BIS-FMCG News Walmart closes stores frequently: In just one month, three stores closed in Shandong, leaving only five in the province; Hefei has closed six in three years! It is understood that Walmart plans to open 30 new stores in China this year, and has already opened 13 stores in January and February. Walmart Closes Stores Frequently in Hefei In 2008, Hefei's first Walmart store, Shengli Road store, opened. From 2010 to 2011, Walmart expanded aggressively in Hefei, opening several stores. In July 2013, Walmart's Huangshan Road store closed, having been open for only two years. In December 2013, Walmart's Tongling Road store closed. In December 2014, Walmart's Shuguang Road store closed. In January this year, Walmart's Changjiang East Road store closed. In April this year, Walmart's Chaohu Jiankang East Road store closed. On June 15 this year, Walmart's Hezuohua South Road store will close. Earlier, rumors online that Walmart would withdraw from Yantai were confirmed, with two stores closing in mid-June. Combined with the Jinan Yangguang Xinlu store closed last month, Walmart has closed three stores in Shandong in just one month, leaving only five in the province. At the end of last month, rumors spread online that Walmart would close two stores in Zhifu District's Haigang Road and Fushan District's Tianfu Street, withdrawing from the Yantai market. On June 1, Walmart issued a statement saying, "To further optimize our business layout, Walmart Yantai Haigang Road and Tianfu Street stores will cease operations from June 15, 2016." This means that after ten years in Yantai, Walmart will completely withdraw from the city. Logging onto Walmart's official website, its information has not yet been updated, showing 8 stores in Shandong, with the recently closed Jinan Yangguang Xinlu store still listed. After the Yantai stores close, Walmart will have only 5 stores left in Shandong. According to Walmart's official website, among provinces where Walmart has a presence, Shandong's store count will be higher only than Inner Mongolia and Tianjin. Almost simultaneously with the Jinan closure, Walmart's Guangming Road store in Chuzhou, Anhui, posted a closure notice on May 11, announcing it would officially close on May 25. (Source: Business Intelligence FMCG Index Daily)
In the Economic Winter, How Long Can Landlords Stay Tough? Commercial Properties May Already Be Risky Assets?
Everyone must feel that in recent years, the shops around your home have changed tenants repeatedly. A friend of Xibao was recently looking for a shop and was worried to death about the rent, which is really stressful. It's strange: the whole economy is sluggish, physical stores are hit hard by e-commerce, why are landlords always so tough? How long can they stay tough? This is a collaborative article by Yue Tao and Da Bai. From "A Shop Nurtures Three Generations" to "A Shop Cheats Three Generations" In the past two years, the privately negotiated "commercial-to-residential" conversions have finally been confirmed by national policy. On June 3, the State Council issued the "Opinions on Accelerating the Development and Cultivation of the Housing Rental Market," allowing commercial buildings to be converted into rental housing according to regulations, with land use adjusted to residential, while land use term and plot ratio remain unchanged. This is a rescue for commercial real estate, but it also means the bursting of the commercial real estate bubble. Since 2009, Chinese cities have undertaken massive commercial real estate construction, with the saying "a shop nurtures three generations" still ringing in our ears. Local governments liked it, developers were happy, and banks supported it. But offline commerce was soon hit by both the economic downturn and the diversion of e-commerce. The fact that the State Council has issued the "commercial-to-residential" policy shows that a dead camel... can it really become a horse? █ Shenzhen Commercial Rent Prices Fell 14% Last Year To give you a direct feel, look at Shenzhen's market conditions. In 2015, Shenzhen's real estate market led the country, but commercial rent prices that year fell 14% from the previous year. And the previous year, they fell 5% from the year before. Shenzhen's average commercial rent dropped from 300 yuan/sq m/month in 2013 to 243 yuan/sq m/month in 2015. People in business know that a rent reduction means that at least several waves of tenants have been squeezed out before the landlord lowers the rent. At this point, it's a state where all industries are struggling, and both tenants and landlords are suffering. This didn't happen without reason. Shenzhen's commercial rents experienced a sharp jump before 2013, from 200 yuan/sq m/month in 2011 to 300 yuan/sq m/month in 2013. Greedy landlords, by killing the goose that lays the golden eggs, successfully killed themselves. █ "Commercial-to-Residential" Cannot Save Commercial Real Estate At least in the short term, it cannot become a lifeline for commercial real estate. First, commercial prices are higher than residential, requiring higher rental returns. The problem is that commercial properties have worse living conditions than residential communities. Would tenants pay more to live in a worse place just because it's labeled "commercial"? At this moment, commercial landlords are mentally collapsing. They would surely prefer to rent to businesses at a price even with residential rents. The problem lies here. Except for some prime locations, the value of many commercial properties will be less than residential in the future! With e-commerce and express delivery conquering territory, the entry point for consumption is gradually shifting from commercial districts to communities. Yue Tao analyzed this in the article "The Truth Behind Wall Demolition: A War of New Landlords Against Old