Luxury Brands Bail on The Bund

on August 8 2014 | in Retail Trends | by | with No Comments

The Bund, Shanghai, luxury shopping, China

The historic central Shanghai district, The Bund, has been the hub for luxury shopping in Shanghai for decades, but with slowing sales, a lack of visitors, and new shopping malls in the city, that’s changing.

The dynamic of the area has changed as the luxury shopping options in Shanghai have expanded , according to Want China Times.

Home to luxury brands including CartierMCMPradaOmega, and Chanel, The Bund used to attract tourists looking for a one-stop shop in Shanghai for all their luxury needs, but the flow of visitors is drying up. Sales clerks at many of the stores have revealed that the tourists that do still visit The Bund are looking to window shop, take photos, and spend money at the cafes rather than spending in-store.

With low sales and fewer visitors, luxury brands have no choice but to chase the money. With the emergence of new luxury malls, such as L’Avenue and K11, retailers are finding success outside of The Bund. In fact, Giorgio Armani, a longtime tenant of the district, has moved to Shanghai’s International Finance Center mall. Other brands have also found better options. Vera Wang opened its first flagship store in Asia at the Xintiandi shopping center.

These new luxury malls also offer lower rents than The Bund. For comparison, the rent for a store on Nanjing Road commercial circle is 20 to 30 yuan (US$3.20-5) per square meter per day, whereas a store in The Bund costs 30 to 40 yuan per square meter per day on average.

The downward trend in retail rent prices is expected to continue, as a report on shopping mall construction by CBRE predicts that the supply of retail space in Shanghai will reach 3.3 million square meters, the highest among major global cities, between 2014 and 2016.

The Bund’s problems are compounded by the move to the suburbs by Shanghai’s middle class and wealthy. The Shanghai Commercial Information Center and the Shanghai Council of Shopping Centers have found that total revenue for shopping malls in the suburbs of Shanghai grew 17.4 percent from 2012 to 2013, much higher than the growth rate of 3.2 percent found in downtown Shanghai, which is home to The Bund.

With more shoppers and lower rent elsewhere in Shanghai, luxury brands have better options than The Bund when entering the Shanghai market.

image credit: Gaëtan Bruneteau

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