Summary of Key Points
This news article highlights a significant shift in the relationship between shopping malls and brands. In the past, both were partners in mutual growth—brands eagerly sought to enter malls, and malls carefully selected which brands to accommodate. However, this has now turned into a situation where they are more selective, with brands being hesitant to enter due to fear of losses, and malls being cautious about attracting new tenants due to empty spaces. The trust that once existed between them (malls relying on brands to attract customers, and brands relying on malls for business) is weakening, marking the end of the easy profit-making days.
Why Are Brands Saying “No” to Malls? — From “Can I Open There?” to “Can I Survive?”
Previously, brands entered malls with the goal of expansion; now, their primary concern is survival. The reasons for refusal are varied, ranging from common issues like high rent and low foot traffic to more absurd ones such as poor feng shui or the distance of the mall owner’s residence. Ultimately, it comes down to the belief that entering a mall is not cost-effective.
- Heightened Risk Awareness: Super franchisee Wu Yaming states that entering a mall now has an 80% chance of loss and only a 20% chance of profit, akin to gambling on odds. By 2025, it is estimated that over 15,000 brands will close, with most of them doing so abruptly. Who would dare to open a new store under such circumstances?
- Loss of Customer Flow Advantage: The rent for a mall store owned by Xiong Zhengyang is twice that of a street-side shop, but the customer flow is only twice as much at most, meaning profits are significantly reduced. Moreover, when a new mall opens, it often draws away customers from existing ones (for example, Wanda in Yibin has seen its traffic decline due to the opening of Wuxiang Tiandi).
- Fiercer Competition: Only one brand of the same type is allowed to operate in a mall (such as porridge-based hot pot), and entering a popular mall requires competing for space or even using connections. Even then, brands still struggle to attract customers (for instance, hiring influencers to promote the store may only yield results for a week).
The Golden Age of Malls: Was Entering a Mall Really About Easy Profit-Making?
Around 2018 was the “golden tail period” for malls:
- Brands Flocked in: When Wu Mei first entered the industry, she could attract brands with just 50 phone calls and had 2,600 potential tenants on her WeChat list. Brands believed that entering a Wanda mall would guarantee success, to the extent of paying intermediaries up to 80,000 yuan for prime locations.
- Malls Generously Offered Subsidies: Yang Shilin mentioned that malls would provide subsidies of up to 400,000 yuan for renovations in exchange for a year’s rent of 120,000 yuan. The logic was simple: malls had customer flow and credibility (consumers trusted Wanda or Wuxiang Hui, not new brands), so brands were sure to make money there.
- Franchisees Were Eager to Open: A good chef would be recruited to open a store, and having the label of an internet-famous shop or being the first in a region could attract customers. Everyone thought opening a store was a surefire way to make money.
The Challenges Faced by Malls: From “Selecting Brands” to “Being Nannies”
Malls are now facing difficulties:
- Inability to Retain Existing Brands: Some businesses, like digital stores, suddenly leave.
- Difficulty at Attracting New Brands: Out of 20 potential brands discussed, only one is actually opened, with a vacancy rate of over 30% in many shopping centers. To survive, malls are shifting their focus from simply collecting rent to actively managing their operations:
- Shift from Rent Collection to Survival Planning: Wu Mei now helps brands determine their break-even points and match their products with the target customer base. She even organizes events for them (for example, a basketball training class that attracted 28 new members in one night).
- More Conservative Approach to Subsidies: Malls are now more hesitant to offer subsidies. Group headquarters may reject applications from brands, citing reasons such as poor quality or asking for too significant rent reductions (even if it’s only 10%-15%).
- Involvement in Brand Growth: For example, China Resources supported the growth of Amo Handmade, helping the small tea business expand nationwide by collaborating with their Wuxiang projects. Malls are now not just providing space but also participating in brand development, sometimes suggesting product adjustments (such as adding more Chaoshan cuisine options).
Future Trends: The Matthew Effect Intensifies, and “Strong Operations” Become Key
The industry is experiencing differentiation:
- Dominant Players Become Even More Powerful: Core shopping areas in first-tier cities (like SKP in Beijing and Lujiazui in Shanghai) and leading commercial complexes (such as China Resources Wuxiang and Longfor Tianjie) will attract more customers. Smaller projects in second- and third-tier cities will find it harder to attract tenants, as predicted by AI monitoring platforms.
- The Importance of Strong Operations: Companies like Longfor have integrated their marketing departments with operations, while China Resources combines land development with Wuxiang Life services. Malls are no longer just landlords but play a role in attracting customers and reducing costs for brands (for example, by helping them optimize their supply chains).
- Reconstructing Relationships: The focus has shifted from discussing rent to considering customer demographics, business formats, and long-term sustainability. Wu Mei’s question, “What value can malls still provide?” reflects the industry’s search for new models of cooperation—success no longer relies on location or foot traffic but on comprehensive operations and mutual support.
In Conclusion: Times Have Changed; No One Can Rely on Easy Profits
Both brands and malls must shift from a focus on expansion to one on survival. Brands need to be more selective about where they open (avoiding areas with high vacancy rates and lacking top-tier brands), while malls need to put more effort into nurturing their tenants (by calculating costs, organizing events, and supporting growth). The old formula for automatic profit generation no longer works; success now depends on attention to detail and patience. This may well be the new norm in business.