Insite (China) working on consumer loans to keep shoppers stick with its malls

Dickson Sezto, the chairman and chief executive of Insite (China), says property players need to know more than just the real estate industry as the internet brings rapid changes to the market

PUBLISHED : Tuesday, 18 August, 2015, 11:32pm
UPDATED : Tuesday, 18 August, 2015, 11:32pm

Dickson Sezto set up property investment firm Insite (China) in 2008 after making a name for himself in the industry by working on Shui On's iconic Xintiandi project in Shanghai and later reviving the Super Brand Mall in the financial district of Lujiazui.

His company has advised on more than 30 shopping malls across the country, putting the company's brand on some of them. Now, he wants to quickly increase the number of Insite-branded shopping malls.

 

You are regarded as a legend in China's retail property industry. Can you tell us about the latest trend?

In the past, the media and government officials we dealt with were all related to the property sector.

More recently, officials in charge of commerce have started to meet us, because activities inside the shopping malls and the people we hire are more closely related to the flow of goods and delivery of services.

Although we are in the property business, the skill set involved in the sector today is much wider than before. If you know nothing about property, you cannot do well in the business. But if you only know property, neither can you do well.

We need to know about property activities, property and consumer finance, the flow of goods and the trend in consumer behaviour, as well as all relevant policies.

On top of that, the internet has added a new dimension, quickly changing everything. That keeps us very busy.

A good mall operator must have a showpiece mall. It must have a core team to operate with successful solutions.

 

An increasing number of developers are trying to adopt an internet strategy. However, we have yet to see real chemistry between property and the internet. Internet is now used as a new way of marketing, sales and more recently financing.

Crowdfunding provides a stable financing channel, neither too cheap nor too expensive. Investors are also homebuyers, which helps reduce risks for developers and quicken their cash flow.

 

Do you see any developers or mall operators moving in the right direction in their online-to-offline efforts?

We still do not know what is right. There are no rules and the government is still hesitant. It will only finalise rules when companies finish their experiments. This is the wisdom of Chinese policymakers.

 

How serious is the oversupply in shopping malls?

There are three groups of companies related to the sector. One is those with many malls but do not know how to improve their performance. Another is those planning to enter the sector by acquiring malls at cheap prices. The third is big non-property state-owned companies which own land but have no expertise or plans on how to enter the business.

Companies like Carlyle Group are in the second group, which will look for opportunities to buy assets from big state firms. They will buy at 30 per cent or 40 per cent discount. Such opportunities will increase in the next few years.

 

As property inventories are very high in China, has investment been slowing down?

Smaller players are slowing down new constructions, but not the big ones. Non-property state-owned firms are still accumulating, at a fast pace, land for property development, although. They do not have plans on how to deal with the land.

 

China has a large number of malls but very few strong operators. Does that offer you an opportunity?

Yes. I am more interested in helping mall owners solve their problems. I cannot do business with Wanda, as it already has its own management team and external consultants are not necessary.

With the rising challenge from e-commerce and online-to-offline development, a strong mall operating team like us must know financial innovation, scientific management, control of retail brands and content, and the commercialisation of art and culture.

For example, (Wanda owner) Wang Jianlin knows it very well he must have control over anchor tenants so he can expand his Wanda plazas very quickly. He cannot rely on the leasing team to fill the space. That is why he invested in cinemas, department stores, karaoke rooms and fun areas for children.

Making money from cultural activities and art exhibitions is also key for mall operators in the future.

In the past, we paid singers to sing at our shopping malls. Now, we team up with top agencies to bring in different bands every week. We don't charge for the space, and neither do we pay for their performance. But they must attract 2,000 more visitors every day.

 

Can you tell more about the financial innovations you are working on?

Most mall operators' financial innovation is zero at this stage. We are talking to big financial companies, particularly internet lenders, for them to grant our member shoppers cheap consumer loans. For example, McDonald's has a unified price nationwide for its hamburgers. If you offer a discount, the people will come to the McDonald's in your mall.

To do that, you must have control over the consumers' payments to give them a cash rebate or discount. We issue membership cards and grant them consumer loans in partnership with lenders. They only need to give me their Taobao account, bank card account and mobile phone numbers.

I will then know their spending habits over the past five years, which will make it safe to grant them a loan. But, this loan can only be used at our malls. We are still discussing the details with the lenders. I have given up talking to the state lenders after the first round as I find their risk management conservative and loan approvals slow.

Most shopping malls in China do not have such services yet, but Wanda has started. It acquired 99Bill, also known as Kuaiqian, which has a licence for internet banking.