China is quickly finding itself in uncharted retail territory, with a large availability of new shopping malls coinciding with the fast adoption of e-commerce by its rapidly-expanding consumer class, says JLL, a professional services and investment management company specialising in real estate.

 

According to China60 - JLL’s latest perspective on the commercial real estate landscape across 60 secondary and tertiary cities in mainland China, competition is leading to mounting pressure for shopping malls to differentiate. Developers have realised that they will need to tread a new path. According to JLL, China’s retail sector will be blazing its own unique trail as bricks-and-mortar facilities grow in tandem with omni-channel and experiential retailing. The company has predicted a 70 per cent growth in China60 consumer class by 2020.

 

The fundamentals supporting the China60 retail market remain compelling, underpinned by probably the most significant expansion of middle-class population in history. The China60 combined has an urban population of close to 300 million people, larger than the entire population living in American cities.

 

While national retail sales growth has slowed to more sustainable single-digit rates, the China60 cities continue to offer some of the world’s most dynamic retail environments. The sector is evolving at an incredible speed as consumer habits change and organised retailing undergoes radical structural shifts. Shopping mall retailing has maintained its expansion across the China60 and while top-tier cities are moving into their third generation of malls, in many lower-tier cities ‘mall shopping’ is still a new concept. 

 

According to JLL’s latest perspective, omni-channel retailing (whereby retailers provide consumers with goods and services across multiple online and offline sales channels) will become a major force in the China60, and will fundamentally change the shape of bricks-and-mortar retailing across all formats and geographies. Traditional bricks-and-mortar retailers are fighting back – embarking on e-commerce strategies and seeking to improve in-store service. 

 

Despite the projection of 70 per cent growth in China60 consumer class, JLL noted that several factors are contributing to the more cautious sentiment among the top luxury houses in China. Anti-corruption/anti-extravagance measures put in place since 2013 to curtail use of public funds for gifting purposes have cut sharply into luxury goods’ sales. Furthermore, slower growth in the private sector and in the number of newly affluent households has arguably reduced the growth of funds available for high-priced goods.