Thou­sands of shop­ping malls are pop­ping up all over China, but many have been left near empty as ex­perts say con­sumers now want qual­ity over quan­tity

China Daily (Canada) - - SHANGHAI -

more than 60 per­cent of the shop­ping projects un­der­way, based on re­search by real es­tate con­sul­tancy CBRE. Bri­tish prop­erty con­sul­tant Sav­ills had also re­vealed that the to­tal amount of shop­ping mall space in the na­tion’s 15 ma­jor ci­ties had risen to 59.48 mil­lion sq m by the end of 2014, with an­other 11.45 mil­lion sq m (2015) and 9.91 mil­lion sq m (2016) in the pipe­line.

Nine of the top 10 most ac­tive mar­kets are in China, with Shang­hai rank­ing first in terms of re­tail space un­der con­struc­tion (4.1 mil­lion sq m), fol­lowed by Shen­zhen, Chengdu, Chongqing and Guangzhou, ac­cord­ing to CBRE.

Ex­perts say that this seem­ingly un­stop­pable boom is cause for con­cern.

In the past few years, more than 200 new shop­ping malls have been cre­ated on an an­nual ba­sis, point­ing to a sup­ply­de­mand im­bal­ance, Xu Rong, a gen­eral man­ager of Sin­cere Group’s Shang­hai divi­sion, was quoted as say­ing by Ori­en­tal Morn­ing Post.

The av­er­age com­mer­cial space in many for­eign coun­tries is 2.5 sq m per capita, but that fig­ure in China has sur­passed 4. Un­der such an un­healthy trend, only one-third of the new shop­ping malls sur­vive, Xu con­tin­ued.

An in­dus­trial in­sider added that in some smaller ci­ties, shop­ping malls are less fre­quented be­cause of poor in­fras­truc­ture and bad man­age­ment. Over­sup­ply be­comes more ev­i­dent in sec­ond-tier ci­ties like Chengdu and Tian­jin when tak­ing into con­sid­er­a­tion the ac­tual de­mand, and it is even worse in smaller towns.

Wuhan, the cap­i­tal of cen­tral Hubei prov­ince, saw the largest sup­ply of new shop­ping cen­ter space in China in 2014. The city’s to­tal reg­is­tered com­mer­cial space has now sur­passed 27 mil­lion sq m, with a sur­plus of be­tween 6 and 7 mil­lion sq m yet to be “di­gested”, ac­cord­ing to data by the lo­cal prop­erty de­vel­oper as­so­ci­a­tion.

Matthew Crabbe, the re­search di­rec­tor of Asia-Pa­cific at Min­tel, a global mar­ket re­search firm, be­lieves that mall de­vel­op­ers need to re­think their strate­gies as con­sumers are now de­mand­ing for qual­ity and not quan­tity.

“What do all th­ese new malls of­fer con­sumers that is dif­fer­ent from other malls? If there’s noth­ing new, they will prob­a­bly fail. If they of­fer in­no­va­tive mixes of re­tail, en­ter­tain­ment, din­ing and ser­vices, they stand a good chance of suc­ceed­ing,” said Crabbe.

“Malls will be­come less about shop­ping, and more about com­bin­ing shop­ping with en­ter­tain­ment, leisure, fam­ily spa­ces, ex­er­cise, work spa­ces, and res­i­den­tial ar­eas,” he added.

Regina Yang, head of re­search and con­sul­tancy with Knight Frank Shang­hai, noted that some malls have al­ready started to tweak the fo­cus of their of­fer­ings, spark­ing a new trend where food and bev­er­age have come into promi­nence.

“Apart from up­dated de­sign and the in­clu­sion of more fast fash­ion brands, an­other dis­tinc­tive change is the por­tion of food and bev­er­age in a shop­ping mall has gen­er­ally in­creased to 40 per­cent, from be­low 30 per­cent five or six years ago,” Yang said.

Shop­ping cen­ters are now also fac­ing in­creas­ing pres­sure from the mas­sive pop­u­lar­ity of e-com­merce. Mar­ket re­searcher For­rester fore­casts that sales in China’s e-com­merce industry will hit $1 tril­lion by 2019.

In con­trast, av­er­age re­tail sales vol­umes are ex­pected to slow down to 8.7 per­cent in the next two years, ac­cord­ing to PwC and the Econ­o­mist In­tel­li­gence Unit. To cope with this, some or­ga­ni­za­tions have turned to co-work­ing so­lu­tions.

SOHO China chair­man Pan Shiyi said that the com­pany re­cently turned a 30,000 sq m com­mer­cial project on Bei­jing’s Guanghua Road into a cowork­ing space project known as SOHO 3Q and they are aim­ing to at­tract busi­ness starters as well as cre­ative com­pa­nies re­lated to In­ter­net, life ser­vices, de­sign­ing and en­vi­ron­ment pro­tec­tion.

“We turned our tra­di­tional com­mer­cial projects into cowork­ing spa­ces be­cause we are feel­ing the pres­sure from e-com­merce. Of­fer­ing flex­i­ble of­fice spa­ces is one way to pre­vent the project from los­ing money,” said Pan.

While Cole noted that there are el­e­ments of off­line re­tail that can­not be re­placed by e-com­merce, such as in­spect­ing goods first- hand and ac­cess­ing per­son­al­ized ser­vice in the stores, he be­lieves that th­ese ad­van­tages must be fur­ther am­pli­fied by ad­vances in on­line-to-off­line strate­gies and mobile In­ter­net adop­tion.

A whitepaper re­port ti­tled China Mall 2020 by Taub­man Asia and Ming­tiandi, has sug­gested that shop­ping cen­ter de­signs will need to be reimag­ined to ac­com­mo­date shop­pers look­ing for cul­tural and so­cial ex­pe­ri­ences, in ad­di­tion to those look­ing to just tick items off their shop­ping lists.

The re­port stated that dig­i­tally-en­abled strate­gies will need to be in­te­grated be­fore off­line re­tail can be­come on par with its on­line ad­ver­saries. Also, malls now need to adopt mobile tech­nolo­gies to “meet con­sumer de­mand for on-thego re­search in stores” and pro­vide a good mix of shops at the right pace in ac­cor­dance with con­sumer ex­pec­ta­tions.

“The re­tail scene in China is be­com­ing in­creas­ingly so­phis­ti­cated. Many malls in China are uti­liz­ing a pow­er­ful mix of dig­i­tally en­abled strate­gies that lever­age mobile, so­cial plat­forms and big data to­gether with tra­di­tional mar­ket­ing ap­proaches. Th­ese kinds of in­no­va­tions are crit­i­cal to our ap­proach for the mar­ket,” said Zhang Guo­hua, China man­ag­ing di­rec­tor of Taub­man Asia.

Crabbe echoed this sen­ti­ment, say­ing that malls must be able to ef­fec­tively com­bine mul­ti­chan­nel re­tail con­cepts or risk a swift demise.

“The malls that will fail are those that do not con­tinue to adapt to the rapid changes in ci­ties, peo­ple’s life­styles and their use of tech­nol­ogy. That is a tru­ism that ap­plies to any busi­ness, es­pe­cially one that is in a re­tail mar­ket that is as fast-chang­ing and com­pet­i­tive as China’s,” said Crabbe.


A girl plays in the K11 shop­ping mall in Shang­hai's down­town area. Th­ese days shop­ping cen­ters are no longer just about re­tail op­tions as they look to pro­vide shop­pers with unique so­cial ex­pe­ri­ences.

An in­stall­ment in Raf­fles City that shop­pers can pose for pho­tos with.

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