Food Junction

Los Angeles Times wrote:
Illusions on Sale in Shanghai
Just like the city, ‘ghost malls’ aren’t what they appear to be. High-end stores attract few shoppers, but image trumps commerce.
By Don Lee
Times Staff Writer

July 13, 2006

SHANGHAI — Amid the towering glass-and-steel splendor of the Plaza 66 mall — packed with boutiques offering Dior, Prada, Cartier and other luxury brands — shop clerk Xu Junyuan idly scratched his bald head as a lone shopper browsed the deserted aisles.

“I’m just bored,” said Xu, who works at the jeans boutique Diesel.

At Fendi, black-suited clerks yawned as they propped themselves against counters. At the palatial Louis Vuitton shop next door, a 7-foot-tall plasma television played to no one.

In this populous city of fanatical shoppers, Plaza 66 is what some locals call a gui gouwu zhongxin — a ghost mall.

The prices are so high that no one buys much. But then, no one really cares.

Just as Stalin erected Potemkin villages to display the glories of communism to outsiders, Shanghai is creating its own illusion of prosperity out of the world’s most luxurious brands.

Offering cut-rate rents to top-tier fashion houses, this city of about 18 million is determined to make itself look like a world capital of high fashion.

And the Burberrys, Hermes and Chanels are all too happy to join in the charade.

“Most leading luxury brands will need to have a flagship store in Shanghai if only to put Shanghai along with London, Paris, Milan on their bags,” said Paul French, founder and China chief of Access Asia, a marketing research firm in Shanghai.

The illusion is so thin that some stores don’t bother to carry much stock. Others may have lots of clothes on the racks, but they carry just one size: medium, which is too big for most Shanghai women.

Some shops “don’t ring up a single sale for days,” Xu said.

Before World War II and the communist takeover in 1949, Shanghai was often called the Paris of the East — a fashionable cosmopolitan city, the place to be.

At its height in the 1930s, the city was an international trading center and money flowed in from everywhere. Tens of thousands of British, French, Germans, Russians and Americans had settled in the city — a legacy of the first Opium War, when Shanghai was carved up into concessions. The foreigners brought to this onetime farming village elegant Art Deco architecture, haute couture, posh restaurants, dance clubs, brothels, everything to satisfy the whims of the rich.

The party ended in 1937 with the Japanese invasion. After World War II, the city endured battles between the nationalist army and communist forces. When Mao Tse-tung emerged victorious in 1949, Shanghai, along with the rest of China, shut itself off from the rest of the world.

In the last decade, city leaders have sought to regenerate the lost hype in part to draw foreign investment. And they’ve been largely successful, capturing worldwide attention from the media and others who gush about Shanghai as Asia’s most vibrant city, overflowing with wealth and grandeur. Gleaming malls like Plaza 66 have risen to replace decrepit neighborhoods.

But Shanghai isn’t what it appears to be.

The Shanghai Stock Exchange boasts Asia’s largest trading floor inside a 27-story glass building modeled on the Arc de Triomphe in Paris. But the floor stays largely empty because trading is electronic, and the stock exchange remains a joke among serious traders for its lack of transparency and inadequate regulations.

At a cost of $1.2 billion, Shanghai built the world’s fastest train in 2003, which at a regular speed of 267 mph beat out Japan’s bullet trains. But residents have complained that the magnetic-levitation train to Shanghai’s largest airport is a white elephant because it doesn’t run during hours when many flights arrive or depart. Although the train’s hours were recently extended, passengers still have to go to the outskirts of the city to catch the train.

Shanghai has been host to an international fashion model contest and a film festival, but they draw few celebrities from outside China.

Shanghai’s upscale malls are another daily reminder that there is less to the city than meets the eye. “Shanghai is a dreadful retail market,” French of Access Asia said.

Many of the well-to-do have their assets locked up in property, he said. Others are too busy squirreling away money for healthcare, retirement and their children’s education — all signs of a metropolis and a population that are maturing.

Government officials who worked with Hong Kong developer Hang Lung Properties to build the five-story Plaza 66 know that the mall is hardly bustling with people.

“If you walk into Plaza 66, you will find it cold and cheerless. There’s hardly anybody,” said Zhang Zuofeng, an economist with the planning department at Shanghai’s Jing An district government.

But he said that Plaza 66’s office tower was doing well and that the complex generated $80 million in taxes last year.

Terry Ng, Hang Lung’s executive director, acknowledged that traffic wasn’t heavy.

“Expensive items, man,” he said, insisting that the mall is profitable for the tenants and his company.

