Matthew Crabbe
Matthew is Mintel Trends Regional Director, Asia-Pacific. He and his team provide insights and analysis on the latest market developments and consumer trends across the region.

As predicted, in Mintel’s new report Department Stores China 2014, private label is being increasingly explored by retailers both to forge an improved bottom line, and help brand differentiation amidst a crowded and competitive market.

The research reveals that there is a need for department stores in China to create a stand-out identity, which reflects the lifestyles that consumers are aspiring to, offering an alluring environment both for shopping and for leisure, while increasing profitability by developing private label.

And leading department store chain New World Department Stores (NWDS) is already ticking all the right boxes. The retailer plans to open LOL (“Love.Original.Life”) private label brand stores this year and next, having already launched the brand in existing stores and Shanghai K11 Art Mall.

Of the 3,000 people surveyed for Mintel’s report, over half (51%) said they sought from department stores products not commonly available or which are new to the market. This shows that having innovative and new products helps keep these outlets attractive to shoppers.

One of the biggest differences between department stores and shopping malls found was that malls appear more favoured as places to visit for entertainment and dining, with 46% and 45% of respondents respectively saying they had visited shopping malls for these reasons, much higher than the case for department stores.

This is an area where department stores can help to improve their customer footfall by becoming more like malls, as destinations where people go for entertainment and leisure as well as only shopping. Of NWDS’ new store in Xi’an (opened in January) 20% of operating area is allocated to non-retail facilities. These include catering brands Xiao Nan Guo and Kungfu Catering, both new and exciting entrants into the Xi’an market.

Mintel also found over a quarter (26%) of survey respondents wanted more events to add to the leisure and entertainment experience when department stores. Since opening in Xi’an, NDWS has held events targeting families (with festival activities); youth consumers (with a high-heel shoe painting contest and speed dating on Single’s Day) and VIP consumers (with VIP privilege days, and exclusive sales).

But most interesting is NWDS’ introduction of private label LOL stores selling products ranging from beauty products to arts and craft, aimed at expressing the idea of quality of life. So far, 3 such LOL stores have opened, but the retailer plans to expand the LOL concept to 20% of its stores by the end of 2014, and 50% by end of 2015. They expect the concept will generate RMB 100 million in sales revenue this year alone.

The upside for the retailer is not just a distinct image, which stands out from the offerings of their competitors, but also means it has no inventory pressure from third party suppliers; higher gross sales margins on its own products; and greater control over product and brand mix.