Consumer spending rises while department stores fall behind: traditional department stores at a crossroads in their 30-year model transformation

Source: China News Service

China News Service Hohhot, March 17 — Title: Consumer Spending Rises, Department Stores Fall Behind: Traditional Department Store Model Faces a Turning Point After 30 Years

Reporter Liu Wenhui

On March 17, Hohhot resident Zhang Jing and her friend planned a shopping trip on Zhongshan Road. Their destination was Maoye Shopping Center, but not for shopping—just to browse for deals. “I heard the mall is going through some adjustments, and many items are on clearance sale,” she said.

The day before, the National Bureau of Statistics released the latest data showing that from January to February 2026, retail sales of department stores above designated size increased by 1.0% year-on-year nationwide, while convenience stores grew by 6.4%, and supermarkets by 4.9%. The growth rate of department stores lagged significantly behind other major retail formats. For the full year 2025, retail sales of department stores grew by only 0.1%, with total social consumer retail goods reaching 50.12 trillion yuan, up 3.7%. While consumer spending is increasing, the share gained by department stores remains limited. The Development Index of Large Retail Enterprises compiled by the China Department Store Business Association shows that in the first quarter of 2025, the comprehensive index fell by 8.5% year-on-year, indicating ongoing pressure on the department store retail industry.

Photo: Inside Maoye Shopping Center, some stores have suspended operations. Photo by Liu Wenhui, China News Service

Money No Longer Spent in Old Malls

Vitorio Department Store, located in downtown Hohhot, opened in 2003, with a construction area of over 60,000 square meters, making it the largest department store in Inner Mongolia at the time. Its sales reached 100 million yuan within six months of opening, rising to 590 million yuan by 2006. In 2016, listed company Maoye Commercial (600828.SH) acquired a 70% stake in Inner Mongolia Vitorio Group for 1.565 billion yuan. For many years afterward, Vitorio and Maoye systems held a significant position in local department store retail.

However, in recent years, the commercial landscape in Hohhot, Inner Mongolia, has changed markedly, with many new commercial complexes entering the market.

In July 2025, Hohhot’s Vientiane City opened, covering 240,000 square meters, introducing nearly 300 brands, with almost 50% being first stores in the local area. During the 14th Five-Year Plan period, nearly 400 first stores and flagship stores of brands settled in Hohhot, accounting for over 60% of Inner Mongolia’s total. In the first ten months of 2025, Hohhot’s total retail sales of consumer goods increased by 7.1% year-on-year, outpacing the national growth rate by 2.8 percentage points. Money is being spent, just not in the old places.

Photo: Maoye Shopping Center, the storefront still bears the Vitorio Shopping Center name. Photo by Liu Wenhui, China News Service

30 Years of “Subleasing”

Behind shifting consumer patterns is a business model that has operated for 30 years. Since the 1990s, the domestic department store industry generally adopted a “brand joint operation” model—brand owners control procurement, sales, and inventory, while malls collect a commission, without controlling products or pricing. A report released by the China Department Store Business Association in April 2025 states that among the challenges faced by the department store retail industry are homogenized competition making differentiation difficult, e-commerce siphoning customers, and high operating costs with low profits. As shopping centers build differentiation through self-operated brands and e-commerce improves efficiency via supply chains, the “sublessor” model relying on collecting commissions has little room to maneuver.

In Hohhot, an insider from the Maoye system revealed that Maoye Shopping Center’s sales have been declining year after year. There were plans to convert the 5th and 6th floors into dining areas to boost foot traffic, but tenant recruitment has been slow.

Photo: The 5th and 6th floors of Maoye Shopping Center have been closed off. Photo by Liu Wenhui, China News Service

Shopping Malls Starting “Surgery”

Some pioneers have already seen results. In Shanghai, the long-established Huaguan Department Store on Nanjing East Road has divested from traditional retail and transformed into China’s first “second-dimensional culture” vertical commercial complex, “Bailian ZX Chuangqu.” According to the Shanghai State-owned Assets Supervision and Administration Commission, before the transformation, the average daily foot traffic was only 6,000 people; after, it reached 20,000 to 30,000 on weekdays. In 2023, annual sales reached 300 million yuan, with 9.5 million visitors.

In Beijing, the 30-year-old Shuang’an Department Store began a phased renovation in September 2024, transforming from a traditional department store into a community lifestyle experience center. According to the China Department Store Business Association, Shuang’an’s positioning serves the surrounding 5-kilometer community, creating innovative markets and community activity centers.

In Chongqing, Chongqing Department Store expanded “fresh + discount” super markets within communities in 2024, and set up boutique lifestyle stores in commercial circles. According to its publicly available information, store sales have achieved double-digit growth year-on-year after the renovation, and plans are underway to renovate 38 more stores in 2025.

Rebranding and Rejuvenation

By the end of 2024, the Ministry of Commerce and six other departments issued the “Retail Industry Innovation and Upgrading Implementation Plan,” which outlined directions such as integrated, curated, themed, and community-oriented transformations for department stores. The plan specifies that each year, a number of pilot cities will be selected to complete renovations of existing commercial facilities.

However, the China Department Store Business Association’s report points out that some malls focus only on “superficial” changes—spending heavily on renovating atriums and adding large screens, while neglecting brand and operational improvements. “Appearance is superficial; operations are core. It’s better to improve both inside and out than just the surface,” it states.

Agu Damu, a teacher at the School of Business at Inner Mongolia Minzu University, who has long studied industrial economics, believes: “Today’s consumers pay more attention to experience and social attributes. The future of traditional department stores may focus more on specialty consumption, cultural experiences, and niche customer operations. Without a differentiated positioning, it will be difficult to attract foot traffic amid fierce competition.”

Leaving Maoye Shopping Center, Zhang Jing carried two discounted jackets. She noticed fewer counters in the old mall. “I hope these old malls can find new life in some other way. After all, many people’s memories are here,” she said. (End)