Why does Shanghai's first 800 companions surpass their peers | Shanghai Vitality Mall ①, still selling department store genes for 28 years | Business | Shanghai

[Editor's note] Commerce is one of the highest quality genes in Shanghai. Shanghai is accelerating the construction of an international consumer center city, with large department stores and shopping centers being important components. Under the diversion and impact of e-commerce, what does physical shopping malls rely on to break through? What are the winning strategies for Shanghai's shopping malls to prosper the market, boost consumption, and lead the international consumption trend? Jiefang Daily and Shangguan News have launched a series of reports on "Shanghai Vitality Mall". Journalists enter the vibrant new and old shopping malls to explore their ways of survival and development in the face of changes, and the "traffic code" behind impressive sales performance.

Wang Jia, Deputy General Manager of Shanghai One Hundred Companions, recently joined a university in Shanghai for recruitment.

There were one or two hundred students present, and Wang Jia raised two questions first and then: those who knew the first eight hundred companions raised their hands, and those who had visited the eight hundred companions raised their hands. There are not many people echoing from the audience. One of the female classmates answered: The last time I went shopping with Ba Bai Ban was when I was a child and followed my parents.

Wang Jia smiled, not surprised by such an answer. On December 20, 1995, Shanghai First Baban New Century Mall, as the first Sino foreign joint venture large-scale commercial retail enterprise in China, officially opened. On the opening day, the mall welcomed 1.07 million customers, equivalent to the one-day passenger flow of Nanjing Road Walkway at that time, setting a Guinness World Record.

This is a milestone event in China's history of opening up to the outside world, and also an important chapter in China's modern business history. But today, 28 years later, in China and Shanghai, Ba Bai Ban is just one of many large commercial entities.

The number one hundred companions in Shanghai, many young people do not recognize it as true. It is also true that they can set new sales records during New Year's celebrations. They have consistently ranked first in sales of beauty and high-end women's clothing categories in Shanghai, leaving their peers behind. It is also true.

Today, we can understand the operation logic of department store business to some extent through 800 partners, and understand how the Internet, consumers, and the changing economic environment intertwined to affect modern business changes in the past 30 years.

In 1995, Shanghai's First Eight Hundred Companions New Century Shopping Mall officially opened. Information photos

Is offline cheaper than online? Department stores have unique marketing codes

"Autumn clothing is on the market, with a 20% discount and the lowest price in Shanghai." The store manager of a women's clothing brand located on the third floor of the first eight hundred companions confidently promoted it. A skirt in the store is priced around 2000 yuan, and is positioned as high-end among domestic brands. Seeing the reporter's hesitation, the store manager quickly opened the shopping app and said, "This item is more than 100 cheaper than Taobao."

After the emergence of the Internet, it has become a common sense that real business has been impacted. People generally believe that offline department stores have almost no foothold in the face of websites and apps with a wide variety of products, cheap and transparent prices.

However, in the view of an industry insider in the retail industry, the global department store industry, which has developed for over a century, has a mature marketing system and cost control capabilities. Especially in the mid to high end market, its survival space is not easily squeezed and divided by the internet. "The perseverance of Eight Hundred Companions is not an isolated case."

In the women's wear area of 800 partners, there are international and domestic first-line brands such as Max Mara, Laurel, DVF, ICICLE, which can not only be tried on site, but also have more competitive prices than the Internet platform. "We offer a 10% annual discount at our 800 partner store, and if combined with promotional activities in the mall, we can achieve the lowest price on the entire network," a clothing store clerk told reporters.

Beauty prices are equally advantageous. On the first floor of the shopping mall, there is a well-known overseas skincare brand, which is equivalent to a 77% discount under the mall's discounts. If the care services and gifts exchanged with gifts and points are added, the converted price is already lower than the price of the online platform's 618 festival.

