Struggling Of Chinese Physical Retailers: Growth Rate Keeps Falling

For China's shopping malls and department stores, the increasing vacancy rate and declining rent have become commonplace.

However, official figures show that retail sales in China have rebounded strongly and helped China's economy exceed the expectations of experts in the third quarter.

The Reuters conducted an in-depth investigation of this huge contrast.

Be located

A shopping mall in the center of the city was very unnatural.

This underground shopping mall is located in one of the most developed cities in China. However, its performance is not good enough and its traffic is seriously insufficient. The owner of a clothing store here said, "sometimes I can't sell one day a day.

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There are many reasons for this obvious contrast, including the fierce competition brought by online sales and the increase in retail data caused by government procurement.

Coupled with improper management of assets, the weakness of shopping centres is expected.

More importantly, the struggle of Chinese physical retailers has amplified a policy problem.

Businesses have built these shopping centers to get a share in the growing consumer market, but now they have become the debt burden of Chinese enterprises.

At present, the total liabilities of Chinese enterprises reach 160% of the total GDP, which is 2 times that of the United States.

The reduction in passenger traffic has squeezed the liquidity of the owners of shopping centers, and this is a potential huge risk for China when its current economic growth has dropped to its lowest level in more than 10 years.

The owner of the mall is trying to redecorate the shopping centre to attract more customers, but the effect is not yet known.

In another big city in China, sunshine department store in Beijing decided to suspend business this month.

Their managers say they will turn to online sales to find a bigger market.

"Sales have gone well, but the overall trend is declining."

Growth rate continues to decline

And many large enterprises running shopping centers are also having a hard time.

Dalian Wanda, a real estate developer, said in January this year that it would close or replan 30 retail outlets, and that more adjustments would be made in 8.

Parkson, a Malaysia group with more than 70 department stores in China (Bai Sheng) closed several stores in northern China last year.

In 2013, their profits in China dropped by 58%.

"The growth rate of China's GDP is slowing down, and the growth of retail sales has slowed down.

The number of shopping centers in many cities is too large, and the redundancy of shops has led to a sharp rise in vacancy rates.

Marie Lam, an analyst at Moodie, said in a research report.

The Bank of China once again lowered interest rates on Friday, trying to revive the economy, the sixth time in a year.

Tim Condon Condon, an economist at Singapore's ING, suggests investors can't misinterpret the retail data given by Chinese officials.

These data do not mean that the consumption of Chinese residents is growing, as it includes some sales brought by government procurement.

On the other hand, despite the obvious slowdown in the growth rate, the growth rate of the electricity supplier sector has remained at 2 digits.

Alibaba, the electricity giant, is expected to slump to 27% in the second quarter, even though it is much weaker than last year. However, compared with physical retail, this is still a very high growth rate.

With more Chinese consumers entering the middle class, the entertainment industry is booming.

In the golden week of October, movie ticket sales reached a record $300 million, an increase of 60% over last year.

However, if consumers' enthusiasm is not enough to keep pace with the construction of shopping centers, banks may face a lot of bad debts.

Oversupply in shopping market

More than half of the world's shopping malls are located in China, according to CBRE, a real estate company.

A large part of them can not bring enough returns to investors.

A cooperative report by China Chain Store Association and Deloitte shows that by the end of this year, the number of new shopping centers in China will reach 4000, an increase of 40% over 2011.

Real estate analysts say many of the plans for retail space have been launched by the local government, hoping to stimulate the economy through the development of real estate.

This led to the rush of construction and bad management of many shopping centres.

And consumers did not surprisingly refuse to shop in these hasty places.

Condon said, "if you build a shop but have no customers, it becomes a bad loan.

This is a big problem for banks. "