Guangzhou Co.,Ltd Friendship Emporium Stores Hualian Commercial Plaza Group Department Friendship Department Xiongfeng Department Store Stores Incorporatd Yinzuo Group (Group) Store Group Development Group Store Group Zhenghua Store (Group) Store China Retailing Holdings Store Xinglong Department Store (Department Capital Grandbuy (Department and Apollo Group Stocks (Group) Commercial Group Shopping Holdings Store (Group) Group Store Group Group Store Holdings Holdings City Province Company Group Co., Ltd. Co., Ltd. Co., Ltd. Ltd. Co., Ltd. Eagle Co., Ltd. Group Co., Ltd. Limited Group Ltd. Co., Ltd. Big Family Store Co., Ltd. store part) co.,Ltd. Co., Ltd. store part) Co., Ltd. Co., Ltd. Ltd.* Group Co.,Ltd Center Limited Co., Ltd. Co., Ltd. Co., Ltd.* Co., Ltd. Co. Ltd. (China) Ltd. Limited Wendeng Shandong 1 Penglai Shandong 1 Rushan Shandong 1 Wuan Shandong 1 Fengfeng Shandong 1 Yongnian Shandong 2 Zhucheng Shandong 2 Shexian Shandong 1 Chengyang Shandong 1 Hengtai Shandong 1 Laiwu Shandong 1 Qinghuangdao Hebei 1 Baoding Hebei 1 2 Shijiazhuang Hebei 1 1 8 Tangshan Hebei 1 1 Wuan Hebei Handan Hebei 4 Zhangjiakou Hebei 1 Gaocheng Hebei 1 Zaoqiang Hebei 1 Zhaoxian Hebei 1 Cangzhou Hebei 1 Jinzhou Hebei 1 Huanghua Hebei 1 Qingxian Hebei 1 Hejian Hebei 1 Lixian Hebei 1 Qianghe Hebei 1 Botou Hebei 1 Diaobingshan Hebei 1 Langfang Hebei 1 Shenyang Liaoning 1 2 1 7 3 1 Dalian Liaoning 2 1 1 Anshan Liaoning 1 1 1 Wafangdian Liaoning Jinzhou Liaoning Benxi Liaoning 1 Dandong Liaoning 1 Tieling Liaoning 3 Paijin Liaoning 5 Fushun Liaoning 1 1 Fuxin Liaoning 1 Chaoyang Liaoning 1 Yingkou Liaoning 3 Huludao Liaoning 2 Gaizhou Liaoning Xingcheng Liaoning 1 Xinmin Liaoning Liaoyang Liaoning Changchun Jilin 2 1 Jilin Jilin Yanji Jilin Huichun Jilin Quanyang Jilin 1 Harbin Helongjiang 1 1 2 1 Shuangyashan Helongjiang Daqing Helongjiang 1 Qiqihaer Helongjiang 1 Qitaihe Helongjiang Yichun Helongjiang Mudanjiang Helongjiang Jixi Helongjiang Heihe Helongjiang Tuohua Helongjiang 1 Jiamusi Helongjiang Xingji Helongjiang 1 1