Landlords" (February 26). The "old landlords" offline have been defeated by the "new landlords" online. In the author's residential community, there are many shops with not-so-high prices. But businesses change like a revolving door. The best business in the past two years was a nail salon. As other businesses became deserted, the nail salon increased from one to five, and then business for each became poor, and one has already closed. Recent news is that the ParknShop supermarket on the second floor is also retreating. Additionally, those with lasting combat effectiveness are real estate agents and community banks. Our economy in recent years has indeed been driven by service industries like real estate and finance. The final question to face is: What industries will real estate and banks rely on to survive? █ Chen Qizong's Prediction: A Long Winter In the next few years, the commercial real estate market will undergo brutal reshuffling. Wanda Commercial has predicted that it will fall into "reduced revenue" for the first time in fiscal 2016. But many landlords are still not awake: despite the sharp drop in commercial rents in Shenzhen last year, the listing price for second-hand commercial sales still rose 7%. It's a case of "not giving up until one reaches the Yellow River." Chen Qizong, Chairman of Hang Lung Group Chen Qizong, a commercial real estate tycoon and chairman of Hong Kong's Hang Lung Group, predicted this "winter" in his "Letter to Shareholders" a year ago: Given the slowdown in both mainland and Hong Kong retail markets, we are preparing for a long winter. I am pleased to see that the situation has been misjudged, but it is prudent to remain vigilant at this stage. After all, there are not many positive signs in either the economy or the real estate industry.
Within six months after the opening of Hang Lung Plaza in Tianjin, at least six sizable retail properties in the area closed! We never thought their difficulties were caused by us; although we are among the best in the market, we are not that powerful. Future competition will certainly decrease, but we are not particularly excited about that, because it shows that the market is in a downturn with no end in sight. In the "Letter to Shareholders" three months ago, Chen Qizong warned again: In terms of performance, on the mainland, except for Shanghai, we are facing downward pressure on rents, even at Grand Gateway 66. In addition, except for Palace 66 in Shenyang, our other mainland retail properties saw lower rental income in the second half of 2015 than in the first half. Furthermore, except for Forum 66 in Shenyang, our tenants' sales in the second half were lower than in the first half.
Most people rarely notice that physical stores are quietly changing. The overall experience of a shopper in a shopping mall may be completely different within five years. We hope to be prepared for this revolution. As for "commercial-to-residential" or "commercial-to-other," such as senior centers or startup centers, Chen Qizong is not optimistic: shopping malls have the highest rental return rates among properties, and most other uses will have significantly lower returns. (Chen Qizong is not just a Hong Kong real estate developer; he is co-chairman of the Advisory Committee of the Center for China and Globalization, vice chairman of the Asia Society (founded by the Rockefeller family), and an early major investor in Xiaomi. He is influential in both Chinese and American political and business circles.) █ De-industrialization + De-commercialization = Hollowing Out Speaking of "commercial-to-residential," isn't residential also oversupplied? China's economy is now facing multi-front battles. Real estate is the main battlefield. However, commercial real estate is often a leading indicator for the entire real estate market, showing that the tolerance of commercial investors, operators, and consumers has reached a limit. Physical industry is already being reduced, and if physical commerce does not revive, it will directly endanger the entire real estate and financial system. The so-called "modern service industry" must ultimately serve physical people and assets. Cities thrive on production and trade. The root of the current situation is the long-term encouragement of low-cost speculation and asset hoarding, which has crowded out production, circulation, and consumption. But on the other side of real estate investors are bank liabilities; price cuts mean bankruptcy and passive financial tightening. If more liquidity is injected, it will still push up asset prices, not asset returns. What is the significance for the economy? Are Shops Already the Most Dangerous Assets? One Empty shops have always existed, but not as many as now. Some bustling areas have entire streets closed. Observing more carefully, Da Bai noticed that these shops are marked "for rent," not "for transfer." It's normal for new shops to be for rent, but the problem is that many are old shops. Old shops being rented out directly by the landlord rather than transferred is not normal. Developers are拼命 developing commercial real estate and increasing the proportion of commercial properties, causing a massive oversupply of large shopping centers and street-front shops, and a significant rise in shop rents. Most of the existing stock of properties was planned five years ago. In those five years of good times, developers painted a beautiful legend of "a shop nurturing three generations" for shop investors. Shop investors sold everything they had, believing it deeply. They grew thin and haggard without regret. With favorable timing, location, and people, both developers and shop investors fell into collective delusion. They pushed up shop prices, pushed up shop rents, built more shopping centers, and created more community shops. No matter how grand