Most other skincare brands can also enjoy a discount of 20% or less. More than one salesperson at the counter told the reporter that they have been working in the Eight Hundred Companions for five or six years. "Because the brand can often become the 'sales champion' in Shanghai at the Ba Bai Ban counter, it has strong personnel stability, rarely resigns or changes positions, and customers are also more loyal."

Can offline be cheaper than the Internet? This seems to go against people's habitual cognition. And how did department stores lower prices? Wang Jia told reporters that the operation of traditional department stores mainly relies on distribution and joint sales models. Simply put, the mall buys goods at a certain discount and then sells them to earn a price difference. If shopping malls follow the strategy of small profits and high sales, it is possible to fully offer profits to consumers.

In addition, online and offline marketing can bring higher purchase conversion rate, which allows brand merchants to enjoy the benefits of the Internet while still taking the offline business as the core business, entering department stores one after another, and willing to develop a series of member points rules to make offline purchases more affordable, and finally formed a win-win situation for stores, brand merchants and consumers.

Ba Bai Ban regards beauty as the "sharp knife category" of the shopping mall, with more than 30 brands supporting the mall for many years, ranking first in the city's beauty category sales.

The skincare counter on the first floor is the storefront representative of Ba Bai Ban.

"Over the past decade, the beauty category in the domestic retail market has maintained an annual growth rate of over 10%. Today, we believe that the positioning of skincare products in customers' minds has shifted from high-end consumer goods in the past to daily consumer goods with fast repurchase speed. We are willing to do more layout in this field," said Wang Jia.

In order to continue consolidating its leading position, this year, Ba Bai Ban plans to further increase the proportion of beauty in a new round of business restructuring, adding nearly 10 new beauty brands, including Tom Ford, Gucci, and Prada.

Shopping centers impacting department stores, consumer contraction brings new uncertainty

Of course, even though department stores have not collapsed in the current trend of the online economy, they are still unable to escape the pressure of new forms of commerce.

Global shopping malls can be roughly divided into two types in terms of form and function: department stores and later emerging shopping centers. In comparison, the former is a retail venue that categorizes various products for sale by floor and location; The latter is a commercial real estate that integrates various formats such as tourism, shopping, leisure, entertainment, etc. The core of the former is commodity trading, profiting through the sharing of revenue from counter sales and the price difference between imports and exports; The core of the latter is booth leasing, which obtains rental income by introducing diverse business formats and soliciting rentals from the outside. The former has a clear target audience and a high consumption conversion rate; The latter has a wide customer base and a significant traffic effect.

In the 1990s, Shanghai successively opened a number of shopping malls, most of which were department stores. The pattern of selling jewelry and cosmetics on the first floor, women's clothing on the second and third floors, men's clothing on the fourth floor, and children's clothing on the fifth floor almost became a fixed trend.

Under the traditional department store format, different categories of goods are sold by region and floor.

Since the 21st century, shopping centers have sprung up like mushrooms after rain, redefining the Shanghai commercial market and gradually changing people's consumption habits. Nowadays, most people go to shopping malls hoping to provide a one-stop solution to diverse consumer needs such as clothing, food, entertainment, culture, and sports.

In 2016, Ba Bai Ban launched its largest renovation in 21 years of operation. The fundamental reason for the transformation is that the strong shopping center has brought challenges. Eight hundred companions have added coffee shops, lounges, flower art galleries, book bars, landscapes, and more than 300 rest areas on the first, third, and ninth floors of the building.

Since then, the previous adjustments of Ba Bai Ban have consciously increased the proportion of catering, especially by embedding a certain number of catering items in each floor as supporting facilities for department stores. This year, the entire 9th floor has been adjusted as a catering area, introducing a group of catering brands suitable for all age groups and consumer groups. At this point, Ba Bai Ban will also present a greater degree of "shopping centerization" in form.

After the renovation, Ba Bai Ban has also added many "shopping center like" recreational spaces.

However, in my genes, I am still the eight hundred companions of department stores. When facing low social consumption expectations, I always have to return to my own business logic and accept challenges.

