What: Traditional Chinese department stores are reinventing themselves through AI integration, experiential retail, and new revenue models amid changing consumer preferences.

Why it is important: This transformation demonstrates how legacy retail institutions can successfully adapt to digital-first consumer behaviours while maintaining physical relevance.

China's department store sector is experiencing a fundamental transformation, driven by changing consumer preferences and digital innovation. Traditional retailers are moving away from conventional layouts to embrace experience-first models, with major cities now dedicating significant space to entertainment and cultural zones. This shift is supported by sophisticated digital integration, including AI-powered retail solutions and omnichannel strategies that bridge online and offline experiences.

The transformation extends beyond physical spaces to encompass new revenue structures, combining traditional rental income with sales commissions and brand collaborations. Department stores are increasingly acting as service platforms rather than mere landlords, developing private labels and fostering brand partnerships to enhance profitability and differentiation.

This evolution is particularly evident in their approach to younger consumers, with retailers focusing on categories that resonate with Gen Z values and aesthetics. The integration of art exhibitions, wellness programmes, and community initiatives reflects a deeper understanding of modern consumers' desire for authentic experiences and meaningful connections.

IADS Notes: The transformation of China's department stores is validated by significant developments throughout 2024-2025. In June 2024, Intime Department Store demonstrated the success of digital integration by achieving a 15% increase in counter sales through AI implementation. This technological advancement coincided with a broader shift toward experiential retail, as evidenced by April 2024 data showing 16% of retail space now dedicated to entertainment zones. The sector's evolution was further highlighted by December 2024's strategic sale of Intime to Youngor for $1.02 billion, while January 2025 saw a 180% growth in "slow life" related content, reflecting changing consumer preferences. These changes occur against the backdrop of substantial market growth, with January 2024 projections indicating retail sales of ¥44.2 trillion.

China’s Department Stores Report 2024-2025