Despite inflation concerns and a suppressed residential and financial market, Tianjin has maintained a rapid retail sales growth rate. Tianjin retail sales of consumer goods have seen double digit growth since 1995, and are forecasted to grow at around 16% per year from 2012 to 2015. Coupled with the growing middle class whose personal wealth has also risen, domestic and international retailers are eager to expand into Tianjin.
Rising incomes, changing consumer behaviours and the construction of new retail malls continue to contribute to a rapidly-evolving retail landscape in Tianjin.
Tianjin’s retail market is currently undergoing a transformation, moving away from traditional department stores to large-scale integrated shopping malls. In the past, the predominant retailers in Tianjin were large department stores like Youyi Department Store which is government-owned and caters to a very specific clientele where both its operator and consumers are only partial to luxury retailers. However, as the middle class burgeons and becomes the mainstream consumer in Tianjin, the city has started to adapt to this new trend with more than 700,000 sqm of shopping mall platform retail projects entering in the next few years. To respond to the changing demographics with rising incomes, better education, and urban living, shopping malls in Tianjin are opening their spaces to more foreign and smaller-format retailers like i.t., Uniqlo and Gap. Some of these projects include Joy City, Aqua City, and the Metropolitan by Hutchison Whampoa.
The biggest challenge for these large retail complexes entering is how to build a sustainable and leading position in Tianjin riding the growth tide. Hard lessons have been learned by many investors that have entered Tianjin.
Not all retail projects will be able to achieve international standards. Some of these large scale projects are completed in haste to meet government required deadlines for market entry. Due to time constraints, some are poorly planned or lack sophistication in management. For example, a local partner in a joint-venture project in Tianjin’s Nankai district wished to repatriate its investment, and as a result, portions of the project were strata-title sold without planning, which discouraged more qualified tenants from entering the project. No considerations were placed on the overall project tenant mix. Secondly, as consumers and markets vary greatly across regions, a successful retail mall concept from elsewhere cannot simply be replicated here. Failed examples include outlet malls developed or planned in the Tianjin Airport Economic Area, Tuanbo Lake, and Tianjin Port Free Trade Zones, where these assets all have now gone bankrupt, been cancelled, or plagued by an inability to attract tenants due to their location, operation strategy, etc.
The macro-economic performance and the changing demographics in Tianjin all support a positive investment market, but various risks do exist for international investors. It will be crucial for investors to lay out a storybook for themselves, first defining geographies, market segments, categories, and secondly a detailed due diligence process of the market and local partners to ride the growth wave in Tianjin.
About the author
Alice H. Chen is the Head of Research and Strategic Consulting for Jones Lang LaSalle in Tianjin, China.