Shanghai tops Savills China 20 retail cities for another year

Savills recently published its latest edition of the China 20 retail cities report in which it found that Shanghai and Beijing remained head and shoulders ahead of other cities in terms of retailer penetration, though their economic lead has narrowed somewhat.

The China 20 retail cities study, which began in 2014, compiles 16 key economic, demographic and financial indicators as well as over 50 retailer store counts to determine leaders in two categories, namely “economic index” and “retailer index”. Each of the series are weighted and aggregated to give a final score for each city.

Shanghai and Beijing maintained the top two spots on both the economic and retailer index restrictively. No other city was able to achieve commensurate rankings in both indices.

Mass market and coffee shops keeps momentum while luxury remain cautious despite improving sales figures

The report studied store openings of 50 international brands in the year leading up to mid 2016, during that period of time mass market fashion and coffee brands maintained a healthy rate of expansion with average store number per retailer per city increased 18% and 16% respectively. Luxury sector remains cautious on new store openings.

Wing Chu, Managing Director of Savills Central China and Head of China Retail says: “The luxury sector has remained sluggish during the past a few years, though a number of retailers have started to record a recovery of sales in mainland China since the second half of 2016. While this is encouraging is it unlikely to result in a return to store expansion by these brands until at least the latter part of 2017 or 2018.”

Joey Chio, Director of Savills Shanghai Retail, says: “Demand from international brands looking to enter the China market remains very strong. With an expanding middle class and affluent younger generation, we believe the trend will continue with both mainstream brands such as Lululemon and Victoria’s Secret and newly start-ups F&B such as Wheelys looking to gain a foothold in China.”
 
Cities in central China are moving up the rankings while those in the northern parts of China continue to fall on the back of slower economic growth.

Tech cities such as Shenzhen and Hangzhou continue to narrow the economic disparity between themselves and to the two leading megacities of Shanghai and Beijing, nevertheless retailers continue to emphasise their presence in the latter two markets with average store counts per fashion retailer in these cities more than triple that of Shenzhen (No. 3 in retailer index).

A further study of fashion retailers and leisure/entertainment operators showed that the two gateway cities of Beijing and Shanghai still have significant scope for further development of their F&B and entertainment sectors.

James Macdonald, Head of Savills China Research, says: “While every city will have their own unique character resulting from history, culture, income levels, demographics that may result in an emphasis of one retailer form or another, the trend should generally be for cities to gravitate toward a mean weighting between fashion and leisure. Exceptions to this might be the big tourist or international business cities where fashion brands want to ensure they have a strong presence.” James added “The analysis of the store networks however do indicate that there are still opportunities in markets such as Wuhan and Guangzhou, where leisure and entertainment operators have already forged inroads into these markets but fashion retailers have been more cautious.”