21 February 2020

Old-world stores fight for O2O place in new retail order

Brick-and-mortar department stores have been the big losers to online shopping but they’re not giving up just yet. Some are hoping online-to-offline promotions will stabilize some of the shifting consumer ground and channel shoppers to their high street doors.

The grande dame of capital retailing, Beijing Wangfujing Department Store (600859.CN), has teamed up with Tencent (00700.HK) to launch a program called “Weixin Shopping” {微訊購物} in its flagship Beijing store.

It’s counting on membership discounts and location-based services like car parking to get Weixin users to look up from their smartphones and head into the stop. The deal allows the store to reach out to online customers through Tencent technology instead of spending its own money on software and hardware. In return, Tencent gets to promote its Weixin Payment system. The networking and gaming giant is also expected to receive a 0.6 percent fee on every transaction, according to Haitong Securities analyst Wang Liting {汪立婷}.

The service is provided by Tencent’s Weishenghuo {微生活} e-commerce unit. Its clients are mainly traditional retail chains and department stores that want to mine Weixin’s enormous online resources, user base and information on users’ shopping habits.

Wanfujing is not the first chain to link up with Tencent — rival Rainbow Department Store (002419.CN) started working with Weishenghuo in September but there’s been little visible difference since then.

That’s hardly surprising. The popularity of cyber shopping has completely changed the retailing landscape. By saving on wages and store rent, e-tailers have far lower operating costs than department stores and can undercut their established rivals. The stores have been hard-pressed to match on price so many have been trying to offer unique shopping experiences. But they still haven’t figured out ways to squeeze their operating and transaction costs. 

The e-commerce developments may not be game-changers but introducing an online shopping element into the department store business is better than doing nothing.

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EJ Insight writer