Retail in Asia

In Markets

The rise of China’s shopping villages

During lean economic times in the developed West, the hunger for luxury and fashion in Asia, in particular China, has fuelled market growth beyond expectations. But China’s so-called luxury retail slowdown has taken its toll on some brands. A shifting economy coupled with a state-led crackdown on corruption (and the extravagant status symbols or luxury gifting that comes with it) has meant that the past three to four years ended the age of double-digit growth for many luxury labels in China.

There’s also been a natural maturation of an overheated industry in China. In the short term, those who suffered most are European fashion mega brands, many who banked too quickly on the same growth rate despite spreading themselves too thin and wide. Other retail sectors, such as outlet villages and malls, have seized on an opportunity.

“The way people are shopping in China is changing,” says Mark Israel, China CEO of outlet shopping developer Value Retail.

It’s been a hectic few months for the team that Israel leads. This week they opened their latest project: the 55,000 square metre Shanghai Village, next door to the world’s biggest (and newest) Disneyland. Shoppers can pick up items from the likes of Armani, Michael Kors and Calvin Klein for outlet prices.

“When economical growth is not as strong, we’ve traditionally done well,” says Israel. “People are more price conscious, less willing to spend lots as freely … There is more and better merchandise available in the outlet stores, so traditionally we’ve done well in a bad economy, however, China is not a bad economy, it’s just a changing economy.”

For outfits such as Shanghai Village, the growth of their target consumer – rising middle classes and upper middle classes – continues to be strong. It’s a group easily wooed by brand outlets selling off-season merchandise at up to 75 per cent off the original store price.