But now, they have to contend with small boutique stores and single-brand outlets for market dominance.

One victim of the change in taste and shopping habit is Parkson Holdings Bhd. Last month, its Vietnam arm filed for bankruptcy, having closed its last outlet there.

Back home, it has been mired in debt for five years already. For the financial year ended Dec 31, 2022, the group posted a net loss of RM119 million.

Trouble began before the Covid-19 pandemic. In the financial year ended June 30, 2019, it lost RM129 million. The financial year end was revised in 2021 to end on Dec 31.

But Parkson is not the only retail giant affected by this change.

Sunway REIT recently announced it would not extend its lease with Sunway Pyramid’s anchor tenant Aeon that expires in September. The space will be converted into smaller lots for speciality stores that will fetch higher rentals for Sunway.

What lies ahead for department stores?

An evolving retail landscape

“As early entrants in the retail space, Parkson and others like it set up shop in major cities where space was limited and land prices and rentals were high,” Fred Wu, a partner and retail expert at GE Consult Asia Sdn Bhd, told FMT Business.

“However, the emergence of suburban shopping malls and online retail took away the appeal of department stores,” Wu said.

Compounding the problem were Covid-19 and changing consumer tastes. They have dealt a severe blow on department store operators, but these giants are fighting back.

Many have invested in new designs and layout while retailers have added new attractions. For instance, bookstores now double up as a reading space for customers by adding a coffee bar.

These changes have appealed to shoppers.

Wu said landlords have also discovered that they could make more in rentals by having a collection of smaller tenants over one big department store.

Department stores have also responded to the change. Some, such as Aeon, have morphed into commercial complexes with popular tenants, Wu said.

“This shows that operators are gradually shifting (their) focus away from the large retail chain concept to shopping malls to survive,” he added.

However, the last word on the traditional department store has yet to be written.

Yuen May Chee, director of property management at Knight Frank, pointed out that they continue to be anchor tenants at many malls, taking up substantial retail space.

“The original idea was to offer everything under one roof, and that is (still) their specialty,” she said.

Ultimately, she said, big department stores and small boutique shops alike have to be updated and refreshed to attract a new generation of customers.

The end of an era for Parkson?

Parkson, an early entrant in the Malaysian retail market, has downsized from 102 stores to about 80 since 2020.

The group recorded losses before tax of RM30.6 million in 2021 and another RM161.5 million the following year. In that period, revenue shrank by RM4.9 billion and RM2.9 billion respectively.

Wu attributed the decline to a drop in the demand for premium items post-pandemic and the pick-up in e-commerce.

He also expressed concern that the introduction of Parkson Online, its e-commerce option, could have a negative impact on its in-store sales.

However, Yuen is of the view that the e-commerce channel could contribute positively to the growth of large retail chains.

“Some large shopping malls have begun to use e-commerce channels to drive customers to their brick-and-mortar stores,” she added.