China's consumption landscape is changing fast -- with ecommerce taking more market share, brick and mortar stores trying to stay afloat through embracing new retail, Wei Lynn Tang explores how department stores are holding up, and what lies ahead for the sector.

China's retail market, worth over 36 trillion yuan or 5.7 trillion US dollars last year, is now the world's largest, overtaking that of the United States.

But with the rapid rise of e-commerce platforms in recent years, physical stores have taken a beating. According to think tank Fung Business Intelligence, China's department store sector underwent restructuring in 2016.

Players began leveraging on mobile internet and big data to integrate their online and offline platforms, in what is also known as "New Retail".

As a result, almost 65 percent of surveyed department stores saw positive year-on-year sales growth in 2017. However, margins remained thin at just over 2 percent.

Intime Retail Group, which is now fully-owned by Alibaba Group, is one of the better performing department store operators. They shared their strategy with us.

KAVEN YAN, CHIEF TECHNOLOGY OFFICER INTIME RETAIL GROUP "At the end of the day, we have to go back to the essence of what retail is--to enable customers to buy what they want, at a price that's reasonable. We have sought to maintain price harmonization between our brick-and-mortar stores as well as our online offerings via Tmall. We have also digitized our supply chain in the past year--from collection of its members' data, promotional efforts and payment transactions."

Intime Retail has also sought to enhance its customer experience. You can find interactive facilities in its malls from smart nursing rooms to smart toilets.

But still, it acknowledges the road ahead may not be that easy.

KAVEN YAN, CHIEF TECHNOLOGY OFFICER INTIME RETAIL GROUP "Yintai is transitioning from being a commercial real estate player to a retail player, which means we will focus more on the products that we carry and their prices. As e-commerce finds its way into the entire retail ecosystem, the biggest challenge lies in organizational and human resource upgrading, how can we quickly train and develop the right people to embrace this new organizational form."

WEI LYNN TANG BEIJING After years of lackluster sales and declining profits, analysts say China's department sector saw a rebound in 2017, with some signs of stable recovery. But while some players have started to benefit from integrating their online and offline sales channels, some other department store operators are still struggling.

Liu Chunsheng, an associate professor at the Central University of Finance and Economics, says some department store players have seen their market share dwindle, or even disappear, because they refuse to adapt to new changes in the retail industry.

LIU CHUNSHENG, ASSOCIATE PROFESSOR CENTRAL UNIVERSITY OF FINANCE AND ECONOMICS "Consumption upgrade aside, department stores are not just for shopping anymore. It has to be a one-stop comprehensive center where people can eat, have fun, and even educate their children--be it to learn piano, art, or even sports. Also, players that use big data to better understand their targeted customers have seen good results."

One thing is for sure: department stores and shopping malls are here to stay in China. And industry players believe there will be more market consolidation going forward, with sub-par operators and brands being eliminated, as consumers become more savvy. As they say, you gotta keep up, or alas, get kicked out. WLT, CGTN, Beijing.