Retail in Asia

In Markets

Why 1/3 of Chinese shopping malls will close in five years


One-third of China’s overabundant shopping malls will close down in five years and the rest will have to transform to survive, according to a report by the Chinese Academy of Social Sciences.

Shopping centers are rapidly losing appeal to consumers in many cities due to their lack of competitive strengths, the report said.

One-third of the malls will change into wholesale or retail marketplaces, with an emphasis on customer experiences. Another third will have to integrate online shopping with brick-and-mortar outlets.

SEE ALSO: China’s malls adapt to survive online shopping onslaught      

Hong Tao, director of the commercial economy research institute at Beijing Technology and Business University, said stores are closing their doors for three main reasons:

1. Economic restructuring

Especially because of the rise of online shopping. Hong’s studies show that 138 department stores, 262 supermarkets and 6,209 sports stores closed from 2012 to 2015.

2. Oversupply of shopping malls

The oversupply of shopping malls  was encouraged by regional governments, reported the 21st Century Business Herald.

China has nearly 4,000 shopping centres, three times more than the United States. Among the world’s top 20 cities building large shopping malls, 13 are located in China.

3. Too homogenous malls

In addition to oversupplied space, another fatal flaw is that many shopping malls are homogenous, often with little difference between one another.

Jing Linbo, director of the Chinese Evaluation Center for Humanities and Social Sciences, said shopping malls need to reform their business models to compete with e-commerce.

Jing also said the key to survival lies in diversified competition and value-added services to customers while Hong suggested that the government help lower the business costs for physical stores, which are faced with rising rents.

(Source: ECNS)