To stay competitive, department stores are shifting their focus to the mid- and high-end market segments, and increasing their service offerings and store sizes, according to Gao.

Alfred Zhou, general manager of GfK China, a market research agency, said department stores can thrive by offering a better shopping experience.

With convenience stores featuring handy services, and online shops advancing lower prices, department stores must excel in "on-site" feelings and "have it right now" values, said Zhou.

"If department stores remain as they are today, they may have a very low chance of surviving the huge impact of other sales channels," he said.

"Changes must be made. Department stores need to have themes, move to become high-end and luxurious shopping spaces, and provide something that can't be found anywhere else, something people can't achieve by clicking a mouse or touching the screen of a smartphone," Zhou added.

Zhang Chunjie, a 32-year-old Shanghai resident, said department stores with prestigious locations and high service qualities are still attractive.

"Shopping online may help people save money, but some transactions can only be completed in brick-and-mortar stores, and preferably a nice department store. You can have a late lunch in a restaurant, get your hair done, buy some books and do grocery shopping within the same afternoon in the same department store, but you cannot do all these by shopping online," said Zhang.