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Asia300

China retailers turn to internet to boost customers

Survival at stake as department stores, shopping malls lose ground to online rivals

At New World Department Store China's outlet in Shanghai, customers can use their smartphone to read the 2-D barcode to see how much an item costs.

HONG KONG -- With their presence increasingly eroded by online rivals, China's major brick-and-mortar retailers are increasingly adopting internet technologies to bolster operations.

In a symbolic move at a Hong Kong results announcement event on March 23, Intime Retail (Group) CEO Chen Xiaodong said the department operator will go private and seek a drastic change in its business model by enlisting Alibaba Group Holding's support.

China's department store operator Intime has made a bid for survival by enlisting support from Alibaba.

The company is in the process of introducing an inventory control system by Alibaba, which is now its parent. It also hopes to reduce costs by using the direct purchase channels Alibaba has with manufacturers, cutting out the middleman and enabling retail prices on a par with online rivals.

Intime is just one of many Chinese physical retailers whose operations have continued to slump as customers continue to migrate to online rivals. Now these players are turning to online companies' expertise to boost operational efficiency and lure customers.

The company's malls will be on Alibaba's point-of-sale network to boost efficiency of its operations. Information from this system will be used to strategically plan outlet locations and merchandise lineups to address customer needs in a more efficient manner.

Intime operates about 50 malls mainly in Zhejiang Province, but earnings have continued to slump over the past few years. This eventually prompted the management to join the Alibaba Group to maximize use of online retail's advantages.

As the company expects the new initiative to take some time, it has chosen to go private while seeking to carve out a new business model, according to Chen.

New World Department Store China, which operates about 40 outlets, last year introduced two women's fashion brands that are popular on its online retail site, at its Beijing and Shanghai outlets. Instead of price tags, they have a 2-D barcode, which, when read through a smartphone camera, displays the same price at which they are sold online. This system is intended as a tactic to lead online shoppers to physical outlets.

Dalian Wanda Group, which operates Wanda Plaza shopping malls, last month struck a deal with China UnionPay to introduce the latter's online payment service, which will be available for use at about 190 outlets, including shopping malls.

Dalian Wanda is also creating a system in which the company sends out sale information tailored to individual customers' interests and tastes, analyzed through data on customer behavior gathered from the payment system.

The Chinese government is encouraging physical retailers, many of which are forced to close outlets as online rivals nibble away at their market share, to take advantage of online resources as part of "Internet Plus," a program promoting the use of the internet to boost the growth of various industries.

But the future of retailers' online attempts remains uncertain. Dalian Wanda Chairman Wang Jianlin noted that no company has ever succeeded in integrating online and physical operations.

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