"(


Beijing Jiangsu Shanghai Wangfujing Wenfeng Golden Beijing Shijiangzhuang Liqun Nanjing Wuhan Beijing Handan Shirble Friendship Changchun Department Rainbow Parkson Great World Eagle Hefei Intime New World Beijing Maoye Caishikou Zhengzhou Wanda Beiguo Anhui Group Hunan Central PCD Jinan Zhongnan Cuiwei Charter Sunshine Guangzhou Xinyulou Nanning Department JiaHua Group Eurasia Store Department Retail Chainstore Retail Department Department Department Capital International Department Liaoning Dennis Department Group Commercial Guangzhou Co.,Ltd Friendship Emporium Stores Hualian Commercial Plaza Group Department Friendship Department Xiongfeng Department Store Stores Incorporatd Yinzuo Group (Group) Store Group Development Group Store Group Zhenghua Store (Group) Store China Retailing Holdings Store Xinglong Department Store (Department Capital Grandbuy (Department and Apollo Group Stocks (Group) Commercial Group Shopping Holdings Store (Group) Group Store Group Group Store Holdings Holdings City Province Company Group Co., Ltd. Co., Ltd. Co., Ltd. Ltd. Co., Ltd. Eagle Co., Ltd. Group Co., Ltd. Limited Group Ltd. Co., Ltd. Big Family Store Co., Ltd. store part) co.,Ltd. Co., Ltd. store part) Co., Ltd. Co., Ltd. Ltd.* Group Co.,Ltd Center Limited Co., Ltd. Co., Ltd. Co., Ltd.* Co., Ltd. Co. Ltd. (China) Ltd. Limited Wendeng Shandong 1 Penglai Shandong 1 Rushan Shandong 1 Wuan Shandong 1 Fengfeng Shandong 1 Yongnian Shandong 2 Zhucheng Shandong 2 Shexian Shandong 1 Chengyang Shandong 1 Hengtai Shandong 1 Laiwu Shandong 1 Qinghuangdao Hebei 1 Baoding Hebei 1 2 Shijiazhuang Hebei 1 1 8 Tangshan Hebei 1 1 Wuan Hebei Handan Hebei 4 Zhangjiakou Hebei 1 Gaocheng Hebei 1 Zaoqiang Hebei 1 Zhaoxian Hebei 1 Cangzhou Hebei 1 Jinzhou Hebei 1 Huanghua Hebei 1 Qingxian Hebei 1 Hejian Hebei 1 Lixian Hebei 1 Qianghe Hebei 1 Botou Hebei 1 Diaobingshan Hebei 1 Langfang Hebei 1 Shenyang Liaoning 1 2 1 7 3 1 Dalian Liaoning 2 1 1 Anshan Liaoning 1 1 1 Wafangdian Liaoning Jinzhou Liaoning Benxi Liaoning 1 Dandong Liaoning 1 Tieling Liaoning 3 Paijin Liaoning 5 Fushun Liaoning 1 1 Fuxin Liaoning 1 Chaoyang Liaoning 1 Yingkou Liaoning 3 Huludao Liaoning 2 Gaizhou Liaoning Xingcheng Liaoning 1 Xinmin Liaoning Liaoyang Liaoning Changchun Jilin 2 1 Jilin Jilin Yanji Jilin Huichun Jilin Quanyang Jilin 1 Harbin Helongjiang 1 1 2 1 Shuangyashan Helongjiang Daqing Helongjiang 1 Qiqihaer Helongjiang 1 Qitaihe Helongjiang Yichun Helongjiang Mudanjiang Helongjiang Jixi Helongjiang Heihe Helongjiang Tuohua Helongjiang 1 Jiamusi Helongjiang Xingji Helongjiang 1 1

#*

Beijing Jiangsu Shanghai Wangfujing Wenfeng Golden Beijing Shijiangzhuang Liqun Nanjing Wuhan Beijing Handan Shirble Friendship Changchun Department Rainbow Parkson Great World Eagle Hefei Intime New World Beijing Maoye Caishikou Zhengzhou Wanda Beiguo Anhui Group Hunan Central PCD Jinan Zhongnan Cuiwei Charter Sunshine Guangzhou Xinyulou Nanning Department JiaHua Group Eurasia Store Department Retail Chainstore Retail Department Department Department Capital International Department Liaoning Dennis Department Group Commercial Guangzhou Co.,Ltd Friendship Emporium Stores Hualian Commercial Plaza Group Department Friendship Department Xiongfeng Department Store Stores Incorporatd Yinzuo Group (Group) Store Group Development Group Store Group Zhenghua Store (Group) Store China Retailing Holdings Store Xinglong Department Store (Department Capital Grandbuy (Department and Apollo Group Stocks (Group) Commercial Group Shopping Holdings Store (Group) Group Store Group Group Store Holdings Holdings City Province Company Group Co., Ltd. Co., Ltd. Co., Ltd. Ltd. Co., Ltd. Eagle Co., Ltd. Group Co., Ltd. Limited Group Ltd. Co., Ltd. Big Family Store Co., Ltd. store part) co.,Ltd. Co., Ltd. store part) Co., Ltd. Co., Ltd. Ltd.* Group Co.,Ltd Center Limited Co., Ltd. Co., Ltd. Co., Ltd.* Co., Ltd. Co. Ltd. (China) Ltd. Limited Central Zhengzhou Henan 1 1 1 3 2 Luoyang Henan 1 1 1 1 Xinxiang Henan Luohe Henan Xuchang Henan Xinyang Henan Kaifeng Henan Puyang Henan Jiaozuo Henan 1 Pingdingshan Henan 1 Nanyang Henan 1 Anyang Henan 1 Shangqiu Henan Shouguang Henan Sanmenxia Henan 1 Wuhan Hubei 1 1 6 3 2 Ezhou Hubei 1 Xiangyang Hubei 1 1 Xianning Hubei 1 1 Suizhou Hubei 1 1 Xiantao Hubei 1 Jinmen Hubei 1 Huanggang Hubei 1 Shiyan Hubei 1 Xiaogan Hubei 1 Yichang Hubei 1 Changsha Hunan 1 1 1 1 1 5 Yueyang Hunan 1 1 Loudi Hunan 1 Huaihua Hunan Shaoyang Hunan Hongjiang Hunan Jishou Hunan Zhuzhou Hunan 1 1 Changde Hunan 1 Chenzhou Hunan 1 1 Ganzhou Jiangxi 1 Nanchang Jiangxi 4 1 1 West Chongqing - 1 2 3 1 1 2 1 Chengdu Sichuan 2 2 2 1 2 Dazhou Sichuan Mianyang Sichuan 1 1 1 Leshan Sichuan Guangan Sichuan Luzhou Sichuan Yuechi Sichuan Zigong Sichuan 1 Guiyang Guizhou 3 3 Liupanshui Guizhou 1 1 Kaili Guizhou Renhuai Guizhou Qingzhen Guizhou Tongren Guizhou Bijie Guizhou Zuny Guizhou 1 1 Xi’an Shaanxi 4 2 3 1 3 1 Xianyang Shaanxi Kunming Yunnan 1 2 2 1 Lanzhou Gansu 1 1 1 Xining Qinghai 1 Yinchuan Ningxia 1 Urumqi Xinjiang 1 1 Total 25 41 29 61 53 9 25 16 25 37 40 8 21 13 28 9 75 12 16 22 29 7 7 14 4 9 5 4 9 7 15 3 4 14 14

