Chengdu is the Darling of Luxury Retailers

on March 31 2014 | in Retail | by | with No Comments

Chengdu, Chengdu International Finance Square, International Finance Square Mall, luxury shopping mall,

Chengdu, a city of 14 million and the capital of Sichuan Province, has been on retailers’ radar.

“We don’t consider Chengdu a second-tier city anymore. It is a first-tier city,” said Andrew Keith, the president of Hong Kong-based Lane Crawford and Joyce boutique, which has opened an 82,000-square-foot store in the city. The brand is one of many that are currently taking advantage of the city’s ripe retail market.

Chengdu provides shopping for at least 250 million people who live in nearby provinces, and the presence of the West has greatly risen in the city over the past few years. Airports offer direct routes to Vancouver, Frankfurt, London, and San Francisco, among other locales. More foreigners are also moving into the area, drawn by the new opportunities for employment.

Chengdu has seen rapid retail expansion in the past few years; because of this influx, the Sichaun Province’s gross domestic product increased at an average rate of 13.6 percent between 2008 and 2012. Last year alone, retail sales reached 375 billion yuan (US$61 billion) in the city, and over 200 Fortune 500 companies now have their regional headquarters in Chengdu. The city’s factories also produce 70 percent of Apple’s iPads, according to the state-run Xinhua News Agency. It’s no surprise that Forbes listed Chengdu as the fastest growing city in China over the next decade in 2012. 

According to studies conducted by CBRE, a real estate consulting firm, there were 31 retail projects in progress in Chengdu as of December 2013. In January, Wharf Holdings Ltd. debuted the Chengdu International Finance Square Mall (CFIFS), a “2.3 million-square-foot center [that] features 300 luxury and lifestyle brands, 90 of which are new to Chengdu” as well as luxury apartments, recreational areas, and offices, according to Women’s Wear Daily.

Swire Properties, who developed the shopping complexes in Beijing’s Sanlitun Village, will open a 1.14 million-square foot megamall in Chengdu in the fall in a joint venture with a Chinese real estate developer. Such construction projects will help accommodate international luxury brands like Louis Vuitton and Burberry, which already have lucrative outlets in the city and continue to extend their reach. 

Though the outlook looks positive, some are uncertain about the ability of demand from the surrounding area to meet the large supply of new retailers. Furthermore, luxury consumption in Chengdu has declined overall as a result of China’s recent austerity push. Fung notes, however, that the Hong Kong developers entering Chengdu often have more reliable projects than their counterparts from the Mainland.

“The consumption demand is great here,” Fung said. “Will the supply meet with the demand? That is a controversy. Some say yes, some say no. In terms of scale, maybe there is too much supply. But if the shopping mall has good operators, it will attract people.”

Other developers are also optimistic. “Middle-class Chengdu consumers are fanatically buying luxury and fashion goods,” said a spokeswoman with Wharf Holdings, the CDIFS developer. “Their purchasing power has shown an upward trend with healthy economic growth and increasing incomes. Chengdu consumers are relatively more generous and confident about spending money on fashionable items as compared to consumers in northern China.”

Nevertheless, it remains to be seen whether or not Chengdu will live up to retailers’ and developers’ expectations.

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