This article first appeared in The Edge Malaysia Weekly on May 1, 2023 - May 7, 2023

The Parkson group’s exit from the Vietnam market may not come as a surprise to many, judging by the challenging outlook faced by the department store retailing format everywhere.

Parkson Holdings Bhd’s Singapore-listed subsidiary Parkson Retail Asia Ltd announced last Thursday that business in Southeast Asia’s fastest-growing economy was no longer commercially feasible. As such, an application would be filed for the commencement of voluntary bankruptcy proceedings.

Following the exit, Parkson is left with the Malaysia and China markets, which recorded RM203.19 million and RM27.06 million in profit in 2022. However, the group remained in the red with a net loss of RM119.95 million during the year owing to high operating expenses of RM3.03 billion.

At the height of the pandemic in 2020, iconic department store Robinsons’ last four outlets in Malaysia and Singapore were closed.

Meanwhile, some persevered. For example, Japan’s Isetan refurbished its Lot 10 store a few years ago with a brand new concept, creating a niche market segment to stay afloat.

To be sure, innovation and new business models are much needed for fast-changing consumer-related businesses, especially when technology is making online shopping much easier and cheaper. Department stores have also taken a hit from the popularity of fast-fashion and cosmetics outlets.

Notably, department stores with supermarkets remain popular.

For Parkson, the top priority is to outline a turnaround strategy for its Malaysia and China operations. As at end-December 2022, it was operating 38 and 42 stores in these two markets respectively.

With the business case for department stores eroded by more innovative retailing concepts, changing lifestyles and demographics, as well as technology, Parkson must evolve in order to survive.

Given the huge operating expenses incurred, it needs to shut down non-performing stores and beef up its online marketing channels to regain market share.

The question is whether these will be enough for it to stay relevant.

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