Jiu Guang City Plaza, another Nanjing Road shopping center near the 1,800-year-old Jing An Temple, was so keen on attracting Burberry, the upscale British apparel maker, that it offered the first year rent-free, brokers said.

Plaza 66 and other malls like it in Shanghai “are solely a window for these brands,” said Chen Jun, manager of commercial real estate at Shanghai Hanyu Property Agency.

“For Louis Vuitton, the district and municipal government singled out this brand for Plaza 66,” Chen said. So although it has the best location on the first floor, the French company enjoys one of the lowest rental rates per square foot. Other tenants pay a percentage of their sales.

Representatives of Burberry, Louis Vuitton and other premium labels generally declined to talk about individual store sales or lease arrangements. But, said Grace Chao, a spokeswoman for Chanel in Shanghai, “Not all brands are paying rent.”

Chao wouldn’t comment on the merchandise at the Shanghai store, saying that “each market has its own strategy in terms of buying.”

The real Chinese high-end spending is taking place in Hong Kong and in smaller mainland cities such as Dalian and Shenyang in the north.

Managers at five-star hotels near Plaza 66 talk in hush-hush tones about the mall’s stores, trading stories about high-end customers being courted privately, flown for shopping weekends in Hong Kong, where there are better selections, newer styles and bigger savings. Luxury goods there cost at least 10% to 20% less because Hong Kong doesn’t have the duties, taxes and special surcharges of the mainland.

Among those who spend their cash at Plaza 66 are so-called rich wives’ clubs, groups of women who come during weekends from Wenzhou and other entrepreneurial hot spots in Zhejiang or Nanjing provinces. Another group of luxury customers: local Communist Party cadres who buy items such as Mont Blanc pens as gifts.

There are plenty of local nouveaux riches who aren’t bashful about conspicuous spending. But most know better than to burn their money in Shanghai.

Tiffany Hua, a 25-year-old yoga instructor and daughter of a Shanghai restaurant magnate, goes on shopping junkets to Hong Kong three or four times a year. She visits malls like Plaza 66 and Jiu Guang more often than that, but mainly it’s to browse and scribble model numbers for her next trip.

Hua recently was sitting at a coffee shop on Nanjing Road, a stone’s throw from the gold- and silver-lettered malls and boutiques.

She was wearing 1960s-styled Prada sunglasses that she picked up in Tokyo (they don’t carry them in Shanghai, she said) and a silver Cartier watch, which she bought in Hong Kong for $2,300 — about $900 less than the price offered at Plaza 66.

“In Shanghai, it’s window-shopping,” she said.

On a recent weekday mid-afternoon, the mall was so quiet that the clicking of shoppers’ heels could be heard on the synthetic marble floor. On the shopping center’s third and fourth floors, one boutique clerk was polishing her nails and others were chatting or leaning on counters.

Phoebe Lao, a 24-year-old clothes designer, was one of the few shoppers on the third floor. She said she didn’t buy much here because she preferred clothes from cheaper labels.

But she is a regular at Plaza 66. She likes the mall, she said, because it’s one of the few places in Shanghai that isn’t crowded.


I am going to post 2 articles that are contrasting in their views about the china retail scene. The first article is on the Four Seaons shopping Centre, the next expansion for food junction food court due in april 2007.

There is no denying the allure of the Chinese market, and for retailers eyeing this lucrative market, a new quality location is now available in downtown Beijing — The Four Seasons Shopping Centre that is developed by Financial Street Holding Co Ltd. Lee Yoke Meng visits the location for the latest details.

The Four Seasons Shopping Centre is located in one of the most prestigious and important business districts in China, Beijing Financial Street (known in Chinese as Jinrongjie), often referred to as China’s Wall Street. Such is its concentration of wealth and decisionmaking

The 89,000sqm shopping centre is part of the overall government-backed Jinrongjie development and is designed as the lifestyle hub serving the entire area and beyond.

Scheduled for completion by summer 2006, it will be the first major international luxury retail development of its kind in West Beijing. It will comprise a department store, speciality boutiques (from fashion to accessories, watches and jewellery), recreational and entertainment facilities, and a food court.

Developed by Financial Street Holding Co Ltd, the exclusive developer of the entire Beijing Financial Street, Four Seasons Shopping Centre focuses on providing top-line retail shops to target the market’s mid- to high-end white-collar professionals. With its extended range of merchandise and purpose-built shopping environment, it aims to represent the next evolution in retailing in China. The centre is tremendously appealing to retailers in the luxury goods-and-services segment. Here are some facts to prove it.

