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Traditional stores in crisis as Web booms

By Zhao Qian (Global Times)

08:33, January 18, 2013

China's traditional department stores and retail shops are facing challenges from the fast expansion of e-commerce and urgently need to be transformed, an international real estate advisory firm said in a report Thursday.

The market share of Business-to-Customer (B2C) has increased to 30 percent of total e-commerce business in 2012 from 8 percent in 2009, while the share of Customer-to-Customer (C2C) declined to 70 percent last year from 92 percent in 2009, an indication that more brands and companies have moved to online sales, according to the report released by DTZ, a company under UGL Group.

"If traditional department stores do not make any changes to their business models, they will face a survival crisis within five years," Chen Songhong, head of DTZ's Retail Services China, told the Global Times Thursday.

Chen said some commercial property developers in tier-one cities like Shanghai and Guangzhou have already begun scheming to combine physical stores with e-commerce businesses, citing successful and mature models in the US.

US customers can purchase Wal-Mart products online, and pick up the products themselves at Wal-Mart stores. And Wal-Mart offers convenient parking services for the customers, who can even get their products delivered directly to their cars.

Wal-Mart's move could resolve the problem that delivery services tend to deliver products during business hours, when customers are at work and not at home.

"Although business conditions are different in different countries and regions, and China can't duplicate the US model exactly, Chinese commercial properties can still learn from successful practices like the modernization of parking lots and cooperation with e-commerce platforms," Chen noted.

While traditional department stores and individual retail shops face challenges amid the rapid expansion of e-commerce businesses, shopping malls, which can offer diversified services including food courts, cinemas and playgrounds, still have advantages, according to the report.

"Shopping malls can attract a huge amount of customers very rapidly," Chen said.

Li Ming, the mother of a 2-year-old toddler, said she loves malls with children's playgrounds because "it is fun to shop with my family on the weekend."

"Online shopping is convenient, but less in­teresting," Li said.

Shopping malls in major cities witnessed fast expansion last year.

In Beijing, eight shopping malls with a total of 520,000 square meters came onto the market last year, when the average monthly rent for malls in the city reached 762 yuan ($122.45) per square meter, up 8.7 percent compared to a year earlier, according to a report released Tuesday by real estate advisory firm Jones Lang LaSalle.

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