A security guard patrols outside the entrance of a Parkson department store in Shanghai. Photo: IC
Malaysia-based Parkson Retail Group Limited on Monday closed its only department store in Ji'nan, capital of East China's Shandong Province, after two years of operation.
The move marks the fifth shop closure since 2012 as part of the retailer's efforts to combat shrinking profitability.
The store was closed due to high operating costs, a staff member with the Ji'nan store, who declined to give her name, told the Global Times Monday.
She said consumers who have shopping cards issued by the store could be fully refunded before June 20.
For the more than 100 employees in the Ji'nan store, Parkson will offer them job opportunities within the group, and those who do not like the group's arrangement will be compensated in accordance with China's Labor Law, according to her.
Parkson is not the only foreign retailer to exit the Ji'nan market. Japanese retailer Isetan, which had a department store opposite to Parkson's location, also shut down in September 2007 after two years' operation.
Consumers in Ji'nan commented Monday on Weibo that the competition is fierce in the local retail market. There are several other department stores and shopping malls near Parkson, and the Malaysian retailer lacked unique or attractive products.
Parkson's headquarters in Beijing was unavailable to comment on Monday. But the group's chairman said "immediate and necessary actions will be taken against the underperforming stores to avoid further losses" in its latest annual financial report released in February.
The Hong Kong-listed group posted a 57.6 percent year-on-year slump in its net profit to 372.6 million yuan ($59.6 million) in 2013, due to contraction of merchandise gross margins, temporary closure of the Shanghai flagship store and higher start-up losses of the new stores, according to the financial report.
"While many foreign firms face difficulties in localization in China, that is not a problem for Parkson as the group has been operating in the country for two decades," Liu Hui, a consultant at Beijing-based Uni-retail Business and Management Company, told the Global Times Monday.
According to him, department stores in China have been experiencing a difficult period, as the country's mid-level to high-end consumption has been shrinking, and meanwhile department stores are facing increasing challenges from e-commerce retailers, shopping malls and outlets.
Parkson also highlighted the challenging environment in the financial report, including China's decelerating retail sales growth, increasingly sophisticated Chinese consumers and the austerity drive promoted by the central government.
Parkson closed two stores in Shanghai and Guiyang, capital of Southwest China's Guizhou Province in 2012. Last year, it shut down another store in Guiyang and its only store in Shijiazhuang, capital of North China's Hebei Province, Beijing Business Today reported Monday. After the closure of the Ji'nan store, it currently has 57 stores in 36 mainland cities.
British retailer Marks & Spencer was also reported in April as planning to close several of its Chinese stores. The company responded later to the Global Times that it will continue to "treasure" China as one of its top international markets and relocate a couple of its existing stores in first- and second-tier cities.
The Chinese market is still attractive to foreign retailers that eye long-term growth.
Parkson, which targets the middle to middle-upper market, expects to benefit from the emergence of China's middle class in the next decade, the chairman said in the financial report.
