High End Discount Retailers March Into China

"We will be in China market Copy European model, focus on high-end extravagant and fashion Brand. " Scott D. Malkin, founder and chairman of the London based discount Plaza operation, said in an interview. "We plan to expand in the suburbs of first tier cities such as Shanghai, Beijing and Hong Kong", including Suzhou discount Plaza, which will open gradually in the summer of 2013. The first phase of the project covers an area of 25000 square meters, and 125 brands are planned to settle in.

Discount shopping centers have emerged in China, but the existing projects are mainly operated by local developers, which are not attractive and mature management, "far from Woodbury common in New York and Bicester village in Britain." Malkin points out.

The Beijing Tianjin famous outlets, which opened in July this year, is an exception. The train discount Plaza, which is only 17 minutes away from Beijing, is located between Beijing and Tianjin. Its architectural style imitates the Italian town of the 16th century and is jointly established by fingen group of Italy and waitex group of the United States. At present, the project has recruited 40 designers and high-end brands including Prada, Giorgio Armani, Versace, Salvatore Ferragamo, Fendi, Bulgari and coach, and the commodity price is about 30% to 60% of the market price. Of course, developers hope to eventually have 100 brands.

On China's market

The price of Suzhou discount Plaza will be 6.5% lower than the market price. It plans to introduce all luxury brands of value retail in European properties, including Prada, Michael kors, coach, staff international, Ralph Lauren, Sergio Rossi, Belstaff, Missoni, ugg, pink, Yves Saint Laurent, Tod's, Burberry, Armani and Roberto Cavalli. Malkin and some tenants have started to communicate. "Some of the existing tenants of our European projects have expressed their desire to enter the Chinese market, which shows us the business opportunities." Malkin says.

"The biggest challenge facing the Chinese market is the authenticity of products." "The Chinese market is full of fake goods, and customers seem to be used to it," Malkin points out. But we insist that we only sell genuine products at the counter, not the low-grade products specially made for discount stores. "

"Brand image is very important, and brands don't want their products to be questioned. We will bring quality assurance to the Chinese market. " He added.

Looking at the whole world, the sales of discount products are very optimistic. Last year, the sales of discount products of many retailers, including Saks Fifth Avenue, Neiman Marcus and Bloomingdale, continued to grow. Recently, eBay has also launched a special website for discount commodities. In China, according to the research of China market research company, the white-collar customers who go to the discount Plaza for brand pursuit are a large group with rapid growth. The group is usually made up of women in their 20s and earning less than $400 to $500 a month. From the regional point of view, the area along the Shanghai Suzhou line has the mature conditions for opening high-end discount shopping centers in terms of population and economic growth. This region is the center region with the highest population density and the strongest economic activity in China. From 2005 to 2010, the average annual economic growth of Suzhou was 18%, which was the fourth largest urban economy in China after Beijing, Shanghai and Guangzhou. In addition, Suzhou attracts a large number of tourists from home and abroad every year because of its classic landscape. According to industry insiders, Suzhou was far behind in the development of discount sales market.

Common desire of luxury brand

"At present, China's high-end shopping center projects are overwhelming, but there are few discount squares." Christopher Ainsley, President of a global retail people flow measurement company.

As far as Huibo is concerned, there are only about 200 discount analysts in China's retail market, which meet the standard of China securities market.

Although value retail has many successful experiences in the world, Malkin will continue to cooperate in China. The Chinese partner of the project is a large real estate company, which mainly helps value retail acquire land in Suzhou and avoid various problems encountered by foreign real estate developers and retailers entering China. But Malkin declined to name the Chinese partner.

In addition, Marvin Traub associates, which has signed a five-year consulting service agreement with value retail, provides strategic advisory services to the project. Traub proposes to upgrade its product portfolio, focusing on luxury goods, fashion and international goods, which Malkin believes is not difficult.

"The brand sees value retail as a partner, not an owner." Traub points out that "they pay sales commission, not fixed rent."

Traub also said that value retail usually has an on-site product general manager to help the brand maximize its benefits. "They can enhance the relationship between customers and discount Plaza, and help brands master the direction of passenger flow." Its shopping mall is famous for its wide and friendly shopping environment. "Those cheap stores full of substandard goods 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. "

The reason why Malkin has a strong desire to enter the European market is not only that he has a strong desire to invest in new cities in China. Value retail has nine discount Plaza projects in Europe, including La Vall é e village in Disneyland Paris and fidenza village near Parma, Italy.

"The growth of our existing projects is encouraging." Malkin said value retail expects sales of $2.18 billion this year, compared with $1.82 billion in 2010. Last year, the sales efficiency of its discount Plaza was $1250 per square foot, of which Bicester village, the first project opened in 1995, topped the list, reaching $2240 per square foot. Other retail projects around the world are out of reach, except for the BAL harbour luxury mall in Miami, which is expected to sell $2306 per square foot in 2011.

Malkin is confident of the success of his Suzhou project. "75% of Bicester village's customers are tourists, and one third of them are from China." He said that now is a good time to make a big push into the Chinese market. "At present, the Chinese market is still in its infancy in terms of its discount retail industry." Malkin added, "but the status quo in Europe and the US will accelerate in China. In the next three to five years, we will complete five projects. "

Malkin said this is not exaggeration. "The biggest challenge is not in the construction itself, but in the implementation after the completion of the project and the future sales growth. We have maintained double-digit growth for 15 years, which is the main task of retailers."
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