the artificial myth, it will be exposed. No matter how beautiful the flower, it will wither. Two A news report from The Beijing News caught Da Bai's attention, titled "SOHO China's Shops Slump, Performance Plummets, Tenants Prefer to Lose 600,000 to Terminate Leases." The content echoed Da Bai's title. One case was very representative, reflecting the awkwardness of shop investment now. Li Junyang paid a 7 million yuan down payment and took a loan to buy a shop of over 150 square meters in Wangjing SOHO Tower 2, with the actual purchase area being 300 square meters including shared areas. In addition, Li Junyang had to bear an annual property management fee of nearly 100,000 yuan. After buying the shop, Li Junyang did not get the expected returns. In the past two and a half years, his shop had few tenants inquiring, and even for two years, he could not find a tenant, leaving the shop vacant for a long time. Once, a restaurant tenant briefly came, but "after renting for half a year, the tenant preferred to breach the contract and lose 600,000-700,000 yuan rather than continue." Li Junyang calculated that the vacancy over the years had cost him about 1.2 million yuan in total. Once upon a time, "a shop nurtures three generations" was an investment mantra, and buying a "prosperous shop" seemed like a one-time investment solution. Now, the naked reality tells you: shops have become the most dangerous assets. Three Think about it: how long has it been since you bought something in a physical store? In a newly opened global chain clothing store, a salesperson complained about a young customer who stayed in the fitting room for a long time. The salesperson said, "Some girls often come to try on clothes, stay in the fitting room for a long time, and finally don't buy. I know they are here to copy the style numbers." Facing high prices of hundreds or even thousands of yuan in brand clothing and shoe stores, many consumers go to specialty stores to try on clothes and shoes, note the model numbers, and then buy online. Compared to the increasingly high prices in physical stores, more consumers choose online shopping. Although the main customer groups of online and physical stores differ, the market cake is limited, and online consumption has undoubtedly become the most powerful competitor for traditional shops. Clothing and similar formats were previously the most favored by shopping centers for attracting tenants, because the selling price of clothing is usually more than 10 times the cost, with huge profit margins, so the clothing industry has a strong ability to bear rent. However, after the development of e-commerce, it has had a great impact on the above formats: because e-commerce has a high substitution rate for clothing and daily necessities, many people buy these standardized products online, so physical clothing and daily goods stores lose a large number of customers and lack popularity. Deserted commercial districts have become the norm. Some large physical chains, such as Parkson Department Store, Zhongdu Department Store, foreign brands like Walmart and Carrefour, and home appliance stores like Gome and Suning, have all closed stores and contracted their operations. This has been happening for two years, not just this year. Four In the future, e-commerce will definitely be more popular and widespread, and many physical shops will gradually lose their wealth glory. We can only reduce investment risk and correspondingly increase returns by choosing shops that are less affected by e-commerce. Some commercial properties are relatively oversupplied, mainly with homogeneous, repetitive, and extensive business models. Some projects lack core competitiveness and sustainability. Investors should keep their eyes open. E-commerce, with its natural low-cost advantage, has swept in, and small, light, and easily transportable goods have been hit the hardest. So many bookstores have closed, train ticket agents have closed, department stores have gone bankrupt, and cosmetics and clothing stores have transferred. Investors should understand this. These types of shops are least affected:
Shops dealing in bulk goods and high-end, high-priced goods are basically unaffected, such as furniture and building materials, gold and jewelry, luxury goods, high-end clothing, and other high-end goods.
Service-type shops, such as medical, health, entertainment, dining, and hotel businesses, are service products that online stores cannot replace.
Shops like vegetable markets and fruit stores, where fresh goods cannot currently be replaced by e-commerce. However, with the development of the times, localized e-commerce may also complete the above services in the future. (This article is sourced from Shenzhen Economic Observer (WeChat: shenzhenjingji) and Personal Financial Planner (ID: srlcss, with edits by the editor.) -END- The best learning platform for FMCG distributors in China Focusing on providing professional, practical, and applicable tutorials for enterprises and distributors Committed to helping Chinese FMCG distributors grow rapidly The most professional and practical knowledge base in the FMCG industry Reply with the red number below to get the corresponding content Reply with number 1 to view the complete knowledge base | 001 Excellent Article Selection | 002 Distributor Market Operations | 003 Terminal Visit Management | 004 Sales Supervisor Skills | 005 Sales Improvement Techniques | 006 Channel Expansion | 007 Managing Distributors | 008 Distributor Development | 009 Distributor Internal Operations Management | 010 Team Management | 011 Efficient Distribution Techniques | 012 Sales Manager's Eighteen Skills | 013 KA Operation Methods and Strategies | 014 First Lesson for New Salespeople | 015 Internet, Brands | 016 Distributor B2B Transformation | [Long press QR code to follow]