Shopping villages, factory stores all the rage
As the pandemic’s impact eases, multibillion dollar market for luxury goods finds firm foothold in China’s retail industry
In the next three years, China’s outlet sector is expected to see their operations reach the highest standard internationally.”
Shang Xiuli, deputy secretarygeneral of the China General Chamber of Commerce
Despite the COVID-19 pandemic, shopping villages comprising exclusive streets of factory stores in China have seen booming sales and abundant visitors last year and so far this year. Outlets’ business performance has been more robust than that of many traditional department stores in the retail sector, thanks to discount prices offered on international luxury brands. The suburban location of such shopping villages has also helped boost sales.
The pandemic has caused a certain negative impact on the retail sector. Unlike most department stores, outlets are mainly located in suburban areas. Such trendy shopping villages serve as outdoor complexes. They have become one of the go-to weekend or holiday destinations for urban families, and many families tend to bring along their children and pets.
Taking an hour-long self-driving trip to such outlets from downtown area has become a choice for many shoppers. They find such rides and the whole experience very relaxing. Since the pandemic broke out, the outdoor ambience of shopping villages makes it easier for people to get fresh air, keep themselves at a distance from each other, and avoid possible infection from the crowd, industry experts observed.
With international travel stagnating due to the pandemic, China’s domestic luxury market has rapidly rebounded. Chinese consumers continued to buy high-end luxury bags, clothes, jewelry and wines in China.
“Owing to international travel curbs, outlets and duty-free stores have become the shopping destinations for many middle-income Chinese consumers to buy international brands in China. Duty-free stores mainly provide perfume and cosmetics, and outlets at shopping enclaves mainly provide clothing, shoes and bags,” said Shang Xiuli, deputy secretary-general of the China General Chamber of Commerce.
“In the next three years, China’s outlet sector is expected to see their operations reach the highest standard internationally. In the postpandemic era, outlets are foreseen to become a sector that can help promote consumption upgrade and boost the economy in China,” she said.
In 2002, the outlets sector started its development in China, which was later than their origins in the United States and Europe, but the sector has developed rapidly in China.
This year, the total sales revenue of outlets nationwide is expected to exceed 100 billion yuan ($15.5 billion).
Last year, the total sales revenues of outlets in China exceeded 80 billion yuan. Among the total, 39 outlets each achieved annual sales of more than 1 billion yuan, according to Outlets Leader, a Chinese-language magazine that focuses on the development of outlets.
By 2025, China is set to become the world’s biggest luxury goods market, with Chinese consumers expected to account for nearly half of the global spending in the sector in the same period, according to a report by consultancy firm Bain & Co.
The first national outlets shopping season in China began on Sept 17 and will end on Sunday. The event has attracted the participation of 22 groups that own outlets nationwide. They include Chinese companies such as Capital Outlets, Wangfujing Group, Sasseur Outlets, as well as Italian company RDM Group.
This is the first major gathering of different outlets in China, and they together issued shopping coupons online on the first day of the shopping season. Besides, various promotions and sales activities have been held during the shopping season.
In the long term, outlet groups that have operations in China should build more projects near large-scale cultural tourism projects such as Universal Beijing Resort and Disneyland in Shanghai.
“Major consumer groups of outlets and visitors who go to those tourism destinations are largely overlapped. The business model of building outlets near resorts has been prevalent in the overseas markets. For instance, there are outlets located near Disneyland in Orlando, Florida, and near Mount Fuji in Japan,” Shang said.
With a collection of top international brands, outlets can help create new types of commercial circles and empower more vitality to farreaching regions of a city. For instance, Tianjin has established a large number of outlets in the city. They include Florentia Village and Tianjin New Yansha Outlets.
Chinese conglomerate Shanshan Corp recently signed an agreement with the local government of Xiqing district of Tianjin. Under the agreement, Shanshan will establish an outlet in the area with an investment of 3 billion yuan. The new outlet plans to start operations in 2023.
“Tianjin is fostering itself into an international consumption center, as the city aims to further raise its soft power and international influence. Building outlets will help Tianjin to form a strong domestic consumption market, promote its high-level opening-up and highquality economic development,” said Zhou Lu, an official of the Tianjin Municipal Commission of Commerce.
With the launch of more outlets in China, the competition between different retailers has become fiercer. Some major companies such as Wangfujing Group, Florentia Village and Shanshan have taken a significant market share in China, and some smaller companies have been endeavoring to survive, according to magazine Outlets Leader.
Beijing-based Surprise Outlets, which positions itself as an outlet that offers trendy and stylish brands, instead of top luxury brands, has attracted a diverse base of customers, especially young families.
Located not far from the Beijing Capital International Airport, the company now operates one outlet in Beijing. It has seen annual sales revenues increase around 20 percent year-on-year on average, and the pandemic did not have much significant impact on its business operations.
If conditions permitted, the company said it is likely to open more outlets in other Chinese cities.
Since the outbreak of COVID-19, Surprise Outlets tried multiple ways last year to drive its sales revenues and overcome the challenges brought by the pandemic. Its staff members held the first livestreaming sessions online, which helped it to get closer to customers.
“Surprise Outlets is conveniently located for people to drive there. We have differentiated ourselves with many other outlets, as we hope to build ourselves into an interesting and fashionable place and attract more customers who love fashion. We plan to expand our operations and the parking lot in Beijing and hopefully open the new stores next year,” said Luan Shaomei, president of Surprise Outlets.
Besides international brands, outlets in China should introduce more local brands and provide additional sales platforms for Chinese brands. The business model of outlets can help more Chinese brands to extend their sales periods and channels and provide more choices of products for consumers, and thus further raise the sales revenues of outlets, said Neil Wang, global partner and China president of consultancy Frost & Sullivan.
“Locations, prices and brands are the most important three factors that may decide the success of an outlet. Outlets should offer a large number of international and Chinese renowned brands, launch frequent discounts to consumers, and guarantee the source of goods is abundant,” he said.