Outlet villages in China don't just offer bargains
Rise in luxury retail outlets reflects increasing number of shoppers
Lower prices are one of the factors driving Chinese to shop for luxury goods abroad, which is why outlet malls in Europe and the US have become a top destination for travellers.
But for the tens of millions of Chinese without a passport, a new form of retail therapy has emerged on home turf: outlet malls, or "villages", that offer shoppers more than just affordable designer goods.
Designer outlets have existed in the US since the 1970s and China has been slow to catch on, until now.
"Outlets have existed in other Asian markets such as Japan and South Korea, but the tendency was to rebrand an old building as an outlet, and just bring in grey merchandise [parallel goods]," says Dan Kelly, president of The Outlet Company, which operates Shanghai Mega Mills.
"In China, we are seeing a new generation of outlets that are modelled on global standards and that are way more sophisticated. They are designed to elevate the shopping experience so that it's comparable to how brands position themselves in full-price models," he says.
While many of these outlets are similar to their Western counterparts in size, they are aimed at completely different customers. Their core customer group is locals and day tourists from nearby towns who are looking to do more than simply shop.
"When the Chinese visit [British outlet] Bicester, they come armed with a list, and are targeting a set of major brands they are familiar with. It's more of a mission," says Mark Israel, CEO of Value Retail Management China, which just opened Yi Ou Lai Suzhou Village. "They are more open to trying other things here - they are committing more time and they want to be surprised.
"They can and choose to spend money in many different places, so it's important we create a destination that justifies the investment of time and money."
Shopping at a Chinese outlet isn't considered the main event, as visitors want a unique overall experience. The design and setting are important, and the more impressive the place looks, the better.
Yi Ou Lai is located just a 90-minute drive from Shanghai. Set against the picturesque Yangcheng Lake, its grand architecture brings to mind Italy's Lake Como, complete with cobbled streets and bridges.
Visitors can take a stroll in the oriental water garden, which comes with a pavilion and tower that includes space for performances and exhibitions.
Florentia Village Designer Outlet Centre near Tianjin, meanwhile, also evokes one of Italy's greatest cities, thanks to its open-air layout, and mock 16th-century architecture, complete with Venetian-style canals and gondolas.
"We do monthly marketing surveys, interviewing around 7,000 people every quarter. Since the very beginning, people have said the main reason they visit our centre is for the environment, rather than the brands we carry," says Maurizio Lupi, managing director of Florentia Village. "In China, there aren't many places to go, so we try and provide a relaxing, fun atmosphere."
Along with lavish surroundings comes a list of services and activities that integrate the shopping and entertainment experience.
At Shanghai Mega Mills, visitors can watch a film at the nine-screen cinema, while upcoming developments will feature mini-golf, an outdoor water park and a Ferris wheel. Food and beverage offerings are a cut above food courts, and range from farm-to-table restaurants (Suzhou) to upscale Italian eateries (Florentia).
At Value Retail, highlighting culture and art is a way to differentiate itself. Its Silk Story boutique is a collaboration with the Suzhou Silk Museum, and highlights the local area's history of silk production, complete with vintage looms and a silk painting class.
They have also hired art curator Davide Quadrio to help bring art into the village through exhibitions, digital installations and live performances.
Israel says art should be lived - "people have an emotional reaction it" - rather than hung on the wall. "People who come here are interested in Chinese culture and its history, and it draws them in," he says.
But the merchandising is still vital. In most cases, each brand will decide what merchandise will appear on shelves (it's usually a year old), although discounts can range anywhere from between 30 to 75 per cent off retail.
Added-value services for vendors include in-house retail teams, architects, designers and staff training, to ensure a smooth experience for the customer. "We have a retail academy where we train store managers and attendants, so they know how to deal with the customers, sell more, and know how to display the goods," says Lupi. "Every year, attendants receive a certificate which is recognised outside our industry as well." Many outlets are also experimenting with a unique mix of brands and boutiques. Children's wear is a category that does particularly well, while local designer brands attract a younger audience.
"When people come here, they stay together as a family. So we have more children's clothes, as well as a playground for them to enjoy while their parents shop," says Israel.
"We also have the opportunity to feature Chinese designers. One of the changes that's happening in all markets is that the traditional power brands are not as dominant. There are lots of interesting dynamic brands coming into the market, and we are willing to showcase them," he says.
The Outlet Company will open its second outlet in Nanjing early next year, while Value Retail's second development in Shanghai will open its doors in mid-2015.
In addition to two new openings in 2015, Florentia hopes to open seven outlets across the mainland, extending to second-tier cities such as Chengdu and Qingdao by 2017.
"The biggest challenge for us is educating people about what a luxury outlet should be," says Kelly. "Also, in China scale is paramount and when you expand so quickly, it's important you do it right.
"You have to adapt to the market, and still maintain the integrity of product and the service. You cannot forget that China is a long-term investment."
Three of a kind
Florentia Village, Tianjin
Opened: June 2011
Size: 49,000 square metres
Number of stores: 165
Shoppers: four million a year
Average spend: 550 yuan (HK$694)
Shanghai Mega Mills
Opened: January 2013
Size: 62,000 square metres
Number of stores: 175
Shoppers: 3.6 million a year
Average spend: 1,625 yuan
Yi Ou Lai Suzhou Village
Opened: May 2014
Size: 32,000 square metres
Number of stores: more than 50, with 30 to be added by year's end
Shoppers: 20,000 a week
Average spend: 4,300 yuan