Shopping mall economics: how to get Chinese consumers to shop in stores
One of the most prominent storefronts of Shanghai’s hippest mall, TX Huaihai Youth Energy Center, belongs to the only immersive experience boutique of skateboard brand Vans in Asia. At one point, it was decorated like a spaceship control deck in a mint green color.
The American company, like many other mall vendors, has to change their signage every month or even every week.
“Sometimes customers say the changes are so drastic that they feel like they’ve arrived in a whole new place,” said Tiffany Xu, TX Huaihai project manager.
Shopping centers are struggling to attract buyers. The COVID-19 pandemic has exacerbated the trend for online shopping. China’s total retail sales reached last year 39.2 trillion yuan ($ 6 trillion), of which 75% of offline sales. This is a decrease of 10% compared to 2016.
Offline vs Online
Chinese consumers have e-commerce apps that allow them to buy anything in the car; grocery store that arrives within 30 minutes; and luxury goods delivered by men wearing suits and white gloves.
“Seventy percent of what I buy is online and 30% of my purchases are offline,” said Chen Zhikai, major in economics.
Still, the 19-year-old is forced to visit TX Huaihai once a week when he can.
“I love its fashion boutiques and pop-up shops,” Chen said.
One of the advantages of offline shopping is the ability to try on clothes, according to his friend Zheng Xinyu, an accounting and finance graduate. He only orders online if he cannot find the right size. The same goes for shoes.
“I entered the sneaker world by buying basketball shoes on the side. Then I bought a pair of Adidas Yeezy and started buying a new pair of sneakers every month, ”Zheng said.
The 19-year-old’s sneaker collection expanded to 20 pairs, which cost him around $ 6,200.
“I went crazy for a while and now I regret some of these purchases,” Zheng said.
More difficult to find items
TX Huaihai opened in late December 2019 and closed shortly after due to the COVID-19 lockdown in China. It resumed operations after a six-month hiatus and today the mall has 30,000 visitors a day. His the target market is 18-25 year olds who shop “on impulse,” according to Xu. TX Huaihai offers more difficult to find brands.
Mall vendor Innersect, one of Shanghai’s leading cultural street events organizer, sells Japan’s Bearbrick, a collectible teddy bear. The items cost hundreds to thousands of dollars each.
TX Huaihai also includes DJ stations that allow consumers to spin a few tracks. There is an entire floor dedicated to emerging Chinese designers, a theater for talk shows and art exhibitions, which includes a permanent installation of the multimedia collective TeamLab inside the mall’s nightclub. The mall also has a hair salon specializing in coloring.
“Most fashionable young people today dye their hair and change color frequently. One day it’s red, the next day it’s green. Young people see their hair color as just as important an accessory as their clothes, ”said Xu.
Guests can also play with cats. The Cat Cafe charges 68 yuan ($ 11) for two hours, which includes a cup of coffee.
“People are lining up for this on the weekends,” Xu said.
She did not want to disclose the profitability of the mall, but said sales had been good.
“Take Vans for example, the brand has a 1,000 square foot store here. It generates more sales per square foot than any other Vans store in China, ”said Xu.
She said TX Huaihai was succeeding without going down the route of traditional shopping malls, which rely on grocery stores to boost foot traffic.
“The golden rule for malls when I started in the industry 12 years ago was 30% restaurants and 70% retail. It was considered a healthy ratio, ”Xu said. “What’s scary is that by the time we were planning [TX Huaihai], some suburban malls have reversed the ratio to 70% restaurants and 30% retail. “
TX Huaihai has revived a dilapidated shopping area on Huaihai Road into a meeting place for young people. Xu said the mall charges the highest rental rate in the block. Rather than fighting e-commerce, TX Huaihai also offers its suppliers a live streaming space on Alibaba’s TMall.
The mall taps into celebrity endorsements to attract visitors.
Preschool Education Major Yilina Li traveled to TX Huaihai just for Machi Machi bubble tea.
“The drink appeared in [Taiwanese pop singer] Jay Chou’s music video, ”said the 20-year-old. ” It is really good. “
Next to the bubble tea stand is a well-lit wall to encourage selfies in front of the phrase: “I love you so much machi” – a play on the name of bubble tea.
There are plenty of other photo ready places in TX Huaihai which is by design.
“What can’t you buy online these days?” So what would make you come shopping? Because we provide what is called social capital. You can post beautiful photos to your Wechat feed. You can show your friends that you have bought something that they cannot get. You can brag about attending an offline event as a VIP, ”Xu said.
Playing on this fear of missing out is how the mall hopes to retain younger consumers.
Further research by Charles Zhang