No last laugh for Wahaha founder as mall struggles

WAOW Plaza in Hangzhou, China's version of London's Harrods or Paris'Galeries Lafayette, is said to be ending contracts with developers after suffering from extended losses since its opening in 2012. Dong Xuming / For China Daily

WAOW Plaza in Hangzhou a rare misfire for China's 2nd-richest man

The first luxury shopping mall from the nation's second-richest man, Zong Qinghou, has been finding it tough to turn a profit in the two years since its grand opening.

China's version of London's Harrods or Paris' Galeries Lafayette, WAOW Plaza in Hangzhou, Zhejiang province, is said to be ending contracts with developers after suffering from extended losses, according to China Real Estate website.

Wahaha spokesman Ren Weifeng said on Monday that he couldn't comment on the latest moves at the mall as the person in charge was on a business trip.

WAOW was created to sell European luxury brands - well-designed but largely unknown by Chinese customers.

Zong, board chairman of Hangzhou Wahaha Group Co Ltd, also planned to sell some brands from the United States and the United Kingdom. "They are good at innovation and update their product lines quickly," he said.

Recently, the shopping mall began hosting the Wahaha Education Center for children in a new direction for the beverage empire. In March, Wahaha set up Wahaha Sanjie Investment Co Ltd to operate Wahaha Future City.

The news came as no surprise to one former executive of WAOW who declined to be named. "It is heartbreaking to hear it," said the source. "We all learned a lesson. Without the right professionals and clear direction, it is hard to make the ship sail."

The source said the shopping mall launched its business in only four months. "The opening was done in such a hurry. Other commercial properties will invest two to three years in research, marketing and operating. But WAOW opened despite its ill-preparedness."

Retail experts worried that the facility's simple layout, scarcity of visitors and the fact that Zong had moved out of his comfort zone, where the business return was much faster, did not bode well.

Zong put an initial investment of 1.7 billion yuan ($273 million) into the shopping mall with dreams of opening 100 WAOW Plazas across China within five years.

Then, last September, the billionaire was attacked at his home in Hangzhou by a migrant worker whose job request had been rebuffed by the beverage tycoon. Zong suffered injuries to his left hand.

Prior to the incident, several members of the retail unit's senior management team had been removed from their posts, generating talk that the attack was related to those sackings.

To diversify his beverage empire, Zong announced last November he was embarking on a five-year, 5 billion yuan project: collaborating with liquor producers in the hometown of the country's most famous liquor brand, Moutai.

His empire, which is based on bottled water, soda and other nonalcoholic beverages, would work with Jinjiang Liquor Co Ltd in Moutai county, Guizhou province, he said.

The two companies will integrate local small and medium-sized distillers to develop a new brand.

Zong's move into the liquor business comes as the sector struggles with sluggish sales amid a government crackdown on corruption and lavish consumption using public funds. Zong, 67, has a personal fortune of 115 billion yuan, according to the latest Hurun Rich List.

Summarizing why Zong's direct buyer model for his shopping center didn't work well, the executive who had once worked there said the idea itself was not wrong.

"But he only trusts himself," the source said of Zong's family-run business.