Lifestyle hub

According to Gao Liang, deputy general manager of Financial Street Holding Co Ltd, the decision to have a shopping centre in the financial district was arrived at after major considerations and thorough market analysis. Among them was the fact that a lifestyle hub,
anchored by a retail-and-entertainment landmark, will add vibrancy and colour to the area — day and night. It will cater to the retail-and-entertainment needs of those living and working in the area, as well as those visiting it.

“Market surveys clearly confirmed the need for a lifestyle development here,” Gao says. “There is very strong demand from the people in this area for high-end consumer products, and this demand will grow significantly as the financial district and the surrounding areas mature.

“There is currently no retail centre of this nature in Beijing city’s western districts. The main shopping areas are currently located in Wangfujing or the World Trade Centre area. Our plan, therefore, is to create an exciting retail hub in the western part of the city that will cater for these high-income earners and consumers.

“The retail potential is tremendous, and Four Seasons Shopping Centre will be able to capture this market very well,” she points out.

Significant advantages

Situated in the heart of Beijing Financial Street, with the Forbidden City and Tian An Men Square to the east and Chang An Avenue to the south, the Four Seasons Shopping Centre offers an unparallelled advantage when it comes to having a large population of nouveau-riche and some of the wealthiest consumers in the country on its doorstep.

Spanning a total area of 1 sq km, the Beijing Financial Street is being developed according to three main zones.

The north and south zones are primarily Grade A commercial and residential

In addition, the central zone includes the Four Seasons Shopping Centre; a trendy fusion bar and a food street called Exchange Walk; a green plaza called the Central Park; an international convention centre; a Financiers’ Club; the five-star Ritz-Carlton and Westin hotels; and luxury serviced apartments.

All three zones are slated to be ready by 2007. The timing is ideal as it will also be able to cater for the influx of visitor spending arising from the 2008 Olympics in Beijing.

Purchasing power

Housed within the Financial Street area are some of China’s supreme financial policy-making and supervisory bodies, the headquarters of Chinese commercial banks, insurance companies, investment companies, telecommunications and electricity power groups, and largescale foreign and local enterprises. Total financial assets in this region alone account for 60% of that of the whole of China.

This, in turn, translates into a massive purchasing potential. An estimated population of 200,000 work and reside in the primary catchment area, most of whom are high-earning white-collar employees.

With a retail area per person of just 0.28sqm, compared with a Beijing city average of 0.8sqm per person, the potential for retailers is obvious. Then, there is the secondary catchment area, bounded by the Third Ring Road, with an estimated population of three million people. This area, too, has a high concentration of government bodies, corporate headquarters and top-grade residential developments.

Finally, there is the tertiary catchment area that extends to the west of the Fifth Ring Road. This potential consumer base includes some seven million people in Beijing city’s urban areas.

Retail interest

These statistics have certainly caught the attention of retailers, especially those in the luxury-brands category. A queue of interest has already formed, following initial rounds of promotions and previews held by the developer and Jones Lang LaSalle, property consultant and leasing agent for the shopping centre. Says Gao: “We’ve received very encouraging
response from retailers, including from the US, Europe, Hong Kong, Japan and South Korea.”

Negotiations are under way with some, while others are expressing serious interest. High-end watch retailers IWC of Switzerland and Chopard of Switzerland are believed to be keen to secure space at the Four Seasons Shopping Centre.

Strong demand exists from luxurygoods retailers for China flagship stores, given that the space is designed to accommodate such requirements. There is also demand from luxury-goods brands such as jeweller and watch-maker Bvlgari, and lifestyle brands Dunhill and
Chloe. Anchor slots include those for retail formats like department stores, modern supermarkets, international book stores, spas and sports centres.

Singapore’s Food Junction, making its debut in the Chinese market, has signed up to operate the food court at Basement 1. It is expected to take possession of the new site, which has a floor area of 1,558sqm, this December and is slated to open for business by
summer of next year.

Around 200 tenants in total are expected to trade at the shopping centre and the adjoining Exchange Walk.

Strategic positioning

Apart from location, the centre’s strategic positioning is another significant factor for retailers at the Four Seasons Shopping Centre. As analysts and luxury-goods companies pointed out at a recent Financial Times business summit in China, “although the richest people
live in Beijing, there are limited locations with the right image to showcase brand-name goods”.

Four Seasons Shopping Centre, with itsunique design, positioning and image, aims to correct this anomaly.

Says David Hand, managing director of Jones Lang LaSalle’s Beijing office: “We will provide the best-possible environment for retailers, one that offers excellent trading prospects both in the short and longer terms. Four Seasons Shopping Centre is a high-end, purpose-built and retail-managed centre. We see it as the next generation of luxury retailing in Beijing — and,
indeed, the rest of China. It will provide a luxury environment for the brands that are not currently available in Beijing.

