China's property and entertainment giant Dalian Wanda Group announced it will scale down traditional department stores and karaoke bars to focus on activity-driven businesses.
As e-commerce drives down popularity of traditional department stores, the company is refurbishing its old properties in order to better meet market demand.
One such project is the Wanda department store in Jinan, capital of east China's Shandong Province. Once complete, it will be transferred to Wanda's commercial property company, with plans to shift its department store model from high turnover to earning rent and property management fees.
More than 40 department stores and 80 karaoke bars owned by Wanda will be closed, according to the Securities Daily, who attributed the new company direction to Wang Jianlin, the founder and president of the group.
Wang was not available for comment, but sources with Wanda told Xinhua the company plans to develop more dining halls, playgrounds, cinemas and other businesses that focus on visitors' experience at the mall, while reducing its department stores.
According to a report by the China Retailers' Association, 26 department stores closed in the first six months of 2015. Wanda alone closed 10 shops in different cities. Sources with the company said none of the shops opened after 2007 made a profit.
With e-commerce growing 40 percent year on year in the first five months of 2015, online shops are quickly drawing customers away from department stores.
The retail market is polarizing. Traditional department stores, which now sell everything from food to footwear, are seeing fewer visitors. Shopping malls that experiment with different shop formats, like Beijing's Joy City, are thriving.
Once a hub for eager shoppers, Xidan Shopping Center and Beijing Department Store on Wangfujing Street are now barren, with scant visitors on the weekend.
"Department stores are being sandwiched by high-end competition from larger shopping malls and price competition from online sellers," said Wu Bin, operation manager of Yintai Shopping Group, which runs a number of department stores.
"People have started going to shopping malls for fun, and you have to provide fun. Chinese retailers cannot survive only by selling products."
Though karaoke bars have long been one of the most popular mall pastimes, cinemas have become a more powerful competitor. In the first half of 2015, China's box office sales rocketed to 20.4 billion yuan (3.3 billion U.S. dollars), compared to 29.6 billion yuan in 2014, according to the State Administration of Press, Publication, Radio, Film and Television (SARFT),
Wanda earned 3.4 billion yuan from cinemas in the first half of 2015, about 57 percent of the year's revenue target for cinema business, it said.
Another report from the SARFT showed that Wanda Cinema Line Co., Ltd was a top earner among domestic competitors.
However, revenue of the 90 karoake bars owned by Wanda in 2014 was 767 million yuan, accounting for a fraction of the group's 242.48-billion-yuan total income, according to its website.
The business adjustment is well planned and will better meet consumer demand, said the source at Wanda.
