Retailers in China are optimistic given the nation's strong
economic development and rapidly growing middle-class consumer
group but quality retail space is in short supply, according to a
recent survey.
International real estate services firm Jones Lang LaSalle
surveyed 92 domestic and foreign retail chains at the end of last
year on retailer sentiment in China.
Most respondents were confident about trading prospects in China
this year, with 82 percent expecting gross turnover to increase and
97 percent believing profit margins would remain the same or
improve over the next 12 months.
These expectations were based on the fact that China's gross
domestic product averaged 8.9 percent annually over the last seven
years and has continued to be outpaced by retail sales growing at
an annual rate of 10 percent.
The prosperity of China's tourism industry and demand for
different types of retail real estate products also contributed to
retailers' optimism.
The survey showed that 97 percent of retailers in China expected
to expand their networks this year. None expected a decline in the
total number of stores.
Of those surveyed, 37 percent said they would expand rapidly, 43
percent were aiming for moderate growth, while 17 percent planned
marginal growth.
"The strong and positive results recorded for retailers in our
survey reflect the aggressive expansion and modernization of the
retail sector in China," said David Hand, head of China Retail for
Jones Lang LaSalle.
"The market will become ever more complicated and
competitive."
But 89 percent of respondents said locating suitable sites for
retail outlets would be difficult, mainly due to lack of quality
space and rising rental costs.
Landlords that provide genuine shopping center management that
focuses on the "shopper experience" and "partner with retailers"
will outperform those that provide more traditional property
management services, according to Hand.
"Another area for gains would be to differentiate product mix by
locations," said Hand, explaining that retail space in suburban and
family-oriented areas was becoming more distinct from those located
in city centers.
Retailers could improve product placement that varied between
these formats and target markets, according to the survey.
It also said that rule changes due to China's WTO (World Trade
Organization) commitments meant that foreign retailers' existing
joint ventures or those entering China without joint venture
partners might lose or risk strategic relationships with agents and
developers.
"Fostering relationships with key developers and making use of
quality retail leasing agents may be a way to gain access to
multiple sites or projects and can also make the hunt for new store
space easier and more predictable," said Hand.
(China Daily January 12, 2007)