The Next Barrel Of Luxury Goods: High-End Discount Retail Discount Shopping Center

High-end discount retailing can be regarded as the next pot of gold in China's market.

Value Retail China's first discount center, one of the nine largest discount Plaza operators in Europe, will start in March next year in Suzhou, 50 miles west of Shanghai, covering an area of 60000 square meters. The project called Suzhou Village is based on the Bicester Village discount Plaza operated by the company. The discount Plaza is 65 miles away from London and attracts large numbers of Chinese tourists every year.

"We will copy the European model in the Chinese market, focusing on high-end luxury and fashion brands." The Scott D. Malkin, founder and chairman of the London based discount Plaza operator, said in an exclusive interview. "We plan to expand in the suburbs of cities such as Shanghai, Beijing and Hongkong," including the Suzhou discount Plaza, which will gradually open in the summer of 2013. The first phase of the project covers an area of 25000 square meters, with 125 brands planned to enter.

The discount shopping center format has appeared in China, but the existing projects are mainly operated by local developers, lacking attractive and mature management, "far from the Woodbury Common in New York and the Bicester Village in the UK". Malkin points out.

In July this year, Florence Town, Beijing and Tianjin famous products outlets can be regarded as an exception. The discount Plaza, which is only 17 minutes away from Beijing, is located between Beijing and Tianjin. Its architectural style is modeled on Italy town in sixteenth Century, which is jointly established by Italy Fingen group and Waitex group. At present, the project has netted 40 designers and high-end brands including Prada, Giorgio Armani, Versace, Salvatore Ferragamo, Fendi, Bulgari and Coach, and the price of the products is about 3 to 40 percent off of the market price. Of course, developers hope to eventually have 100 brands to enter.

Chinese market discrimination

The price of Suzhou discount Plaza will be less than 35% off of the market price. We plan to introduce all luxury brands of Value Retail in European property, including Prada, Michael Kors, Coach, Staff International, Ralph Lauren, Sergio Sergio, ",", ",", ",", "," Malkin has already started some initial communication with some tenants. "Some of our existing tenants of the European project have expressed their desire to enter the Chinese market, which gives us a chance to see business opportunities." Malkin says.

"The biggest challenge facing the Chinese market is the authenticity of products." Malkin pointed out: "the Chinese market is full of fake goods, and customers seem to be accustomed to it. But we insist that we only sell genuine products instead of customized products for discount stores.

"Brand image is very important, and brand does not want its product to be questioned. We will bring quality assurance to the Chinese market. " He added.

Looking at the world, sales of discount products are very optimistic now. Sales of discount products including many retailers such as Saks Fifth Avenue, Neiman Marcus and Bloomingdale (all high-end department stores in America) continue to grow last year. Recently, Ebay also launched a discount commodity website. In China, according to the research of China Market Research, the white collar customers who go shopping for discount Plaza are a fast growing group. This group is usually composed of more than 20 year old women who earn no more than 400 to 500 dollars a month. From a geographical point of view, from Shanghai to Suzhou, both the population and economic growth have ripe conditions for the establishment of high-end discount shopping centers, which are the most concentrated and economically active central regions in China. From 2005 to 2010, the average annual economic growth in Suzhou was 18%, the fourth largest city in China after the north. In addition, Suzhou attracts large numbers of tourists both at home and abroad because of its classic garden landscape. According to insiders, Suzhou has lagged behind in the development of the discount sales market.

The common desire of luxury brands

"At present, China's high-end shopping center projects can be described as overwhelming, but there are few discount squares." Christopher Ainsley, chief executive of a global retail stream measuring company, pointed out.

Hu Weibo, a retail market analyst at CITIC Securities Beijing branch, said that at present, there are about 200 shopping centers in China, which are self defined as discount Plaza, but only 10% of the products they sell and their pricing are up to the world standard.

Although Value Retail has had many successful experiences all over the world, Malkin will still cooperate in China. The Chinese partner of the project is a large real estate company that mainly helps Value Retail get hold of land in Suzhou and avoid all kinds of problems encountered by foreign property developers and retailers in China. But Malkin refused to reveal the name of the Chinese partner.

In addition, Marvin Traub Associates, which signed the 5 year consultancy agreement with Value Retail, provides strategic advisory services to the project. Traub suggested that the improvement of product mix should be focused on luxury goods, fashion and international products. Malkin is not a difficult thing to do.

"Brand regards Value Retail as a partner rather than an owner." Traub points out that "they pay the sales commission instead of the fixed rent."

Traub also said that Value Retail usually has a general manager in the field to help the brand to maximize its benefits. "They can enhance the relationship between customers and discount Plaza, and help brands grasp the trend of passenger flow." Value Retail's shopping center is famous for its unique architectural style, friendly shopping environment and wide streets. "Those cheap stores full of defective products are not what we want to build. There are already many so-called discount squares in the Chinese market, but customers want a more upscale international experience, which is what we want.

Malkin said he saw the Chinese market not only because he felt a strong desire to enter the brand, but also because new projects in major European cities tended to decrease. Value Retail has nine discount Plaza projects in Europe, including the La Vall e Village of Paris Disneyland and Fidenza Village near Italy, Palma.

"The growth of our existing projects is gratifying." Malkin said that Value Retail expects sales to reach $2 billion 180 million this year, compared with $1 billion 820 million in 2010. Last year its discount Plaza sales rate was $1250 per square foot, of which Bicester Village, the first project in 1995, topped the list, reaching $2240 per square foot. The flat effect has left much of the rest of the world's retail sales. Apart from the Bal Harbour luxury shopping center in Miami, it is expected that sales in 2011 will reach $2306 per square foot.

Malkin is confident of the success of its Suzhou project. "The customers of Bicester Village 75% are tourists, and 1/3 of them are from China." He said that now is a good time to enter the Chinese market in a big way. "At present, the Chinese market is still in its infancy for its discount retailing industry." Malkin added, "but the current market situation in Europe and the United States will accelerate in the Chinese market. In the next three to five years, we will complete 5 projects. "

Malkin said that this is not an exaggeration. "The biggest challenge is not in the construction itself, but in the implementation of the project and the growth in sales in the future. We have maintained a 15 digit two digit growth, which is the main task of the retailers."