TOO FAST, TOO FURIOUS
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
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.