Technology is key to attracting shoppers amid challenging retail environment in China
While brick-and-mortar stores are often considered the low-tech counterpart to online shopping, mall operators and retailers in China need to embrace new technologies to attract customers, says Hong Kong developer Sun Hung Kai Properties.
Touch-screen platforms, e-signage and video walls have emerged as key elements in shopping malls, while interactive activities involving mobile devices enable stores to gather data and enhance the consumer experience, according to Maureen Fung Sau-yim, a director at Sun Hung Kai Development (China), a wholly owned subsidiary of Sun Hung Kai Properties (SHKP).
Shopping malls in China are using a mix of digitally enabled strategies that leverage mobile, social platforms and big data together with traditional marketing approaches, she said,
Fung said Sun Hung Kai Properties’ two major shopping malls in China – Shanghai ifc and iapm – have also adopted technology to improve sales and service.
With iBeacon, a protocol developed by Apple, the malls can identify the exact location of shoppers within a store and transmit highly contextual messages, promotions, merchant offers and advertising directly to their smartphones.
Fung said technology and creative and memorable experimental elements are the key to drawing customers amid the challenging retail market in China.
The overall retail market is being pressured by the large number of new malls in the pipeline, according to a research report by Mizuho Securities.
According to JLL, 43 shopping malls will be completed in 2017, of which 20 will be located in prime areas.
Vacancy rates in prime retail areas in Shanghai increased for the eighth consecutive quarter, reaching 6.9 per cent in the third quarter of 2016, according to a Savills research report released in November.
Nearly half of the projects tracked in the prime retail areas recorded an increase in vacancy rates in the third quarter, it said.
An increase in the number of large, high-quality malls in non-prime and suburban locations has made it harder for a number of older malls in prime areas to attract leading retailers, Savills said.
But Fung said the two SHKP malls overall are enjoying retail sales growth, including in the high-end segments. She estimates that the iapm mall will have achieved 10-15 per cent year on year growth in retail sales for 2016, and Shanghai ifc will reap retail sales growth of 15-20 per cent growth in the same period. Around 10 per cent of the two malls’ total rental income is from turnover rent, which is based on the tenants’ sales turnover.
Commenting on the state of the retail market, Fung said is still being challenged by the three Os – online (e-commerce), overseas shopping and outlets – but she believes luxury e-commerce is unlikely to replace traditional shopping malls.
“It is about personal touch. You need to feel the quality of the products. You will not buy the expensive products online because you cannot touch them,” she said.
In Shanghai, internet sales in the first three quarters of this year accounted for 11 per cent of the city’s total retail sales, up 15.7 per cent year on year. In Beijing, internet sales accounted for 17 per cent of the total, up 12 per cent year on year. But in Shenzhen – considered a technology hub for the country – the ratio was 39 per cent, with year on year growth of about 40 per cent.