One-third of China’s overabundant shopping malls will close down in five years and the rest will have to transform to survive, according to a report by the Chinese Academy of Social Sciences.
Shopping centers are rapidly losing appeal to consumers in many cities due to their lack of competitive strengths, the report said.
One-third of the malls will change into wholesale or retail marketplaces, with an emphasis on customer experiences. Another third will have to integrate online shopping with brick-and-mortar outlets.
Hong Tao, director of the commercial economy research institute at Beijing Technology and Business University, said stores are closing their doors for three main reasons:
1. Economic restructuring
2. Oversupply of shopping malls
The oversupply of shopping malls was encouraged by regional governments, reported the 21st Century Business Herald.
China has nearly 4,000 shopping centres, three times more than the United States. Among the world’s top 20 cities building large shopping malls, 13 are located in China.
3. Too homogenous malls
In addition to oversupplied space, another fatal flaw is that many shopping malls are homogenous, often with little difference between one another.
Jing Linbo, director of the Chinese Evaluation Center for Humanities and Social Sciences, said shopping malls need to reform their business models to compete with e-commerce.
Jing also said the key to survival lies in diversified competition and value-added services to customers while Hong suggested that the government help lower the business costs for physical stores, which are faced with rising rents.