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Malls are big in China’s smaller cities

Posted on 15 Nov 2009 | Comments Off

Mushrooming of mega shopping centres fuelled by retail boom

The Raffles City Chengdu has a five-star hotel, offices, serviced apartments and a retail mall. — PHOTO: CAPITALAND

Ms Mandy Jin may not know much about Singapore, but she knows about VivoCity – the gigantic 400,000 sq m mall that will open next year in her neighbourhood in north-western China.

‘Vivocity is the biggest mall in Singapore. But that one will still be much smaller than the VivoCity here,’ said the marketing executive in her 30s, a resident in Xian, the capital of Shaanxi province.

Ms Jin’s excitement about the foray of mega malls into second-tier Chinese cities like Xian reflects the wave of consumer anticipation marking the comeback of China’s retail mall boom.

Amid a nationwide effort this year to boost domestic consumption as an engine of economic growth and a growing appetite among affluent Chinese for high-end goods, malls are sprouting up not just in first-tier cities, but fanning out into the relatively smaller ones as well.

Roughly 3 million sq m of new shopping centre space may come into the market in the three top cities of Beijing, Shanghai and Guangzhou over the 12 months to June 2010.

This supply spurt is driven by an expected rise in demand from the World Expo in Shanghai and the Asian Games in Guangzhou next year, according to real estate consultant Knight Frank.

Another 2 million sq m to 3 million sq m of retail space may debut in the 10 smaller cities, dubbed ‘Tier 2′ cities, such as Xian, Chengdu, Tianjin, Chongqing, Wuhan and Hangzhou, according to back-of-the-envelope estimates by Chinese retail space analysts.

‘It is very difficult to estimate exactly how much new retail mall space is being built in the Tier 2 and 3 cities as no comprehensive data has been compiled on this. But clearly the growth will be much faster in these smaller cities, where there are previously no major malls.’ said Mr Deng Heping, spokesman for the China Shopping Mall Association in Beijing.

Despite the paucity of information on the retail space boom in second-tier cities, analysts point to the recent aggressive moves by developers to bring in snazzy, Western-style shopping complexes to meet Chinese shoppers’ more sophisticated tastes as an indication that this time, ‘the boom is for real’.

‘Developers are turning to second-tier cities because that’s where the consumer masses, who are growing in affluence, are,’ said Guangdong-based commerce professor Zheng De.

Several years ago, bullish developers bet on a shopping revolution and built malls en masse, including putting one of the largest malls in the world – the 890,000 sq m South China Mall – in the small city of Dongguan, a manufacturing hub in Guangdong.

However the mega mall, like the bumper crop of malls in the so-called first-tier major cities, soon made headlines for having everything a mall should have and more – except shoppers. Having been burnt, developers were unwilling to release more retail space unless they are assured of a steady flow of shoppers to their malls, said Prof Zheng.

The mood seems to have shifted now, he suggested, based on a rough tally of at least 27 announcements in the past few months that large shopping malls are to be built in second- and third-tier cities.

China’s retail sales will grow around 16 per cent next year as the government continues to focus on stimulating domestic consumption to support growth, the China Securities Journal recently quoted a commerce official as saying.

Foreign developers are also bullish on the China market. Tycoon Henry Sy, the Philippines’ richest man, will build an American-style SM Shopping Mall in the Chongqing municipality. He had earlier announced plans to build three malls a year in China’s second-tier cities.

Another developer looking to expand in these cities is Capitaland. In all, it has 50 malls, with five malls slated for completion next year and another 11 set to come on stream in 2011 and beyond.

Ms Jin said that the Raffles City Beijing mall ‘was a tourist attraction’ for her.

‘I may come from a second-tier city, but I’m as demanding about a beautiful ambience and shopping experience as anyone from Beijing. We need more Singapore-style and American-style malls,’ she said.

SPENDING POWER

‘Developers are turning their attention to second-tier cities because that’s where the consumer masses – who are growing in affluence – are.’ – Guangdong-based commerce professor Zheng De

Source : Straits Times – 14 Nov 2009

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Going to China with CapitaMalls

Posted on 11 Nov 2009 | Comments Off

VENTURING into China might seem a daunting prospect but the Scottish-themed Highlander bar and restaurant reckons it has a great way in – hitching a lift on the back of shopping centre giant CapitaMalls Asia.

The Clarke Quay outlet is one of several in Singapore being encouraged to use CapitaMalls’ expertise and huge presence in the Chinese market to leapfrog in.

The firm has 50 retail malls in 33 cities across China and has already proved a valuable vehicle for small and medium-sized enterprises (SMEs) to expand abroad while minimising the risks.

BreadTalk, watch retailer City Chain and M)phosis are just three of the 18 local companies that have taken up retail space in CapitaMalls centres and there are high hopes that more will be attracted.

CapitaMalls Asia has teamed up with Spring Singapore to organise its second trip to China, this time focusing on SMEs in the food and beverage business.

Spring’s deputy chief executive Ted Tan said the collaboration will allow SMEs to tap CapitaMalls’ network of contacts and its first-hand knowledge of trends in the China market.

‘We want to help eliminate as many variable risks as possible when entering a new market. It’s not always a rosy picture and there will be setbacks but at least you go in with your eyes open and with a shorter learning curve,’ said Mr Tan.

China’s food and beverage sector has enjoyed double-digit growth for the past 18 years and sales are tipped to hit 2 trillion yuan (S$406 billion) next year. It is an exciting industry in a huge market with untapped opportunities, added Mr Tan.

Many of the retailers The Straits Times spoke to have been tenants at CapitaMalls centres in Singapore.

Highlander managing director Clark Martin said he felt comfortable working with a mature and well-organised landlord.

‘We need someone to hold our hand and open the doors. The Chinese market is massive…it’s a little bit more challenging and there is no cookie-cutter approach so we need to get our concept right before going in,’ he said.

He is looking into expanding to Shanghai and Chengdu.

Highlander – a bar which offers over 250 different types of whisky – is a concept that has not yet been fully explored in the Chinese market. Tapas restaurants are also few and far between so that may mean opportunities for his other restaurant, The Tapas Tree.

Mr Tony Tan, managing director of China One, a bar at Clarke Quay, has similar expansion plans for Chengdu. He said Chengdu’s high disposable income and relaxed lifestyle meant an increased propensity to spend on entertainment and leisure.

M)phosis, a womenswear retailer, opened its flagship store in Beijing in April and now has five outlets.

Managing director Hensley Teh said that partnering a local retail player meant he did not have to compete with other international and more renowned brands for retail space.

‘Singapore brands are usually not at the top when a mall is looking for tenants but CapitaMalls gave us a platform to showcase our designs and raise the awareness of our brand,’ he said.

However, China’s sheer size and numbers mean there is no single winning market or strategy.

CapitaMalls Asia deputy chief executive Simon Ho said it was important to realise that China was not a homogenous market and that firms need to focus their resources on a single segment.

‘It’s a very competitive market and that’s where we urge our retailers to exercise caution… (Companies) need to conduct adequate market research and link up with the right partners.’

Source : Straits Times – 10 Nov 2009