Department stores, despite woes, remain as anchors
Print Edition
DESPITE the challenges traditional department stores face in the West, in Asia this type of retailer remains a go-to anchor tenant even in developed markets like Tokyo and Singapore.
The trend continues despite declining revenues in the department store category, according to Adam Cook, Asia Pacific retail lead for Project Development Services at Jones Lang LaSalle.
“Overall, the department store model continues to grow in Asia, mostly due to new shopping center properties that follow prescriptive tenant mix formulas, particularly in the region’s emerging markets,” said Cook.
A recent report from JLL showed that Asia’s middle class population is expected to double to 1.32 billion by 2020, highlighting the region’s exploding consumer base.
“Consumer spending in Vietnam alone is up 12 percent annually. The growing expendable wealth in these emerging markets is a real opportunity for both international and domestic retailers,” Cook said.
However, the region is yet to see the expansion of speciality retailer-anchored shopping centers that have gained popularity in the West. While some well-known retailers like Marks & Spencer feature their own private labels, traditional department stores are able to house a mix of globally recognized brands. More specifically, they deliver to the consumer a mix of private and independent labels, and can offer a great podium for new retailers to enter emerging markets through shop in shop programs.
“The Isetan Japanese department stores are able to bring in some reasonably high-end designers from time to time, which seems to work well. Specialty shops like the Vivienne Westwood boutique in Isetan’s Orchard Road store in Singapore offers shoppers exclusive access to top avant-garde couture design,” noted Cook.
Although the stock prices of most publicly traded department stores in the region have recently seen a slight decline, the department store remains an important element of the tenant mix in the growing numbers of new shopping centers under development in the region. Middle- and upper-class shoppers in many Asian markets still favor the department store format, and tourism continues to drive sales.
“Japan-based retailer Isetan is expanding throughout Asia, as is Central, a Thai-based retailer, which supplements its core department store business with franchise brands like Muji and Nike. ... there’s still money to be made and the formula is still working,” Cook said.
With a rapidly increasing GDP, China has become a magnet for international retailers, but has it been a case of too much too soon?
As a speciality retailer, British-owned Marks & Spencer sits in the middle ground between department stores and independent brands, and its growth trajectory in China is an indicator of the overall retail landscape.
“We are seeing retailers like Marks & Spencer closing stores across tier-2 and tier-3 cities in China and focusing more on remodeling outlets in the major cities of Beijing and Shanghai,” Cook said.
A key aspect of the department store evolution is negotiating the omni-channel pathway; with the explosion of online services and shopping, consumers want an “experience,” and a holistic one at that.
Retailers must unite the platform, so there’s a similar experience and brand voice, no matter what channel the consumer is shopping in, Cook said.
Summing up, Cook believes that while the formula is working at the moment, Asian department store operators lack the e-commerce and mobile platforms that exist in the West and will need to adapt to maintain growth.
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