As a traditional retailer, Parkson Retail Group recorded an 8-percent drop in same-store sales in 2015. The company has decided to go through a "transformation" to adapt itself to the new environment, its chief executive says. Asia News Photo

Parkson Retail Group - a Beijing-based department store chain run by Malaysia's Lion Group - is to diversify its retail business while controlling costs to meet market demand and deal with the challenges ahead, according to Chief Executive Shaun Chong Sui-hiong.

The mainland's retail industry, particularly department stores, is very challenging, he told China Daily, as consumers now spend less time shopping because they have other ways to entertain themselves and relax, while e-commerce shopping is gaining the upper hand.

For the year ended Dec 31, 2015, Parkson recorded a loss attributable to owners of the company of 186.2 million yuan ($28.5 million), compared with a net profit of 235 million yuan a year ago. The group's revenue last year fell 6.4 percent to 4.2 billion yuan, while same-store sales were down 8 percent during the year.

Parkson's share price dropped 2.08 percent to close at HK$0.94 apiece on Tuesday, while the Hang Seng Index decreased 0.95 percent.

Chong said Parkson has decided to go through a "transformation" to adapt itself to the new environment.

The company has teamed up with South Korea's E-Land Group in a joint venture, in which Parkson holds a 50-percent stake. The venture had transformed one of Parkson's department stores in Shanghai into a South Korean city lifestyle mall - Parkson Newcore Citymall - late last year.

The mall has been doing very well since its opening, as the products sold in the store are cheaper, Chong said, adding that sales have more than doubled so far.

Parkson also intends to turn another two of its traditional department stores in first- or second-tier mainland cities into a South Korean city lifestyle mall this year.

If everything turns out well, the group will transform itself, Chong said, leading to more of its department stores switching to similar stylish malls.

Meanwhile, Parkson will open two to three standalone supermarkets in 2016, cashing on consumers' preference for shopping at nearby supermarkets for food and daily necessities.

Chong said Parkson is also promoting its online shopping platform established five years ago.

"I notice that customers like to shop for cosmetics through our online platform. As a reputable department-store operator, people have more confidence with us when they shop for cosmetics products online."

According to Chong, the major advantage of e-commerce is that the products will be shipped from the group's department stores, without the need for separate warehouses to store them. Online shopping will also encourage consumers to visit physical stores, and this will help boost sales at the stores.

Chief Financial Officer Au Chen-sum said Parkson still owns 59 department stores on the mainland after having closed three of them last year - in Tianjin, Baoding, Hebei province and Zhengzhou, Henan province.

He said the group will add two new stores on the mainland this year while continuing to evaluate their performance.

Parkson will control costs in all aspects. Last year, the group's capital expenditure reached 300 million yuan and, this year, it's expected to be cut to 200 million yuan.

sophiehe@chinadailyhk.com

(HK Edition 02/24/2016 page9)