Retail properties

Virtual shopping malls a further threat to mainland China’s dwindling department stores

Mainland China is the largest e-commerce market in the world

PUBLISHED : Tuesday, 03 May, 2016, 2:00pm
UPDATED : Wednesday, 04 May, 2016, 10:43am

Shopping in virtual reality could be the next big thing in mainland China, with industry experts saying department stores and traditional retail brands need to evolve before the ongoing e-commerce wave wipes them out.

Virtual reality allows viewers looking through a goggle-like headset plugged into a mobile device or a computer to be transported and completely immersed in a three-dimensional environment, that could be a purely digital creation or based on reality.

British virtual reality content provider Infinity is road testing its virtual shopping concept, in which people can purchase items while watching a movie or video in “shopping mode” in the comfort of their own homes while wearing a virtual reality headset.

If you see a movie [through the virtual reality headset], and you like the lady’s dress, then you can just click on it and purchase it
Johnny Hon, Gate Ventures

“For example if you see a movie [through the virtual reality headset], and you like the lady’s dress, then you can just click on it and purchase it,” said Johnny Hon Sei-hoe, executive chairman at Gate Ventures, an investment company which holds a 61 per cent stake in Infinity.

Infinity also produces content for Oculus, a virtual reality technology company acquired by Facebook for US$2 billion.

“We believe that’s a big thing going forward. In the future a lot of the media content will be driven by e-commerce companies or retail brands,” he said, adding that virtual shopping malls could be ready as soon as the end of this year.

Mainland China is the largest e-commerce market in the world, and Hon said virtual shopping, an extension of online shopping but in a virtual reality format, could take off there.

The rise of e-commerce in China has led to dwindling sales for department stores and traditional retail brands, with some forced to close.

“Department stores originally were designed as a one-stop shopping destination ... but really, over the past five years, they’ve lost out to shopping centres and the past three years, lost out to e-commerce,” said James Hawkey, head of retail at Jones Lang LaSalle in China.

At least 449 mainland department stores have pulled down the shutters since 2012, according to Linkshop, a mainland website that tracks the retail industry.

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Dalian Wanda, one of China’s biggest private property developers, announced last year that it would close around 40 of its 99 department stores due to the slump in the retail business.

“Traditional department stores will continue to suffer,” said Hawkey, who added that major mainland department stores reported declining sales last year.

Hon said retail brands or stores in Hong Kong that failed to develop a proper e-commerce strategy would also lose out.

“Hong Kong lags behind on [innovation and e-commerce]. We see it as competitive disadvantage if Hong Kong is stuck with this traditional [mentality relying on] tourists buying stuff,” he said.

Hon said that the current downturn in retail sales, which Hong Kong’s richest man Li Ka-shing called one of the worst in decades, was a result of the city focusing too much on property and too little on innovation.

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“It’s a by-product of property prices rising too much over the past 20 years, so everybody just focused on buying property as their main investment,” he said.

While Hon and Hawkey both agree that virtual reality shopping is not likely to deter people from going to shopping malls, they said mall owners would have to pick tenants that had developed key online-to-offline strategies.

Mainland department stores would have to evolve to differentiate themselves, Hawkey added, either by developing strong private labels like Marks & Spencer and Debenhams in Britain, or becoming more like shopping centres, which focus more on a social experience.

“People are social animals, so I think the future for shopping centres is that they need to become amazing places to spend your time,” Hawkey said. “A virtual shopping centre doesn’t fulfil social needs. It doesn’t provide that physical level of experience.”