Four obstacles slowing digitalization of China's department stores

Companies need employees that can engage and capture young consumer groups.

Despite the accelerated digitalization and development of online business across China’s department store industry over the past year, the level of digitalization of the industry as a whole remains in its infancy, according to a report from Fung Business Intelligence.

The report noted numerous obstacles to digitalization. First, the industry is currently facing organisational limitations, as the determination to digitize at the management level is a make-or-break factor.

“If the management lacks sufficient knowledge and support, digitalization efforts and success will be limited. Furthermore, the digital transformation process often affects certain individuals with vested interests within the business, making them likely to hinder the process,” the report stated.

Second, there are too many existing systems within a business amongst department stores, which creates significant difficulties in terms of time and economic costs when merging different systems.

Third, there is difficulty in measuring outcomes, as the effects of digitalization may not be immediately reflected in sales and performance, but rather through the improvement of soft criteria such as better shopping experiences and closer connections with consumers.

“Although these improvements will be reflected in the data over time, decision-makers are often concerned with the lack of tangible and measurable outcomes,” Fung Business Intelligence said.

Lastly, the industry also suffers from a lack of talent. As consumption trends are increasingly shaped by young people, companies need employees that understand young consumer groups and can utilize modern marketing strategies to connect with them, the report noted.

In particular, these employees must stay up-to-date on new technologies and implementation methods, in order to efficiently meet operational requirements. Yet the industry is lacking in such talent, and the current organizational structures—including performance appraisal and reward systems—of many businesses are ill-suited for facilitating digital transformation.