Ito Yokado to shut Beijing shop

An Ito Yokado store in the Wangjing area in Beijing will be closed on April 25 due to location planning and fierce competition from thriving e-commerce. Wang Zhuangfei / For China Daily

Bricks-and-mortar retailers under growing pressure from e-commerce

Japanese retailer Ito Yokado Co Ltd is to close its Wangjing store in Beijing on April 25, with employees and goods withdrawn on May 15. Industry experts said fewer customers and a less-than-satisfactory performance are to blame for the end of eight years' operation.

The closure of the store in a high-end community of northeastern Beijing is the beginning of a strategy reshuffle for Ito Yokado, which has eight stores in the capital and five in Chengdu.

Traditional hypermarkets and department stores have been hit by the rise of e-commerce, represented by companies such as online retailer Tmall, a platform of Alibaba Group Holding Ltd. In response, Beijing Wangfujing Department Store (Group) Co Ltd and New World Department Store China Ltd have entered the e-commerce market.

"Although the price of their fresh food and daily necessities are higher than those at other supermarkets, their quality can be trusted, and the shopping experience is pleasant," said Li Weili, a 60-year-old frequent visitor to the food market at the Ito Yokado in Beiyuan, beyond the North Fifth Ring of Beijing.

Trips in search of electronic goods and clothes were rare to the store's upper floors, she said, because such items can be found at more competitive prices on the Internet. But she worried that more Ito Yokado stores may close.

The move came after the end of a collaboration with Beijing Wangfujing Department Store, a leading domestic retail group based in the capital city. The joint venture was founded in 2004.

The closure of the Wangjing store is a prelude to structural adjustments, said Wang Kun in the communication department of Ito Yokado Beijing.

The company closed one store in Wangfujing in January in 2013 and took over another from the joint venture - in the Sanlitun area - and turned it into Ito Yokado Food Market.

To attract customers and improve performance, the retailer invested in such things as store decoration and the addition of more high-end and imported products. In some Beijing stores, services have been upgraded and shelf-height lowered to increase customer satisfaction.

Liu Yun, a Wangjing housewife, said most of her shopping finds come from the Internet. She buys fresh and organic food from Tootoo, clothes and other necessities from platforms as Taobao or JD.

"Going to bricks-and-mortar stores nowadays for my family is becoming a social occasion where we meet our friends and family," she said.

The penetration of e-commerce is now 29 percent, up from 19 percent two years ago and thrives in key cities where penetration is 46 percent, according to Kantar Worldpanel's report in March. It expects lower-tier cities to catch up over the next few years as e-commerce retailers expand their networks and reach.

Future successful retailers in China will likely be those that can offer a range of different store formats to cater to a variety of shopper needs, said Jason Yu, general manager of Kantar Worldpanel.

Shoppers can now more easily compare prices and pay through their mobile phone. The challenge for retailers is how to grow or simply retain customers as demand increases for wide inventory ranges, low prices and good service, according to the report.