Shopping Centers Today is the news magazine of the International Council of Shopping Centers (ICSC)
Issue link: https://sct.epubxp.com/i/331061
50 S C T / J u l y 2 0 1 4 shopping abroad, Bain says. "A lot of Chinese consumers want to buy luxury goods in the places where they are made," said Dana Telsey, CEO and chief research officer of Telsey Advisory Group. Given the slower pace of sales growth in mainland China, top- tier luxury brands have become much more cautious when it comes to opening stores there. Right now they probably have a sufficient number of stores in Shanghai, Beijing and other tier-one cities, although there is still untapped demand in secondary and tertiary markets, McCord says. "These brands haven't given up on China — far from it," he said. "But the degree to which they want to study markets before they go into them has gone up considerably. They want to see some real proof demand exists before they put capital into stores." More-affordable luxury brands, such as Calvin Klein, Michael Kors and Kate Spade, are reportedly rolling out stores at a faster pace than their counterparts at the top of the luxury chain. So-called light-luxury brands have strong appeal among mainstream consumers, and many still have untapped growth potential in China's primary markets, ex- perts say. With concerns about retail space oversupply weighing on the mainland market, development has probably reached a peak, McCord says. As in many other parts of the world, the rapid rise of e-commerce has also posed a challenge for mall landlords. According to Woods Bagot and Knight Frank, China has more Internet shoppers than any other country, some 220 million of them, and will soon overtake the U.S. as the world's largest on-line retail sales market by total value. "De- velopers are catching on to the fact that the easy days are over, and simply throwing up a new center isn't going to make you rich," said McCord. As in other markets, restaurants, cinemas and other leisure concepts are becoming a larger part of the tenant mix at shop- ping centers throughout China. The number of cinemas in China has surged from nearly 1,430 in 2007 to about 3,680 in 2012, Woods Bagot and Knight Frank say. Shopping center design and layout is also evolving, with a greater focus on prop- erties that open out to their surroundings. This year Wharf Holdings, a subsidiary of Hong Kong's Wheelock & Co., opened the first of five International Finance Square projects it is de- veloping in mainland China. Wharf owns and operates two of Hong Kong's most successful luxury malls — Harbour City and Times Square — and has modeled its International Finance Square projects on Har- bour City. Wharf bills its first International Finance Square project, in Chengdu, capital of the Sichuan province, as a city within a city. The complex con- sists of an upscale, multilevel mall measuring 210,000 square meters (nearly 2.3 million square feet), two class-A office build- ings, a five-star hotel and some luxury residential units. Nearly 300 international luxury brands have leased space at the mall, many unveiling their first stores in Southwest China there. Wharf already owns and operates a number of high-end malls in China, including two malls operating under the Times Square banner. One of those is in Dalian, a city in the North- east region, and the other is in Chonquing, in the Southwest. Its Dalian Times Square mall has been fully occupied since it opened five years ago. Chonquing Times Square and Chengdu IFS are nearly 95 percent occupied, according to the company. "We are optimistic about the luxury retail market in China," said Doreen Lee, Wharf's executive director. "It is diverse and still has much room to grow. The Chinese consumer is becom- ing more sophisticated than ever, and incomes are growing. But you have to have the right positioning, the right partners and experience in mall management that meets international standards in order to succeed." Though the luxury-goods sector in mainland China has reached an inflection point, the market is still perceived among many global brands as important, says Telsey. Sales in Greater China are projected to account for about 25 percent of global luxury-goods sales by the end of 2017, up from 17 percent in 2012, she says. Currently, only about 5 percent of the population in China has real disposable income, but that still equates to some 65 million "upscale consumers," said Ian F. Thomas, SCDP, chairman of Vancouver, British Columbia–based Thomas Consultants. "For many Chinese consumers, shopping is their biggest pastime," Thomas said. "That is why China is, by far, the biggest market for luxury stores, and where such stores tend only to build flagships." S C T L o u i s V u i t t o n , s h e n y a n g L I L U N / F E A T U R E C H I N A / N E w s C o m 46-50_SCT_JUL14_China.indd 50 6/12/14 5:58 PM