As of November 2013Source: Company websites

#)


Beijing Jiangsu Shanghai Wangfujing Wenfeng Golden Beijing Shijiangzhuang Liqun Nanjing Wuhan Beijing Handan Shirble Friendship Changchun Department Rainbow Parkson Great World Eagle Hefei Intime New World Beijing Maoye Caishikou Zhengzhou Wanda Beiguo Anhui Group Hunan Central PCD Jinan Zhongnan Cuiwei Charter Sunshine Guangzhou Xinyulou Nanning Department JiaHua Group Eurasia Store Department Retail Chainstore Retail Department Department Department Capital International Department Liaoning Dennis Department Group Commercial Guangzhou Co.,Ltd Friendship Emporium Stores Hualian Commercial Plaza Group Department Friendship Department Xiongfeng Department Store Stores Incorporatd Yinzuo Group (Group) Store Group Development Group Store Group Zhenghua Store (Group) Store China Retailing Holdings Store Xinglong Department Store (Department Capital Grandbuy (Department and Apollo Group Stocks (Group) Commercial Group Shopping Holdings Store (Group) Group Store Group Group Store Holdings Holdings City Province Company Group Co., Ltd. Co., Ltd. Co., Ltd. Ltd. Co., Ltd. Eagle Co., Ltd. Group Co., Ltd. Limited Group Ltd. Co., Ltd. Big Family Store Co., Ltd. store part) co.,Ltd. Co., Ltd. store part) Co., Ltd. Co., Ltd. Ltd.* Group Co.,Ltd Center Limited Co., Ltd. Co., Ltd. Co., Ltd.* Co., Ltd. Co. Ltd. (China) Ltd. Limited Central Zhengzhou Henan 1 1 1 3 2 Luoyang Henan 1 1 1 1 Xinxiang Henan Luohe Henan Xuchang Henan Xinyang Henan Kaifeng Henan Puyang Henan Jiaozuo Henan 1 Pingdingshan Henan 1 Nanyang Henan 1 Anyang Henan 1 Shangqiu Henan Shouguang Henan Sanmenxia Henan 1 Wuhan Hubei 1 1 6 3 2 Ezhou Hubei 1 Xiangyang Hubei 1 1 Xianning Hubei 1 1 Suizhou Hubei 1 1 Xiantao Hubei 1 Jinmen Hubei 1 Huanggang Hubei 1 Shiyan Hubei 1 Xiaogan Hubei 1 Yichang Hubei 1 Changsha Hunan 1 1 1 1 1 5 Yueyang Hunan 1 1 Loudi Hunan 1 Huaihua Hunan Shaoyang Hunan Hongjiang Hunan Jishou Hunan Zhuzhou Hunan 1 1 Changde Hunan 1 Chenzhou Hunan 1 1 Ganzhou Jiangxi 1 Nanchang Jiangxi 4 1 1 West Chongqing - 1 2 3 1 1 2 1 Chengdu Sichuan 2 2 2 1 2 Dazhou Sichuan Mianyang Sichuan 1 1 1 Leshan Sichuan Guangan Sichuan Luzhou Sichuan Yuechi Sichuan Zigong Sichuan 1 Guiyang Guizhou 3 3 Liupanshui Guizhou 1 1 Kaili Guizhou Renhuai Guizhou Qingzhen Guizhou Tongren Guizhou Bijie Guizhou Zuny Guizhou 1 1 Xi’an Shaanxi 4 2 3 1 3 1 Xianyang Shaanxi Kunming Yunnan 1 2 2 1 Lanzhou Gansu 1 1 1 Xining Qinghai 1 Yinchuan Ningxia 1 Urumqi Xinjiang 1 1 Total 25 41 29 61 53 9 25 16 25 37 40 8 21 13 28 9 75 12 16 22 29 7 7 14 4 9 5 4 9 7 15 3 4 14 14

As of November 2013Source: Company websites

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