NewInternational brands shun shops and build China presence online
Trend towards e-commerce makes it harder for landlords to find international retail tenants
Landlords of retail centres in China will find it more difficult to secure quality international tenants to fill their shopping centres as these companies are becoming cautious in opening new stores, given changes in business format.
"Some international retailers used to adopt very aggressive expansion strategies to boost brand visibility. But after a few years' operation in China, they found that such ambitious business expansion faced problems such as high costs," said Regina Yang, director and head of research and consultancy at Knight Frank Shanghai.
Yang said a number of brand owners had started to close unprofitable stores and focus on improving core competencies. "E-commerce may be a new development direction for most retailers as they see big gains from this sector," she said.
Yang noticed an increasing number of international brands willing to link up with third-party online platforms such as Tmall because marketing their goods online provided access to "customers nationwide without location constraints".
One example is Marks & Spencer of Britain. The retailer recently announced the decision to close five of its supporting stores in the greater Shanghai region by August. It has also reviewed its head office resource structure in line with growth plans.
After a few years' operation in China, they found that such ambitious business expansion faced problems such as high costs
Marks & Spencer did not say if those shops were unprofitable, but the company wrote in an emailed reply to the South China Morning Post that "closing these stores frees up resources that we will invest in other stores". That includes focusing resources on its flagship store on West Nanjing Road in Shanghai and future plans to enter the Guangzhou and Beijing markets.