If there is one thing Chinese consumers love, it's a bargain. Another thing they adore is brand-name goods, and these two elements have been concocted into a heady mix that is turning some centers into luxury goods meccas that are attracting well-known companies from home and abroad.
RDM Group, the real estate arm of the Italian fashion, retail and real estate outfit the Fingen Group, opened an outlet center in China in June, in partnership with the US Waitex Group.
Florentia Village is located in Tianjin, close to Beijing. It is the first Chinese development in RDM's international portfolio of retail assets. More than 1 billion yuan (115 million euros) has been pumped into the village, which covers 60,000 square meters and hosts nearly 200 outlets.
The shopping center is built in the architectural styles of Rome, Venice and Florence. A canal runs through the village, and there are gondolas, a central arena, bridges, fountains, squares and porticos.
Many famous international and domestic fashion premium brands, such as Prada, Fendi, Bulgari, Giorgio Armani, Salvatore Ferragamo, Versace, Burberry, Zegna and Tod's are there. Most significantly, it is the first time for Prada, Fendi and Bulgari to open outlet stores in China.
RDM vaunts not only the scale of the big brands it has attracted, but also the village's location. Getting there from Beijing takes just 20 minutes by high-speed train, which delivers passengers virtually to the front door of the village.
The top brands believes the location was the optimum one, says Ivano Poma, chairman and CEO of Florentia Village and managing director of RDM Asia. It can satiate the desire of people from two big cities for bargains, he says.
Customers from Beijing bring strong spending power, he says, and Tianjin, with its surging GDP, has huge potential.
Putting its money where it says its faith is, the company has leased the land for 40 years.
The World Luxury Association says that last year the sales value of luxury goods in China was $10.7 billion (7.8 billion euros), excluding spending on private jets, yachts and luxury cars, making the country the world's second-largest consumer of luxury goods after Japan. Chinese spent the most in overseas luxury markets last year, with almost $50 billion in Europe, the association says.
It says Chinese consumption of consumer goods and services is greater than 25 percent of the global total, and that nearly two-thirds of the top international brands now operate in China. The country is expected to overtake Japan as top luxury goods consumer, and its domestic consumption of top brands will be about $14.6 billion in 2012.
It was the right time to enter the Chinese market as full-price stores continued to open, Poma says.
Top brands, wanting to safeguard their market position and profile, prefer to burn unsold goods rather than sell them in a bazaar, he says.
"So upscale outlets can help them solve the problem. (The) outlet industry is complementary to the full-price business. The two have to move (in tandem). Our company (has) contracts with those brands to ensure (only genuine goods are sold)."
They can provide products available not only in Europe, but throughout the world, he says.
These may be off-season items, but within two years of their being sold at full price globally, they are selling at Florentia Village with a discount of 30 percent, he says. "We want to define customers (in ways other) than (by) their income."
A second part of the village development, complete with children's amusement park, will open in October, and customers will be able to buy nearly 160 more brands, such as Nike and adidas, as well as other domestic and international sports wear and shoes.
By next June the village is expected to have brought in 1.3 billion yuan in revenue, Poma says. "The customer flow is 8,000 to 24,000 every week, with the average number reaching 10,000 to 20,000 at weekends. The top three popular brands are Prada, Burberry and Coach and the (most) bought goods are accessories."
When China Daily visited the Village recently, there were many couples and families enjoying the day out, strolling about or simply sitting and lapping up the open air. The Italy-themed setting proved to be a hit with photographers. Other visitors wandered into shops but most seemed to come out empty-handed. The 3,500-capacity car park has been almost full some Saturdays.
In many of the upmarket outlets, shop assistants garbed in somber formal attire conversed with customers - in most there were fewer than 30 at any time - explaining products and prices. Most shoppers then put the products back on shelves before leaving.
At the Prada outlet a staff member asked customers to wait in a line outside the entrance, but once inside it became clear that such an invitation was redundant because there were so few customers.
A bag said to be half-priced, at 7,500 yuan, was one of the cheapest leather bags in the shop. "There's a big discount on this," a salewoman said. "The full-priced one only went on sale at the beginning of this year. This really is a great bargain, because others only have 30 percent off."
In contrast to Prada, Burberry did not ask shoppers to line up, but the shop was packed. But customers there, too, were decidedly tight-fisted despite the discounts. Fitting rooms remained empty and no one was making a beeline to the cash register.
"I have checked the prices and bags in top-brand shops here," says a young woman surnamed Yuan. "Though they are cheaper than those in full-price stores in Beijing, I am really struggling to buy one Most of the prices are about the same as in full-price shops overseas. So I would rather buy a bag while I am travelling abroad."
Others were not so skeptical.
"We have come all this way," says a middle-aged customer. "I drove almost two hours from Beijing to get here. My wife and I think we should at least buy an affordable shirt."
Whether outlet store centers really do offer luxury goods at reasonable prices or not, they are flourishing in China. In Beijing there are at least five, one of them being Beijing Scitech Premium Outlet Mall. With its colonial style architecture, the mall has 200 brands and it forecasts revenue of 1.2 billion yuan this year. It plans to open seven to eight branches nationwide over the next five years.
The two investors in Florentia Village, Italian RDM and US Waitex, also plan to open more outlet centers in China. The chairman of Waitex, Li Xuehai, says five outlets will be built nationwide over the next five years. Two of them, in Shanghai and in Chongqing, will open next year.
DTZ, a leading global real estate adviser said China's outlets industry will boom in the next five years. Its retail service China director, Zhang Jiapeng says, "China's outlet industry is growing 30 percent every year. Some capital cities such as Hangzhou already have outlets as well. So we are optimistic about the industry."
Wan Wenying, vice-president of China General Chamber of Commerce, and the woman said to have introduced the outlets format to China, said in a speech in Shanghai last month that there are about 500 outlet centers worldwide, almost half in the US and about 100 in Europe.
"This business will develop quickly together with the booming middle class. But we need government support in customs and legal matters. Only then can we set up authentic outlets in China."
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