Shenzhen, the fourth largest city in China in terms of GDP, has seen comparatively weak consumption of luxury goods due to outbound consumption and the government’s anti-corruption drive. Its luxury goods market is still physically only one-tenth of Hong Kong’s in terms of stores, and a third of Beijing’s and Shanghai’s, reports the Guangzhou-based 21st Century Business Herald.
Wongtee Plaza planned to build up another shopping center for luxury goods in Shenzhen after The Mix C Shopping Mall, but two months after its opening, Wongtee has seen few visitors, making people wonder whether Shenzhen can handle a second luxury goods shopping mall.
On June 8, Wongtee opened its flagship store, Italy’s COSCIA, the global famous luxury department store brand. Over the next two years, Shenzhen will open about 10 large-sized shopping malls, some of which are designated as high-end.
Shenzhen International Enterprise, owner of Wongtee, said it expects Wongtee to have a gross income of 340 million yuan (US$54.75 million) and a net profit of 260 million yuan (US$41.87 million) in 2014.
As of now the vacancy rate at the mall is still higher than 60%.
Shenzhen International has offered COSCIA preferential conditions, granting subsidies for interior design amounting to 98.7 million yuan (US$15.9 million) and a yearly revenue of no less than 150 million yuan (US$24.15 million).
Shenzhen International has recently projected its first-half loss to be around 80 million yuan (US$12.9 million) and 95 million yuan (US$15.3 million), worsening from a loss of 39.5 million yuan (US$6.4 million) in the same period a year earlier. Whether the firm can benefit from the opening of Wongtee remains on the fence, unnamed industry insiders said.
Outbound consumption has been a main factor for Shenzhen’s failure to keep a prosperous market for luxury goods. Since April 2009, Shenzhen citizens were granted the convenience of one visa with multiple re-entry visits to the neighboring Hong Kong. According to the Hong Kong government, from June 2013 to May 2014, mainland visitors to Hong Kong on the visa reached 13.22 million, and they spent 45.54 billion yuan (US$7.33 billion). Shopping in Hong Kong has become a trend among Shenzhen residents. Between 2010-2013, the ratio of Shenzhen citizens going to Hong Kong for shopping almost doubled every year except 2012.
Read more at Want China Times.