SHANGHAI: Discount outlet malls selling excess inventory from leading upmarket brands have become a fast-growing segment of the Chinese retail market and are attracting investment from overseas.
"The outlet market is absolutely booming," Shaun Rein of China Market Research in Shanghai, told the Financial Times. And he attributed this development to rising car ownership, increased disposable income and greater exposure to foreign shopping models.
The government's crackdown on corruption and a relative economic slowdown are other factors helping boost this market.
David Ng, general manager of a Mega Mills outlet near Shanghai, noted: "The austerity campaign will probably lead to an increase in inventories for luxury brands in China, and outlet malls are one of the few alternatives for those brands to dispose of excess inventory."
Since not all Chinese luxury consumers are in a position to shop overseas, developers have been opening outlet malls with a foreign flavour where shoppers can pick up luxury bargains close to home.
China's largest outlet mall recently opened in Wuxi and is modelled, in terms of architecture and style, on discount outlets in the eastern US.
And Value Retail, the European discount luxury outlet chain, is aiming to "create an authentic European experience" in a new mall planned for Suzhou, including mall architecture "with an Italian inspiration but that has elements of traditional Chinese design".
Value Retail, which claims that three out of four Chinese tourists to the UK visit its Bicester Village outlets in Oxfordshire, believes its retail tourism model – offering upmarket and lifestyle brands, fine dining and delivery of parcels to aircraft or train after a day of shopping – will work in China.
Chairman Scott Malkin observed that 80m tourists visited Suzhou every year and only a small proportion of them could realistically go to Hong Kong, where prices are lower thanks to the luxury taxes on the mainland.
Value Retail will also have noted the UK's visa rules which have limited Chinese tourist numbers and spending in that country. "Paris is seeing eight times the spend from this group than London, representing a big missed opportunity for us," said Michael Ward, managing director of upmarket store Harrods.
Data sourced from Financial Times; additional content by Warc staff