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Factory outlet shops: bargains or bunkum?
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FACTORY outlets are still considered a bit of a novelty in China, having appeared on the scene less than a decade ago.
However, domestic retailers seeking to jump onto the bandwagon should look before they leap.
The concept of factory outlets, which claim to reduce prices by eliminating the middleman, seeks to attract customers by offering big selections from a wide range of brands, including world-famous labels. Many sell out-of-season offerings or overstock.
But does the concept really work in Shanghai?
The Global Outlets Park in the Jinshan District might serve as an interesting case study. It caught media attention when a reporter from the Shanghai Morning Post wandered through the site during the rush of holiday shopping for the Qingming Festival earlier this month.
On a day when most commercial venues were packed with shoppers, the Jinshan factory outlet park was registering customers in the single digits, according to the report.
The 408,666-square-meter Global Outlets Park was hailed as China’s largest factory outlet when it opened in 2008. Claiming to offer international luxury brands at bargain prices, it targeted shoppers from across the Yangtze River Delta region. However, only 20 percent of the 4,000 shops available in the park are currently leased.
Among those that are open for business, most feature rather obscure foreign brands, far from what the park ballyhooed more than five years ago. To be sure, there are stores selling Armani, Burberry, Prada and Dior in the heart of the park, but the prices they charge are largely the same as those in department stores, which defeats the purpose of factory outlets, the report said.
“There are more security guards than visitors in this place,” an unidentified saleswoman was quoted as saying.
Indeed, it is hard to imagine how such a large shopping complex in a bustling metropolis like Shanghai can be so empty. When a Shanghai Daily reporter tried to phone the park for comment, there was no answer.
However, not all factory outlets in Shanghai are faring so badly.
According to the local commerce authority, Bailian Outlets Plaza in the Qingpu District, which opened in 2006 and covers 160,000 square meters, has become a real attraction for bargain hunters and fun seekers. Its owner, the Bailian Group, plans to replicate the business model in other cities, including Wuxi in Jiangsu Province.
Qi Xiaozhai, a researcher at the Shanghai Commission of Commerce’s Business Information Center, said the spotty performance of factory outlets highlights fierce competition.
“For factory outlets, it is important to have popular brands sold at affordable prices, along with other factors such as convenient location, strong marketing and entertainment offerings to make the shopping experience enjoyable,” Qi said. “Also, it is fair to say, Shanghai has too many similar factory outlets.”
By rough calculation, there are at least a half a dozen centers in the city calling themselves factory outlets. They are located in districts including Qingpu, Songjiang, Baoshan, Zhabei, Xuhui and Yangpu.
Greenery Milan Outlets in the Yangpu District is among those suffering from too little foot traffic, even though it is close to Wujiaochang, a vibrant shopping area. Last month, a set of booths was set up in front of its gates, selling small items like towels, socks and snacks.
The booths attracted a multitude of shoppers, but few ventured beyond the gates into the shops inside Greenery Milan Outlets.
“It was all the rage to open factory outlets five years ago, when investors saw a few successful commercial venues,” Qi said. “But it is a hard model to copy because selling top brands at lower prices is difficult to pull off. These outlets need a lot of imagination and innovation to attract consumers.”
In addition, the unrivaled popularity of online shopping will always be a headache for factory outlets, Qi added.
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