Summary in One Sentence
In 2026, despite an overall domestic consumption growth rate of just 1.2%, the offline retail industry did not experience a widespread decline. Instead, there was a stark differentiation: convenience stores and supermarkets, which focus on essential and frequently purchased items, continued to thrive, while traditional department stores and brands offering non-essential products saw a steady decline. Of the 81 stores that closed in August, nearly half did so not due to financial insolvency but as part of a strategic reorganization by leading brands to improve efficiency and eliminate less competitive players. The traditional model of offline retailing, which relied on expanding store networks, spending heavily on operations, and leveraging consumer traffic, has become completely ineffective.
---
Detailed Analysis
1. Understanding the Context: People Are Still Spending, But More Pragmatically
The consumption growth rate of 1.2% might suggest that people are avoiding spending, but the reality is that their spending habits have changed. Nowadays, when people go out to buy something, they either look for items that can be used immediately (e.g., buying breakfast or emergency supplies from convenience stores, even if they are slightly more expensive) or seek value for their money (e.g., purchasing fresh and prepared food from supermarkets). As a result, the sales of convenience stores increased by 6.1%, and those of supermarkets by 3.8%. In contrast, the trend of impulsive, unnecessary purchases has diminished—fewer people try on clothes in department stores or pay a premium for new products in brand-exclusive stores. This shift has widened the gap between different types of retail outlets.
2. Many Store Closures Are Not a Failure, but Part of a Strategic Upgrade
At least one-third of the closures were not permanent. Brands are reorganizing their operations to improve efficiency and profitability. For example, large retailers like RT-Mart and Hema are either reconfiguring their stores to focus on more profitable items or reducing their footprint to save on rent and generate additional income by leasing out the extra space to other businesses. Brands like Uniqlo and LV are closing less profitable stores in suburban or less accessible areas and investing in more profitable flagship locations in central business districts. These adjustments have significantly increased their profitability.
3. Those Failing Are Those Used to Relying on Traditional Methods
The stores that were permanently closed lacked core competitiveness and relied on outdated strategies, such as being conveniently located or having unique features (like art-like interiors). Many local small supermarkets, for instance, survived for decades by being close to residents. However, with the rise of online shopping and delivery services, their advantages no longer matter. Similarly, internet-famous bookstores that relied on visual appeal for traffic and government subsidies are no longer viable due to declining mall footfall. Even luxury brands like LVMH are closing less profitable stores to focus on more profitable locations.
4. Restaurants Are Also Realigning Their Strategies
Twenty-eight restaurants closed this year, and many of these closures were not due to poor business performance but strategic decisions by brands to exit certain markets. For example, some well-known chains have decided to exit entire cities. This shift reflects a new approach where brands prioritize profitability over widespread presence.
5. The New Rule for Offline Retail
The trend of store closures highlights a new reality: no store can be maintained at a loss. Brands no longer have the luxury of supporting less profitable stores for years. Whether a store has been open for a decade or is a globally renowned flagship, all must generate enough revenue to cover expenses. This means that all stores must now be profitable, and those that cannot do so are eliminated.
In summary, the traditional model of offline retailing, which relied on expansion and cost-intensive operations, is no longer sustainable. Brands are now focusing on more efficient and profitable strategies to adapt to the changing consumer landscape.