After several sluggish years, bricks n’ mortar retail in the region’s major cities is starting to recover. Just when retailers were convinced that physical retail stores were no longer important, they found that they are.
In 2017, a growing number of online brands moved offline. And while most retailers continue to grow their online presence, there’s a growing trend to better integrate online and offline channels. Overall, it’s been good news for malls and high streets.
Asia’s top malls saw stable occupancy levels through the end of 2017. Retail rents for the most expensive shopping centers stayed stable during the fourth quarter of 2017, with exception of Manila, where rents inched up about 1 percent, according to a report from JonesLangLasalle (JLL).
Inbound tourism and retail sales continued to improve in Hong Kong, fuelled by strong local consumption and growth in Mainland Chinese visitors. In spite of these improvements, demand remained subdued with food and beverage and mass market retailers continuing to account for the bulk of activity, said JLL.
Tourism plays a key role in most major Asian cities in driving retail sales, particularly for fashion brands, accessories and footwear, and cosmetics. Tourists look for unique items that are not available in their home markets, or for famous brands at better prices.
Brands See Opportunities in Asia
In China, Victoria’s Secret opened a flagship in Shanghai, as did Pandora and Superdry. Sports brands including Lululemon, adidas Terrex, Adidas Neo, Adidas Young Athletics and Nike Kicks Lounge also add more stores in China. China, with its huge, increasingly prosperous consumer market, remains the focus of most international brands’ expansion plans.
However there is also increasing interest in Southeast Asia.
Retailers remained cautiously optimistic about the retail environment in Singapore following stronger sales.
Manila’s strong prospects continued to appeal to both local and foreign retail operators, in particular, those from the food and beverage and fashion categories. Carolina Herrera, Lowe Alpine and Peg Perego all opened their first outlets in Manila during the fourth quarter of 2017.
Jakarta mall operators also continue to try to bring in more fashion brands. Vietnam is seeing strong growth as a retail market, with more international brands entering the market.
Retailers are now taking a more serious look at these markets as income levels begin to rise and mainstream consumers are able to afford international brands, particularly the fast fashion labels. Given the population size of these markets, establishing a presence there is essential for future growth, and physical retail stores is the most reliable way to do this.
It’s About the Experience
Mall operators and retailers are increasingly realizing that the secret to drawing traffic is to offer entertainment and experiential retail environments.
More retailers are combining food & beverage with fashion to create a richer, more unique experience for customers. The addition of in-store cafes, wine bars, and novelty confectionaries are just a few of the concepts that are gaining popularity at both large and mid-sized retailers.
High Streets Bounce Back
Malls are not the only retail locations that are beginning to rebound. High Streets are also seeing a resurgence in rentals as retailers realize that the visibility of having a shop on a busy street is an important investment. That said, many have scaled back from mega flagships to more modest spaces, which keep costs more in line with sales.
Most of the major Asian cities saw stable demand for retail space on the main shopping streets. However, a lot of the demand was driven by new-to-market brands and retailers, according to JLL.