Shopping Centers Today

JUL 2014

Shopping Centers Today is the news magazine of the International Council of Shopping Centers (ICSC)

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pirational and often more middle class," said McCord. "These people are sensitive to the pricing of goods on the mainland," where high taxation of luxury goods has spurred many to do their shopping in other markets. Prices for luxury products on the mainland can be anywhere from 15 to 40 percent higher than they are in Hong Kong, a well-established luxury- goods market that attracts some 54 million tourists per year, according to Tom Gaffney, Jones Lang LaSalle's head of retail in Hong Kong. Last year Hong Kong entertained nearly 41 million visitors from the mainland, and those tourists generated about 34 percent of total retail sales in that densely populated territory, according to Sebastian Skiff, executive director of CBRE Retail Asia. Many Chinese are using their new wealth to travel much further than they have in the past — to major cities in Aus- tralia, Europe and the U.S., for instance. Mainland China's consumers now do an estimated two-thirds of their luxury J u l y 2 0 1 4 / S C T 49 With the Chinese consumer spending less on luxury goods, some developers are offer- ing the option to pay less too, by rolling out some of the first high-end outlet centers on the mainland. In May London-based Value Retail, which owns and operates some of the most successful upscale outlet centers in Europe, opened its first in China, Suzhou Village, in Suzhou, 50 miles west of Shang- hai. The company is developing a second project in China, near the future Shanghai Disney Resort, as part of its overall plan to amass a portfolio of five upscale outlet properties near tier-one cities that draw tourists. "Out brands asked us to provide them with the same service in China that we provide for them in Europe," said Frank Blanchette, a retail director at Value Retail. Other developers want to give the global luxury brands that have converged on China in recent years a way to liquidate excess inventory. London-based TIAA Henderson Real Estate is reportedly expanding an outlet center it owns in the northern city of Tianjin. The firm plans to open two more centers — one in Shanghai and one in the southern city of Foshan, according to published reports. The firm is also said to be hunting for devel- opment sites in certain regions of China. Sales of luxury goods, which were grow- ing at double-digit rates not long ago, have cooled as a result of a weaker economy, tougher competition and the government's efforts to clamp down on lavish official spending and gift-giving. That campaign has had an impact throughout Chinese society, reducing demand for the likes of fancy watches and cars. What is more, many consumers in mainland China shop for luxury goods abroad because of the high taxes levied on those goods at home. De- velopers are hoping to tap into this pent-up domestic demand for lower-priced luxury items. "What we have seen in Europe at our outlet villages is a dramatic growth in the number of Chinese visitors who are shop- ping for high-end brands," said Blanchette. Chinese consumers have become more sophisticated when it comes to brand awareness, pricing and fashion cycles, says Mortimer Singer, president and CEO of Marvin Traub Associates, a business- development firm that has advised Value Retail on its expansion in China. "There is a huge market sitting below the luxury consumer waiting to buy in," said Singer. Value Retail's latest project in China, Shanghai Village, is under development in the government-designated Shanghai International Tourism and Resorts Zone. The center will be the only luxury-outlet shopping destination within the area, where Walt Disney Co. is developing a theme park, hotels and other attractions. Both Shanghai Village and the Shanghai Dis- ney Resort are slated to open next year. The luxury-outlet sector in mainland China is still in its infancy, says Singer. A number of existing centers in China bill themselves as outlet malls, he says, but few meet international standards in terms of design, amenities and brand offerings. "Everyone is building malls in the 1980s sense of the word," he said. "These aren't cutting-edge; consumers want something that speaks to a way of life, not just a venue for buying stuff." — AR Mainland welcomes upscale outlets l u x u r y r e t a i l e r s i n s u z h o u v i l l a g e 46-50_SCT_JUL14_China.indd 49 6/12/14 5:58 PM

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