A China twist: why are malls closing if consumption is rising?
SHANGHAI/HONG
KONG (Reuters) - The Di Mei shopping centre in downtown Shanghai is a
surprisingly depressing place to shop. The underground mall is located
in one of the most shopping-mad cities in China, and yet it is run down
and starved of customers. "Sometimes I cannot sell even one dress in a
day," said dress shop owner Ms Xu, who rents a space in Di Mei.
Follow Yahoo Finance
Sun, Oct 25, 2015, 10:31pm EDT - US Markets are closed
A China twist: why are malls closing if consumption is rising?
5 hours ago
The underground mall is located in one of the most shopping-mad cities in China, and yet it is run down and starved of customers.
"Sometimes I cannot sell even one dress in a day," said dress shop owner Ms Xu, who rents a space in Di Mei.
Rising vacancy rates and plummeting rents are increasingly common in Chinese malls and department stores, despite official data showing a sharp rebound in retail sales that helped the world's second-largest economy beat expectations in the third quarter.
The answer to that apparent contradiction lies in the rising competition from online shopping and government purchases possibly boosting retail statistics. Add poorly managed properties into the equation and the empty malls aren't much of a surprise.
More importantly, the struggles of Chinese brick-and-mortar retailers amplify a policy conundrum; these malls, built to reap gains from rising consumption, are instead adding to China’s corporate debt problem, currently at 160 percent of GDP - twice as high as the United States.
Less foot traffic means cash flow of mall owners and developers are getting squeezed - a potential hazard for an economy growing at its slowest pace in decades.
Di Mei's owners are trying to refurbish, but it's unclear whether it will pay off, and others are just closing down. The Sunlight Store in Beijing, for example, is located in another prime pedestrian hub, but it closed its blinds this month, with manager Ni Guifang telling Reuters they are seeking greener pastures online.
"The sales were just OK, but the overall sales were on the downward trend," Ni said.
TRIMMING DOWN
Major listed mall operators are also feeling the pain. Dalian Wanda, a big property developer, said in January it would close or restructure 30 of its retail venues and in August said more adjustments were underway.
Malaysia-based Parkson
"As growth in retail sales slows because of the country's lower GDP growth, and in cities where mall space is abundant, vacancy rates have risen substantially," said Moody's analyst Marie Lam in a research note.
In its latest efforts to re-energise the economy, China's central bank on Friday cut interest rates for the sixth time in less than a year.
Tim
Condon, an economist at ING in Singapore warned that investors should
not read China's official retail figures as exclusively reflective of
rising household consumption, noting that the data also capture some
government purchases.
On
the other hand, e-commerce sites continue to post double-digit growth
rates, even as some moderation is evident. E-commerce leader Alibaba
(BABA.N) is expected to report that sales growth slowed sharply in the
second quarter - albeit to around 27 percent on-year, still a ripping
pace.
And as more Chinese graduate to the ranks of
the middle class, places offering entertainment are thriving. Movie
ticket sales hit a new record of nearly $300 million during a single
holiday week in October, up 60 percent year-on-year.
But
this is little consolation for the likes of Di Mei. And the risk is
that the frenetic pace of mall construction cascades into a bad-debt
problem for banks if shoppers fail to match the zeal of property
developers.
SHOPPING OVERCAPACITY
China
is currently the site of more than half the world's shopping mall
construction, according to CBRE, a real estate firm, even though it
appears that many of these malls will not produce good returns for their
investors.
A
joint report by the China Chain Store Association and Deloitte showed
that by the end of this year, the total number of China's new malls is
projected to reach 4,000, a jump of over 40 percent from 2011.
Real
estate analysts note that much of the surge in retail space
construction came at the behest of local governments, who were rushing
to push real estate development as part of attempts to stimulate the
economy. The result has been malls built in haste and managed poorly.
Not surprisingly, shoppers are voting with their feet.
"If you build it and they're not coming, that's a non-performing loan," said Condon of ING.
"That's the banks' problem."
end quote from:
A China twist: why are malls closing if consumption is rising?
Actually, even here in the U.S. Walmart (in it's stores) cannot compete with Amazon.com so they are trying to set up a shipping business to compete because even they can see that storefronts in many cases may be becoming a thing of the past (at least for certain items).
My wife was saying that one thing that is definitely going to need storefronts are "Women's clothes" because women want to try on what they are buying and often try on 15 to 20 different outfits before buying one.
The other problem with shopping online is often you need to touch something to know if you want it or not and to try it. Also, if you don't know something exists because you haven't seen one, how can you try it.
For example, in South Korea I saw the single wheel item up close and never knew it even existed before. You can ride the single wheel or carry it like a little suitcase to your office which I thought was pretty interesting for someone coming off a subway or car or bus with a long way to walk to wherever they are going.
- More Buying ChoicesFREE ShippingProduct Features
... not be able to pump air into the wheel.To repair or change the inner or ...
No comments:
Post a Comment