BEIJING - The rise of the moneyed Chinese consumer may be old news. But the
rise of consumers who insist on parking as close as possible to a doorway and
who drink cappuccinos above a skating rink while their five-year-olds run
circles around a potted palmetto has just started to hit commercial developers.
Shoppers who want more than to grab something, line up and pay for it got the
attention of Singapore-based CapitaLand Retail Ltd in 2004, when the firm
opened its flagship shopping mall, Raffles City
Shanghai , a 40,000-square-meter highrise
mall next to People's Square in the core of China's business capital. It cost
CapitaLand and four partners US$350 million. Today CapitaLand has 25 shopping
malls in China, including two in
Beijing, one in
Tianjin and 21 anchored by Wal-Mart in
provincial capitals. They cover more than 1.1 million square meters, with
assets worth about $1.1 billion.
"Expanding our footprint in China is part of CapitaLand's long-term growth
strategy in view of the strong economic growth and rising consumerism [there],
which is underpinned by increasing disposable income," said Pua Seck Guan,
chief executive officer of CapitaLand Retail Ltd. He expects his firm to open
additional malls in China.
CapitaLand is not alone. At least two other foreign development groups and a
number of Chinese competitors are trying to dominate retail by re-creating the
shopping-center model that defined American youth culture in the 1980s. Today,
about 200 malls with an anchor store, a food court, entertainment and parking
operate in China. More are on the way as Chinese consumers begin to show
mall-rat tendencies.
In July, US commercial-real-estate developer Simon Property Group signed a
framework agreement with Morgan Stanley Real Estate Funds and Shenzhen
International Trust & Investment Co Ltd to build malls in China. The three
are planning at least 12 projects totaling 750,000 square meters in the Greater
Shanghai area. Wal-Mart will anchor every shopping center, and Warner Theaters
may anchor some as well, the three parties said in a statement. The first mall
is due to open in spring of 2007 in Hangzhou, a city about two hours southwest
of Shanghai.
Both Simon Property and Morgan Stanley declined to discuss the project. "To be
honest, there's not much more to tell," said John Footitt, a Morgan Stanley
spokesman in Hong Kong. "This initiative will be our first retail shopping
center investment-development in China."
Days after the Simon Property announcement, Macquarie Bank Ltd of Australia
said it would join other investors to buy nine malls in China and offer $93
million in debt and equity for a 24% stake.
Chinese developers preceded the foreign. In 2001, for example, Beijing Dadi
Investment Co Ltd began putting together the 3.3 billion yuan,
320,000-square-meter, four-level Beijing Mall in a southern suburb of the
capital. In October 2004, the New Yansha Group opened the 550,000-square-meter
Golden Resources New Yansha Mall, colloquially known as the Great Mall of
China, in Zhongguancun, the university and high-tech quarter of northwestern
Beijing.
Before malls came online, when disposable income and private cars were less
prevalent, Chinese shoppers relied on supermarkets of all sizes. Some went also
to packed department stores, many of them state-owned and some dating back to
the early days of communist rule. Ground levels of office buildings rented out
to fashion retailers and lowrise buildings rented out entirely to scores of
stalls selling handicrafts and discounted daily necessities were the closest
thing to Western-style malls.
American-style malls in China have a reputation for quality goods and easier
ground transit outside, customers say.
"It's more convenient, and the traffic is smooth," said a manager at the
Estyliz lamp store in the Golden Resources mall. "There's more service and
product quality, including after-sales service. There are also international
brands, so that brings good quality."
Shoppers in Beijing say they switched from supermarkets or department stores
because the malls offer bigger, better selections with warranties. Some go
because malls offer free parking and give their children space to run or skate.
People living near a mall may go several times a week to shop for sundries
while their children play in the public areas.
On a Saturday in January, Shi Fengyahui of Beijing sat in front of a coffee
house in the Golden Resources mall as her two sons played on electric-powered
carts that she rented for 30 yuan per hour. She parked her car free. "You park
anywhere else and it's not convenient," Shi complained.
A 20-year-old university freshman said he goes to the same mall for food and
daily necessities because "anything you want, it's here."
About 280 stores have opened on six levels. They include the Paper Tiger, a
book-music seller that does steady business with its DVDs (digital video
discs) for 7 yuan (87 cents) apiece, to Watson's Your Personal Store
and clothiers such as North Face, Speedo and Hush Puppies. Anchor tenants are
the national Yansha Youyi Shopping City and the Lotus Supercenter market. A
fitness center and a cinema showing King Kong in full stereo fill out
the sixth floor.
Painting-shop owner Liu Fenghua chose Golden Resources because of its size and
number of shoppers. He believes that as many as 300,000 people came to the mall
per day in January to shop for Lunar New Year food or gifts - although in early
February the arts-and-crafts section of the mall was empty.
Shoppers come largely from nearby residences. Li Zhongshu, 73, frequents the
mall with his granddaughter Niuniu to eat and rest because they live close.
They like the clean, active setting. "The environment is good," he said.
"Entertainment and food, you can get it all here."
At the three-story Pelagic Mall in Tangshan, a city in
Hebei province east of Beijing, Zhou
Yibing, 13, and her mother window-shop or eat ice cream and watch
boys play basketball on an indoor court every day in the summer because the
place is three bus stops from home. Her grandmother goes early to beat weekend
crowds at the Every Day Low Price supermarket, a variety-grocery store that
takes up a whole floor.
Shopping malls should succeed because they nurture the Chinese urge to be seen
in a luxurious setting, said Tom Doctoroff, author of the 2005 book Billions:
Selling to the New Chinese Consumer. "The key thing about buying in
China is that it's very public," he said.
But most malls built so far are not working out, suggested Anna Kalifa,
Beijing's head of research for property-management-services firm Jones Lang
LaSalle. Golden Resources, she said, has not gotten the traffic it expected
because it's too big to be efficient. Chinese people want to find things
quickly, she said. Some malls also group too many similar stores in one place.
"Developers are fielding their dreams of large malls, with the
build-it-and-they-will-come mentality, but only a few projects stand to provide
a clear strategy, proper tenant mix, professional property management and
design that appeals to retailers and shoppers," Kalifa said. "Developments that
do incorporate the above [are] rare and precious."
Ralph Jennings is a Beijing-based foreign correspondent.
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