Wanda to close, restructure department stores

Experts say business affected by e-commerce

Wanda Group's reported plans to shut down about 10 underperforming Wanda department stores and restructure 20 in smaller Chinese cities to improve profitability and the popularity of its complexes are a sign of the triumph of e--commerce over off-line stores, experts said.

Wanda Group, whose businesses include commercial properties, cinemas, film production, KTVs, and department stores, is planning to close down about 10 loss-making department stores, Shanghai-based China Business News (CBN) newspaper reported on Wednesday, citing unnamed sources familiar with the matter.

Another 20 Wanda department stores will reduce retail space to provide more room for cafes and restaurants, according to the report.

The public relations manager of Wanda Group Li Haifeng did not reply to Global Times inquiries asking for confirmation and comments on the report.

The department stores to be closed are located in cities such as Ningbo in East China's Zhejiang Province and Shenyang, capital of Northeast China's Liaoning Province.

Luo Qingqi, director of Pa Le Consulting -Corporation, said the reported closures, if true, would be an example of the impact e-commerce has had on traditional retail.

"Wanda believed a successful department store would happen after it secured a golden location or created one in the downtown area of cities with its commercial complexes," Luo told the Global Times Wednesday.

"However, the Internet and the thriving e--commerce have diminished the value of downtown locations."

"Time has ruled that the existence of high-cost brick-and-mortar stores are an outdated one," Luo said, noting that it is impossible for off-line stores to have pricing advantage over online shops nowadays.

Nationwide, Wanda has 99 department stores, according to the company's website.

For years, Wanda department stores would be opened whenever Wanda Group expanded into new cities with its commercial complexes.

But given the speed and scale of Wanda's expansion, many of these department stores are making losses, according to media reports.

A citizen in Changchun, Northeast China's Jilin Province, who only gave his surname as Zhao, told the Global Times Wednesday that he was not surprised about Wanda's move.

"The Wanda department stores in my hometown gave me the impression that the department store business is not run efficiently or given enough attention from senior management, if you compare it with the other Wanda businesses in its complex," Zhao said, from his own experience of looking for floor space to set up a small business at the local Wanda department store.

"Management at traditional department stores will rack their brains to woo consumers, such as organizing promotional events or sales campaign, but at the Wanda department store, you simply don't see it," Zhao noted.

Wanda Group has hoped that providing more floor space to eating services could help to attract more people to spend at its commercial complex, the CBN report said.

Wang Jianlin, chairman of Dalian Wanda Group, has made clear that his company will have to transform its growth patterns.

"Wanda Group will end its reliance on property development and expand into the culture, tourism, finance and e-commerce sectors. A concrete plan will be announced on January 17," Wang told a press conference in Wuhan on December 20.

Wanda opened its 100th Wanda Plaza, in Kunming in Southwest China's Yunnan Province, on October 31, 2014.

Wanda's department stores have generated 650 million yuan ($104.7 million) in rent for the Dalian Wanda Commercial Properties Co, Wanda Group's Hong Kong-listed commercial property arm, during the first half of 2014, according to media reports.