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Shopping Centers Today -> December 2002
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SHANGHAI CHIC
Makeover will bring high-end retail to China’s No.1 shopping street
By Susan Thorne
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| Revenues on Nanjing Road, one of the country’s busiest shopping streets, have been compared with those on the Champs Élysées. Soon the retail could be too. |
Chinese authorities have ambitions to turn one of the country’s premier retail thoroughfares into a world-class shopping and entertainment destination.
Nanjing Road, in the Chinese port city of Shanghai, has been a leading shopping district since the days when Europe’s imperial powers held sway in this region. Now it is in the first stages of a program to upgrade its ambience and retail offerings. The Huangpu District’s municipal government is spearheading a combination of public and private renovations along three kilometers (1.9 miles) of the road immediately west of the Bund, Shanghai’s famous waterfront trade and banking area.
Today the district is lined with large and small stores and shopping centers in a variety of architectural styles. At its western end, nearest the People’s Park (a former racetrack that is now Shanghai’s largest green space), Nanjing Road is a shopping street along the traditional Asian model: busy, crowded and lined with colorful Chinese character signage. The area is a lively “people place” comparable to New York City’s Times Square that draws visitors from all over China, according to Robert D. Smith, a vice president in the Los Angeles office of architectural firm RTKL Associates, who has worked extensively in Shanghai. Local workers and visitors stroll to and from the park and attend the Grand Theater or watch televised broadcasts on a giant outdoor video screen. “The last time I was there, they were showing the World Cup soccer games,” Smith recalled.
To the east, a kilometer-long, pedestrians-only section of Nanjing Road is home to three large-scale retail outlets: the Number One Department Store, the largest store in China, which serves 150,000 customers daily; Hua Lian Department Store; and the massive New World store. Collectively, the three generate two-thirds of Nanjing Road’s retail sales. While modern glass and metal structures dominate here, the six easternmost blocks of Nanjing Road near the Bund have a more historical flavor, with European-influenced brownstone buildings from the early 20th century.
This combined area draws 800,000 visitors daily and up to 2 million on weekends, according to data from the Shanghai office of McKinsey & Co., a management consulting firm, which is advising the Shanghai government on the Nanjing Road revitalization. The 3.5 million square feet of retail space on Nanjing Road generate sales of $250 per square foot annually; total annual commercial revenues (combining lodging, entertainment, food and beverage, and retailing) are about $1.4 billion — a figure that approaches the estimated $1.5 billion for comparable businesses on the Champs Élysées. With such a strong performance, why is redevelopment needed?
“It’s not so much a matter of problems; it’s more that there’s an opportunity,” said Jonathan Woetzel, senior partner at McKinsey’s Shanghai office. “Nanjing Road is still the No. 1 shopping street in Shanghai and, for that matter, in the country, but it needs to maintain its relevance in an era where the whole retail environment is changing.”
There is increasing competition from other retail areas in the city, Woetzel explained. And customers in Shanghai, already considered China’s most sophisticated and outward-looking, are becoming more demanding in terms of quality, convenience and fashion brands. Although Shanghai’s $400 average monthly income is small by Western standards, the city of 14 million includes a sizable slice of the population that earns $1,000 or more per month. Currently, Nanjing Road does not have a significant high-end market, Woetzel pointed out, and one of the makeover’s objectives is to add a contemporary, upmarket element to the merchandise mix, bringing in international brands while phasing out the outmoded businesses. This retail restructuring, plus an upgrading of the buildings and street environment, is an important step in making the road a world-class shopping destination, attractive to international and Chinese shoppers alike.
Huangpu District officials are sponsoring renovations along the lines recommended by McKinsey with a public contribution of 18 billion yuan ($2.2 billion). Although the government is providing the vision and the political authority to carry the redevelopment out, it will look mainly to the private sector for financing, Woetzel said. A high number of properties along Nanjing Road are government-owned and occupied by state-run businesses, and many of these sites will be offered for sale to developers to create enhanced retail uses.
One player considering such a deal is Hong Kong-based entertainment and property group Lan Kwai Fong Holdings, which owns the Park 97 entertainment complex of clubs and restaurants in Shanghai’s French Quarter and has introduced the food service banners Baci, California Club and Tokio Joe to Shanghai. Lan Kwai Fong Chairman Allan Zeman said his company is thinking of buying two city blocks of art deco buildings near the Peace Hotel where Nanjing Road meets the Bund. It wants to convert them for retail and food and beverage operations, with residential space above. Private redevelopment will gather momentum once some prestigious tenants are in place, Zeman said, and he predicts that Western retailers, many of whom already have stores in Shanghai, will be strongly represented.
“This city is attractive to them at the moment — it has a buzz,” he said. “Everybody wants to be in China, with its 1.2 billion population, and everybody will be afraid of missing out on this opportunity, because it’s Nanjing Road with its strong history and proximity to the Bund.” LVMH Moët Hennessy Louis Vuitton, which owns Louis Vuitton and other high-end brands, is another company seriously investigating property here.
McKinsey’s redesign for Nanjing Road calls for themed zones — such as a historical-cultural zone near the Bund and an entertainment district near People’s Park — that build on the road’s existing strengths. It includes such features as The Dome, a curved glass ceiling over one segment of the road, and an elevated walkway near the Number One Department Store, with parking underneath and a wide staircase like Rome’s Spanish Steps to reach street level.
These proposals address an important concern identified in McKinsey’s research: the lack of places along Nanjing Road where shoppers can relax or socialize. An increase in food, beverage and entertainment venues will improve this to some extent, but the recommendations also call for outdoor seating areas and uncongested public spaces or parks.
Though an ambitious overhaul like this one is probably beyond the scope of the public sector’s commitment, district administrators have begun more-limited public works on Nanjing Road. Infrastructure improvements and streetscape beautification, such as new signage and cleaning, are already under way near the Bund. Woetzel says that 2002 has been a year of planning and preparation, and he hopes that some major revitalization projects will get going next year. The Shanghai Commercial Commission has predicted 8 percent growth in retail sales citywide for 2002, and Huangpu District officials clearly feel that time is of the essence. The revitalization of Nanjing Road has been paid the ultimate Communist compliment: It’s been sped up from its original 10-year time frame and put on a five-year plan.
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