Summary of Key Points
Although mall foot traffic has gradually increased recently, sales and average transaction values have not recovered accordingly, resulting in a mismatch between available customer flow and actual sales. The increase in foot traffic is mainly due to events attracting a mix of visitors (both those interested in experiencing the mall and those looking to shop). The main reason for the stagnation in sales is that the mall's product offerings (the combination of brands and products) have not been updated, and the recruitment of new tenants has become unbalanced (with a disproportionate focus on low-cost businesses such as dining establishments). Additionally, the physical structure of the malls is lagging behind the changes in consumer preferences and brand trends, which is slowing down the overall recovery process.
1. Foot Traffic Is Returning, but It's Mostly "Casual" Visitors Who Are Not Converting to Sales
Mall traffic figures look promising: 85.5% of shopping centers across the country have seen year-on-year increases in foot traffic, with an average daily attendance of 19,100 people and consumers spending more time (up to 81 minutes). However, most of this traffic is not intended for shopping; instead, it is driven by events such as IP exhibitions, markets, and food tasting competitions. For example, 25%-30% of the mall's foot traffic comes from central atriums and public areas, but less than 20% actually enters the stores. After large-scale events, retail sales often decline by 8%, and the percentage of shoppers who make purchases is consistently below 20%. These events provide short-term exposure, but once the novelty wears off, consumers are unlikely to convert into actual customers.
2. Lack of Sales Growth Is Due to Outdated Product Offerings
The key to sales recovery lies in updating the mall's product offerings to match current consumer preferences. However, this has not been effectively addressed:
- Difficulty in Attracting Top Brands: Leading malls (such as Vanex and Longfor) are highly attractive, making it difficult for smaller malls to secure popular brands like the internet-famous "Pretty Rice" restaurant.
- Cautionous Brand Expansion: Brands that used to open hundreds of stores at once now limit their expansion to just a few locations, leading to insufficient supply.
- Rising Vacancy Rates: The vacancy rate in key shopping centers nationwide has reached 9.8%. To fill empty spaces, malls are forced to accommodate low-cost businesses (such as urban outlets and street food stalls), which have limited contribution to sales due to their lower profit margins.
3. Unbalanced Tenant Recruitment Leads to a Dilemma
The traditional ideal mix of mall activities was 70% shopping, 20% dining, and 10% entertainment, with retail operations generating the majority of revenue. Currently, the proportion of dining establishments has exceeded 40%, sometimes even 50%. While this can attract customers (especially affordable chains and trendy brands like "Pretty Rice"), it also poses challenges:
- Low Profit Margins and Rent Pressure: Dining businesses have lower profit margins and higher rental costs, which negatively impact overall mall revenue.
- Impact on Retail: The high demand for dining space and the long rent-free periods reduce the available area for retail outlets, potentially squeezing their profitability.
4. Malls Are Lagging Behind Changes in the Market Environment
Malls are physical structures with long renovation cycles and significant investment requirements, making it difficult to keep up with rapid changes in the brand and consumer landscape:
- Brands are constantly evolving, but malls need time and money to adjust their layouts and offer new formats.
- The overall supply structure (including brands and products) and consumer demand have not yet aligned. Malls must wait for these changes to occur before they can see a recovery.
5. Short-Term Strategies Create Long-Term Problems
To attract more visitors, malls frequently organize events with low entry barriers (such as free food competitions), which quickly become repetitive and lose their appeal. The introduction of low-cost businesses also leads to high turnover rates among tenants, making it hard for customers to develop consistent shopping habits and further undermining sales. These short-term solutions contribute to a vicious cycle where malls become dependent on traffic, compromise in tenant recruitment, experience structural imbalances, and see declining sales.
In summary, while malls have successfully overcome the initial challenge of attracting visitors, they still need to address the critical issues of updating their product offerings and adjusting their business structures. This requires coordination across the entire industry and will take longer to achieve true recovery. Currently, it is easier to secure a new mall project than to execute it effectively.