“Another key point to note is that the majority of purchasers in this area will most likely be locals, the middleto higher-income Chinese, and that’s important for retailers because that’s
where the true value of their business lies — in repeat business from a local customer base, one that has immense buying power.”

Luxury market

It is also a consumer segment that is growing rapidly. Recent studies value China’s high-end consumer industry at US$2 billion, out of a global total of US$140 billion. It is growing at 15% a year, and by 2010, 250 million Chinese will be able to afford luxury goods, an
estimate that some even consider conservative. By 2010, China’s share of global sales is forecast to rise to 38% from the current 6%, overtaking the Japanese who are currently Asia’s most prolific high-end consumers.

Another finding — in a recent Gallup poll in China — also shows that the country’s affluent residents, mostly urbanites, are smitten by top international retail brands; a desire they can
increasingly satisfy as their rising disposable incomes offer them an increasingly acquisitive lifestyle.

The poll also found that high-income families account for 27% of all China’s urban households, and nearly half of those surveyed preferred to buy foreign branded products. In terms of profession, a large number of the wealthier groups are business-people, followed by employees in government service.

Quality development

Gao says Four Seasons Shopping Centre is all set to woo these buyers. No effort is being spared to ensure that the property — and the entire central zone it is located within — is being developed to the highest international standards.

Designed to be in synergy with the stature and image of the Beijing Financial Street, it is also intended to add a dash of vitality, freshness and greenery amid the surrounding urban environment. World-renowned architectural, engineering and urban design firm, Skidmore, Owings and Merrill (SOM) of the US, was appointed to plan and design the Jinrongjie central zone, with the shopping centre as a pivotal landmark. The result is a layout that allows
for easy access and interaction within the entire area.

All underground areas on the street will be connected and several super large-scale parking areas will be developed. There will be an estimated 10,000 parking lots available, of which 1,000 will be dedicated to the shopping centre. An intelligent traffic-management system will also be introduced to prevent traffic congestion.

Nature theme

The retail-and-entertainment component, in particular, is situated beside a 30,000sqm green park and wetland, with architectural features that reflect the colours and moods of the four seasons. A stroll down the tree-lined Central Park pathway brings the shopper directly
into the shopping mall. Fronting the other side of Central Park is the Exchange Walk where shoppers can take a break amid a hectic day or partake of a meal with friends in the night.

Within the Four Seasons Shopping Centre itself, the theme of nature is reinforced through the interior landscaping and design.

A long transparent dome at the topmost floor, for instance, serves as a giant sky roof with natural lighting, while the colours of the curtain walls will change according to the season. Retailers can apply this theme of nature in their store designs, if they so desire. Food Junction, for example, has indicated that it will be using the theme of nature in the interior decor of its food court.

From all accounts, the Four Seasons Shopping Centre is going to be what its promoters label as: “The shopping paradise by the Forbidden City”.

Tenant mix

The final line-up of tenants will further enhance this “shopping paradise” profile. The tenant mix at the five-storeyhigh shopping centre (plus another basement level of retail space) will reflect the consumption patterns of the potential market.

Basement 1 will feature a lifestyle theme with a supermarket and food court, as well as shops like those selling arts and crafts, fashion accessories and home appliances.

The ground-floor level, themed “International Boulevard”, will have department stores and a car-exhibition area. There will also be international luxury-brand boutiques, watches and
jewellery, leather goods and men’s clothing stores.

Located on the second level will be an “Executive Parade” of stores, including boutique flagship stores, F&B, shoes and bags, and fashion wear.

“Smart Casual” items, including men’s and ladies’ casual wear, and sports and game shops, will occupy much of the third level, while the fourth level (focusing on “Healthy Living”) is
planned to house book stores, spa, clinics, golf shops, beauty salons, electronics,
children’s items, art gallery and restaurants. Completing the entire shopping and leisure experience will be the sports centre to be located at Level Five.

The Four Seasons Shopping Centre will also be connected to the Ritz- Carlton Hotel, which is located at its eastern end.

Professional management

Creating the right environment is one thing. Maintaining and managing it well is another. In this respect, Financial Street Holding says it is committed to guaranteeing a return to retail operators.

“We recognise the importance of good shopping-centre management, and we want to assure retailers that we will be providing the best management expertise possible for our property. We are in the process of appointing an external professional management company for this, one which will be able to assist all of us, developer and retailers alike, to obtain true value from our investments,” Gao says.

With that in place, there is every reason to expect Four Seasons Shopping Centre to become one of the best retail-and-entertainment destinations in Beijing.