Malls in Beijing are escapes from the hustle and bustle of the city. They are eerily empty. The problem is pricing. I was at the Oriental Plaza in BJ, and checked out a few international brands. Across the board, the pricing is 20-30% above what you’d pay for the exact same item in Hong Kong or New York. Which seems to make no sense given China is an emerging market. More shockingly, these malls also have department stores selling “luxury” Chinese brands – and alas, they’re priced at Prada/Gucci level too.
A friend who works in luxury retail once told me that the brand’s strategy in China is to enhance the concept of “luxury”. Since 99% of the people cannot afford the item anyways, the idea is to nurture the brand’s image of being luxurious, which equates to being outrageously expensive. Stores in China certainly loses money – but they claim to make it up elsewhere. Wealthy Chinese travels to HK, Europe, and the US and make big purchases. Thus, stores in China are viewed as marketing expense, and a loss leader. In the long run, they’d make it up elsewhere.
Josh Adams wrote an article in Asia Times titled Retail Strategy Rethink. The thesis is that malls in China are not living up to its earnings potential and that at some point retailers will have to adjust and tailor to middle class consumers. If we look at HK as a model for how a city develops, we might end up with a handful of super high end malls, and many residential community malls where supermarkets are the anchoring stores.
