Welcome aboard a new mainland shopping experience.
Global Harbor Mall, a 480,000 square metre megamall complex resembling a giant aircraft, is the future of shopping malls on the mainland - giant, upscale and themed.
This largest mixed-use development in Shanghai has a European theme featuring a hotel, office buildings, an ice rink, spa clubs and children's playground.
Mainland shoppers will soon be spoilt for choice as developers, including from Hong Kong, rush to set up malls like Global Harbor. And the rush is happening not just in cities such as Shanghai but in second- and third-tier cities as well, with "themed" shopping experience being the new focus.
The mainland is by far the most active development market in shopping, accounting for half of the 32 million square metres of shopping centres under construction around the world, according to CBRE Group.
Second- and third-tier cities are leading the charge. Tianjin and Shenyang are adding two million square metres of shopping floor space, more than 100 shopping centres totalling 100,000 square metres are coming up in Chengdu while 574,000 square metres of new space has recently opened in Wuhan.
The number of shopping malls will rise to 4,000 by 2015 from 3,000 last year, according to the China Chain Store and Franchise Association.
Operators are constantly balancing between continuously enhancing consumers' shopping experience and competing with major local players. As a result, more shopping mall operators in first-tier cities have shifted their focus to operations and themes that range from arts to children, a Deloitte study showed last year.
Hong Kong K11 Art Mall, which doubles as an integrated commerce and art space, saw its revenue double last year, and recently launched in Shanghai's fashionable Huaihai Road.
The new building has been 100 per cent leased out, with 120 tenants in total. Some 30 per cent of them are food and beverage outlets, the developer said.
From Beijing to Qingdao, the brand is also looking to expand in 10 mainland cities in the next few years, adding more than 1.6 million square metres.
But some are concerned that it's too much, too fast.
"There's so much supply in the pipeline, it's scary," said Tom Gaffney, head of retail at Jones Lang LaSalle.
"Many industries are diversifying into real estate, so the key for China's retail sector going forth is capturing strategic locations and choosing the right type of developer."
In meetings held in April and May, the central government devolved more decision-making power to provincial and municipal governments. Critics now blame urban planning bureaus of many cities for driving the shopping mall boom with the help of this newfound power.
"The problem isn't with the demand but oversupply, and the latter is spurred by the government's four trillion yuan (HK$5 trillion) stimulus plan," said Spencer Leung, a consumer research analyst at UBS.
"Developing a shopping mall typically involves a lag time of five to six years, which makes it difficult for the market to absorb this kind of rapid growth," he added.
The expansion is taking place at a time when the economy is showing signs of losing steam and consumer demand cooling. Gross domestic product growth slowed to 7.5 per cent year on year in the second quarter, among the lowest in recent years.
"We believe the current [department store ecosystem] downturn could last another two to three years … with or without discounting, brand operators are facing declining profitability," Leung wrote in a report.
Listed brand operators such as Belle International and Daphne International have been hit the hardest, with their shares plunging nearly 35 per cent and 51 per cent respectively this year. Leung maintained "sell" ratings on both companies.
But Adrian Cheng, founder and chairman of New World China Land and K11, is not worried. "The overall impact of mainland China's slowing luxury goods demand won't be that significant for shopping malls like K11," Cheng said.
"It's only that they are more sensitive to the price point due to sentiment reasons."
By 2018, the company expects a total footfall of 350 million and total retail sales turnover of 20 billion yuan. With Hong Kong giants New World China Land and K11 jumping into the fray, the competition rises for mainland commercial developers.
Hang Lung Properties has five commercial projects in the pipeline, with investment of about HK$40 billion in second-tier cities such as Tianjin and Wuxi. Wharf Holdings is working on five projects with a gross floor area of 2.1 million square metres that are expected to be completed between 2013 and 2016.