"This year, it seems like everyone is suddenly not willing to buy things," a skincare salesperson at Baiban told reporters. Old customers are still limited by their consumption habits, but it is difficult to expand new customers. In the shoe and clothing area, a salesperson said helplessly that there have suddenly been many more customers trying on but not buying this year.

According to the China Private Wealth Report by China Merchants Bank, from 2018 to 2021, the number of wealthy individuals with investable assets exceeding 10 million in China increased at an annual rate of approximately 15%. After the decline in investment expectations, there is a clear driving force for high net worth individuals to shift towards the consumer market.

At the same time, statistics show that in 2022, the median per capita disposable income of residents in China was 31370 yuan. In the first half of this year, the per capita disposable income of Chinese residents only slightly increased, with a median of 16393 yuan.

By comparing two sets of data, it is not difficult to explain why in the perception of many people, luxury consumption and mass consumption are still popular, but the mid to high end consumer goods in department stores have cooled down.

"The market changes we are facing today are still uncontrollable, and Ba Bai Ban is likely to experience a certain stage of volatility, but we don't know when this stage will arrive," said Wang Jia.

Annual New Year Celebration, Finding True Consumers

In recent years, after a group of well-established department stores have gradually shrunk or exited the market, there has been a constant voice in the market that the department store industry will eventually be phased out by commercial real estate.

But to overturn this view, it is not difficult to provide evidence: Beijing SKP. Beijing SKP has been at the top of the domestic shopping mall sales chart since 10 years ago. In 2020, it surpassed British century old Harold's Department Store and became the world's top tier high-end department store in terms of sales efficiency. Its strong investment and operation capabilities have enabled it to have over 900 brands since its opening, with a considerable proportion being international first tier luxury brands.

When sales experienced a significant decline in 2012, Beijing SKP once again turned the tide by transforming the traditional department store model into a direct procurement model, establishing its own membership management system, and creating a store celebration gameplay.

"This really takes the business logic of the department store industry to the extreme." Industry insiders point out that department stores with product sales as the core need to return to "people" and firmly grasp their target customers in order to stabilize themselves in the external economic environment. Cultivating member identity and strengthening member stickiness through store celebration activities is a good approach.

This idea coincides with the long-term exploration of Ba Bai Ban. At the beginning of the new century, Ba Bai Ban officially launched the New Year's Eve celebration. Every December 31st thereafter, it is a nationwide carnival that takes place at 800 partners.

Last December 31st, the Eight Hundred Companions New Year celebration. Eight hundred accompanying drawings

From 2011 to 2014, the cross year sales revenue of Ba Bai Ban increased from 480 million yuan to 710 million yuan. By 2021, the cross year promotion sales revenue of Ba Bai Ban had exceeded 800 million yuan.

At the end of 2022, despite the impact of the epidemic on offline consumer activities, the New Year's celebration of Ba Bai Ban still arrived as scheduled and achieved sales of 450 million yuan, exceeding general expectations. On that day, a district leader from Pudong New Area visited and couldn't help but marvel at the bustle, glimpsing Shanghai's confidence in boosting consumption.

"Why consumers are willing to come, and why merchants are willing to participate, all depend on a complex and rigorous mechanism established by the shopping mall. Through the setting of rules such as full gifts and lucky draws, we make this event not only a promotion, but also a joint marketing between different categories of products, maximizing the interests of consumers, members, and merchants." Wang Jia said.

By analyzing daily operations and customer consumption behavior during the annual New Year celebration, Ba Bai Ban's portrait of its own customer group has become increasingly clear: within a 5-kilometer radius, there are families of middle school students, which are currently the core consumer group of Ba Bai Ban. "That's right, with the declining birth rate and increasing aging population, one day our existing customer base may lose purchasing power or change purchasing behavior, which is also beyond our control. What Ba Bai Ban needs to do is to adjust and change ourselves in a timely manner, and strive to meet consumers' new expectations of us." Wang Jia said.