Flourishing Service Sector: response to a big consumer base
Compared to that of other provinces, Henan’s service sector is rather small and underdeveloped. However, the quickening of urbanization in Zhengzhou metropolitan area has created affluent consumer base, fueling the finance and commerce sector. A prominent example is the department store industry.
Department store industry in Henan had already achieved prosperity in the 1980s to 1990s, benefiting from the increasing demand of ordinary people after the reform and open- up policy. Since 2000, it has regained its vitality and become the most active economic sectors in Henan. Large international department stores like Walmart, Carrefour and domestic rising power like Dennis entered the commercial district in Zhengzhou and other major cities, competing with the deeply-rooted locals.
Along with the increase in numbers, the distribution of these department stores have become less concentrated. Take my home (located in a pretty prosperous district in Mideast Zhengzhou) as a base point. There are two big department stores within 200 meters and 5 more within 2000 meters, making the neighborhood one of the most convenient communities in Zhengzhou and even driving up the housing price in the area.
Since 2005, the competition in department store industry has kicked off and existing department stores have been coming up with ideas to prevent themselves from being phased out. Big departments like Dennis, Zheng Dao Hua Yuan, Dashanghai City have become more professional by integrating fast food restaurants, beauty parlors, cosmetics shops, bookstores, Apple stores, arcades and movie theaters to cater to different demands of visitors. As for small departments, mergers & acquisitions have happened all around. In 2009, Dashang Group bought out local department store Zijingshan. Since its entry in 2006, Dashang Group has developed into 11 chains stores and is still waiting for the next target to expand its empire. According to the CEO Huangfu Lizhi, the group plans to become a real international department store by opening up high-end shopping center. Besides, the group will proceed with its expansion to the outlying region in the Zhengzhou metropolitan area.
The plan to expand to second-tier cities in Henan of Dashang Group may become the trend for department store industry. However, Zhengzhou city is still far from fully developed and there is still much space of profits left for newcomers, especially when a new CBD (central business district, situated between Zhengzhou city and Kaifeng city) is under construction in East Zhengzhou. It is likely that in the following 10 years, CBD will witness department stores springing up quickly and the focus of the whole industry will shift eastwards at the same time, booming Kaifeng city and other surrounding cities and towns in the long run.