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Business

E-tailers, specialists clobber brick-and-mortar generalists

Not even weekends bring many shoppers to this department store in Dalian, China.

DALIAN, China -- China's slowing economy is changing the shape of the country's retail industry, with traditional brick-and-mortar shops increasingly losing out to their online counterparts. 

     According to the National Bureau of Statistics of China, retail sales of social consumer goods between January and May 2015 totaled 11.7 trillion yuan ($1,891 billion), up 10.4% on the year. Though the increase was slower than the 12% expansion marked in 2014, sales continue to log double-digit growth.

     Of the total, online sales accounted for 11%, or 1.3 trillion yuan. And their growth rate -- a blistering 40% -- far outpaced the figure for all retail sales.

     Sales at physical stores are generally stagnant. A survey by the China Chain Store & Franchise Association shows that total sales at 100 major domestic retailers and restaurants, excluding online retailers, in 2014 grew a record low 5.1% on the year. And more of the same is expected this year.

Niche advantage

Big gaps are also developing among brick-and-mortar players. Highly specialized retailers are far outperforming their generalist counterparts, for example. Swedish furniture retailer IKEA saw a 24.4% increase in sales in 2014 thanks largely to the popularity of its designs among younger shoppers.

     Sales at Japanese convenience store chain FamilyMart, which operates in China with a local partner, climbed 13.5% on the year. Fueling the growth was a spate of new store openings, including one in Beijing.

     Companies affiliated with A.S. Watson, the Hong Kong-based operator of the Watsons drugstore chain, posted a 14% increase in sales.

     Also doing brisk business are shopping centers with leisure facilities and restaurants. Japanese retail group Aeon and major local commercial developer Dalian Wanda Group both recorded big sales jumps in 2014. Their original products and focus on excellent service proved strong draws for families and trend-conscious young people.

     General retailers, in contrast, have little to celebrate. Department store operators Golden Eagle International Group and Beijing Wangfujing Department Store (Group) reported sales drops of 8.2% and 6.0%, respectively, in 2014.

     General merchandise stores have responded by closing unprofitable stores. Sales at Carrefour of France were down 2.1%, and those at Walmart of the U.S. and Ito-Yokado of Japan were flat.

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