The balance of power in China’s retail world continued to shift away from one-size-fits all shops this week when Dalian Wanda announced plans to shutter 10 department stores nationwide, and restructure another 20.
The decision by the China retail real estate giant mirrors the experience of other department store operators in China, as the traditional retailers struggle to compete with specialty boutiques and ecommerce.
News of the closings are also the latest sign that Dalian Wanda, whose commercial property arm went public last month in Hong Kong’s biggest IPO of 2014, may have trouble maintaining the breakneck growth that it achieved over the last decade.
From Ghost Cities to Ghost Stores
The department stores that Wanda plans to close include two in Shenyang, as well as stores in Qingdao, Ningbo, Wenzhou, Dongguan and other cities. The shops to be restructured include outlets in Shanghai, Qingdao, Wuxi, and Xiamen, according to reports in the local press.
According to Wanda’s website, the company has a total of 84 department stores across China, with the goal of expanding “that number to 120 department stores by 2015,” and becoming “China’s largest department store brand.”
However, the struggling department store is not unique to Wanda. Malaysian-based store operator Parkson, which opened its first China store in 1994 and operates more than 70 outlets in China, closed several of its stores in northern China last year. The shop closings came after disappointing sales – in 2013 Parkson suffered its worst performance in nine years with net profit dropping 58.4 percent in China to RMB 354 million.
More Bad News for Wanda
The department store struggles are only the latest bad news for Wanda, which at one time hoped to raise as much as $6 billion from its Hong Kong IPO.
While even its truncated listing still brought in $3.7 billion for the real estate developer last month, since that time its stock has disappointed. Since opening at HK$48.65, it has travelled as low as HK$47.95, before closing today at HK$48.50.
Wanda itself has made it clear that its traditional model of rapidly building new malls and department stores has limited room for future growth, and the company is now devoting its energies to developing its own chain of theme parks, and acquiring real estate development projects in foreign countries.