Chinese Tycoon Develops Malls for ‘Undiscovered’ European Brands

on June 6 2013 | in Retail | by | with 1 Comment

shopping mall, China,

Zong Qinghou, founder of Chinese drinks giant Hangzhou Wahaha Group, is diversifying his holdings. His ambitious new venture is developing China’s version of London’s famed Harrods or Paris’ Lafayette.

Named China’s Richest Man by Forbes, Zong wants to bring European clothing and accessories brands to his new shopping malls throughout China, China Daily reports.

The first Wahaha mall – Waow Plaza – opened in Hangzhou earlier this year with a $273 million investment. Zong plans to open 100 Waow Plazas across the country in the next three to five years.

Waow Plazas would provide a one-stop experience of shopping, dining, and entertainment. What you will find at Waow are niche luxury brands that are mostly unknown to Chinese consumers. The Hangzhou Waow Plaza features over 40 European brands.

UK brands like Cambridge Satchel Company, TM Lewin, and Nicholas Kirkwood are at the top of his recruitment list. “We are looking for mid-market boutique brands rather than luxury, because the percentage of the Chinese population that can afford mid-market brands is far greater,” Zong said.

The new boutique malls for European brands will be welcome, Zong reasoned, because many brand owners have had difficulty finding a trusted Chinese distributor, and many Chinese are reluctant to pay European manufacturers up front in case products are not delivered. “But our malls will provide the perfect solution,” Zong added.

“I think Wahaha would be a good partner in China because they know the market very well,” said Julie Deane, the managing director of Cambridge Satchel. She said that Zong’s proposal made her realize the Chinese market is more accessible than she previously imagined.

“We will charge our retail brands fair rents, and be very honest in our business dealings. We will also make our malls unique,” Zong said.

Zong thinks the switch to a different industry will not be difficult, because, he said, “the skills of doing business are highly transferable across industries, whether it be food or retail.”

photo credit: spirosk photography

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One Response to Chinese Tycoon Develops Malls for ‘Undiscovered’ European Brands

  1. This could be very good news, or a blessing in disguise.

    There are now hundreds of malls in construction in China, most of them in the periphery of the cities. This is because the best spots in the canter of the cities are already taken.
    Because the best spots are taken, if you are a real estet company building a new mall, it’s probably in the outskirts of the city, and because of that, with very little traffic.

    The big, established brands with teams in China are very aware of this, so they are not looking for retail space in these malls at this moment, they will do so when the traffic arrives, when the city arrives to them due to natural growth.

    Therefore, real state companies with new malls that are not in the centre of the cities have few options:
    a) Accept local brands, which will in the future harm the “luxury positioning strategy”, if that could is the plan of the real state company (and it is so in 90% of the cases, as rents-and profits-are higher).
    b) Leave the mall empty, waiting for the traffic to come in a few years.
    c) Look for brands that do not have much knowledge of the Chinese market (they can hardly differentiate Shaanxi from Shanxi, as it’s logical from any small brand, whose executives cannot be expected to know the whole world), but being foreign, keep the high positioning image of the –empty- mall. These brands will spend time, money and effort trying to push a brand that is located in the wrong retail malls.

    Strategy c) is not ideal, for the real estate company, but for sure it beats a) and b).

    Regarding the brands, as long as they aware of this game, they can also gain from this situation. But from what we see here in China, the ones aware of it are a minority.

    But as it always happens, in the difficulty lies the opportunity!

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