Signs of the times along Huaihai Road

A pedestrian passes by a row of shuttered shops along Huaihai Road in Shanghai. Gao Erqiang / China Daily

As a well-known shopping street loses flagship stores, it must transform itself to retain tenants and attract customers

Huaihai Road used to be one of the busiest streets in Shanghai, with shoppers flocking to Japanese shopping mall Isetan, Mattel's Barbie flagship store and electronic home appliances retailer Media Mart, along with numerous shops for jewelry and watches.

Yet in the past few months, business seems to have turned sluggish, with many brands, including the above big names, having retreated from the 5.5-kilometer street.

In a 1-km section between South Chongqing Road and Sinan Road, more than 20 stores have closed, including a wedding gown purveyor, watch retailers, a home appliance hypermarket and fast fashion stores.

"I have never seen so many 'final sale' posters on Huaihai Road," said Zheng Shuqi, a 56-year-old resident. "I just don't understand it. It is such a prestigious location, why would a store choose to leave?".

RET, a commercial property agent, said about 7 percent of the stores on Huaihai Road are vacant, compared with a 5 percent to 6 percent vacancy rate elsewhere in Shanghai.

Soaring rents may be one reason.

Daily store rents on Huaihai Road average between 35 yuan ($5.60) and 65 yuan per square meter, according to property consultancy firm Savills China. But compared with such retailing hubs as East Nanjing Road and Xujiahui, these rates are still relatively low, according to market insiders.

Zhen Shiqi, director of retail services for DTZ China, said the tenants' departures reflect a structural transformation for Shanghai's high streets. "There is a dire need for the streets to adapt to change," he said.

Zhang Xiaolu, a 26-year-old shopper, said Huaihai Road needs to improve its parking situation. It is too hard to find a place to park along the street, she said.

In addition, only two subway stations serve Huaihai Road. Shoppers have to walk for at least 10minutes from the nearest bus stop or subway station to reach the stores.

"People no longer want to walk a long distance to go to a store. That time has long passed. Now, people like to take the subway or even drive to where they go shopping. If it is too much trouble, they will buy online," said Zhang.

Wu Hesheng, head of Shanghai Huaihai Commercial (Group) Co Ltd, which leases many of the stores on Huaihai Road, said tenants moving in and out is "a cycle that every high street experiences".

"Stores choose their locations based on their business strategies," he said. Some have moved out to focus on online sales, others to cut costs and some simply to avoid competition. But other brands are considering moving in, Wu said.

Meanwhile, some stores on Huaihai Road have retained their popularity with locals - elderly shoppers still line up at the Guangmingcun food store that sells snacks such as fresh pork mooncakes.

People still elbow their way through the silk and clothing stores where discounts are offered. In winter, many get up early to shop at herbal medicine stores for chilly season remedies.

Zhen said: "You can tell who is not shopping in the main section of Huaihai Road anymore. They are the young consumers with large purchasing power and are willing to spend on whatever they like."

The middle part of Huaihai Road needs to enhance its allure for young shoppers, he said. It needs "new brands to serve as magnets for shoppers".

Government officials said the empty-store period won't last beyond the end of the year, as authorities and developers are promoting such things as pop-up stores - where a space can be leased for as short as three months. The previous contract term was a minimum of three years.

Yuan Geping, deputy head of Shanghai Huaihai Commercial (Group) Co Ltd, said: "Retailers can make full use of the three-month period to showcase their products and services to attract consumers. The new model is more flexible and will attract consumers seeking new brands."

Malls compete with 'social' experience

In a rooftop restaurant at K11, a high-end department store, Wang Xiaochan, a program manager at a Forbes 500 company, was having afternoon tea with three acquaintances on a sunny Sunday. Wang said the restaurant was her favorite place to meet friends.

After their refreshments, the women went to the basement of the store to see an exhibition of the works of French Impressionist painter Claude Monet.

And after that, they spent four hours and some 9,800yuan ($1,580) shopping in the mall.

To compete with surging e-commerce activity, brick-and-mortar retailers and commercial property owners are striving to attract consumers by offering something that cannot be ordered online - the social space of a physical store.

"E-commerce has indeed affected brick-and-mortar retailing. However, there are things that can't be provided by e-commerce, such as dining out, entertainment, meeting friends. These cannot be achieved by just clicking a mouse," said Fanny Leung, vice-president of Chongbang Group, developer of several lifestyle hubs in central and sub-urban Shanghai.

By promoting catering, theaters, exhibitions and music events, Chongbang has seen each of its properties in Shanghai attract an average of more than 100,000 consumers on weekends.

Market insiders and analysts said developing a variety of commercial properties is key to boosting brick-and-mortar retailers.

West Nanjing Road in Shanghai is a good example of a place that offers a wide range of services, said Zhen Shiqi, director of retail services, DTZ China.

The street is divided into three sections. The east end offers high-end retailing, the middle part focuses on exhibition space and hospitality services, and the west end houses office buildings. The functions are clearly positioned and realized, said Zhen.

High streets in other countries can also inspire commercial hub developers, said Zhen, citing Avenue des Champs-Elysees in Paris and Fifth Avenue in New York.

Xu Liyan, a 26-year-old office clerk who was visiting Life Hub @ Daning in north Shanghai's Zhabei district, said: "About half of my spending in the complex is related to food."

She said the idea of coming to the complex starts with dining with her boyfriend at a barbecue restaurant on a Saturday night.

"If we have to wait for a table, we may wander into Uniqlo or C&A or other fast fashion stores before we eat and watch a film in the theater," said Xu.

"Of course you can order food and dine or watch TV together at home, but meeting here certainly makes a more wonderful weekend night," said Xu.

Education and recreational services targeting youngsters and children are also occupying large spaces at commercial properties. These services also inspire parents to spend more time and money in the complex.

"When I put my boy into a 45-minute English course or a drawing program, I often spend the time wandering around in the building, having a haircut, sipping some coffee, browsing at a bookstore, or doing grocery shopping at the hypermarket," said Liu Zhi, father of a 7-year-old boy.

"This is much more interesting than just standing outside the classroom and waiting."