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Retail Meccas: Beijing

China’s capital city has long been the country’s retail powerhouse.

Adidas and Uniqlo in Sanlitun Village.

China’s capital city has always been less outwardly glamorous than its showy southern neighbor Shanghai, but Beijing has long been and remains the country’s top retail powerhouse.

That’s because, analysts say, the money and power centers of China are firmly rooted in Beijing and they are not going anywhere, despite Shanghai’s overwhelming glitz. The world’s premier brands will continue to set up shop in Beijing for long-term, serious investment prospects in the world’s number-one growth market.

“From the perspective of investment, today’s world is dominated by capital. The place that has a pool of money will bring new opportunities,” said Meng Jing, real estate analyst from Galaxy Securities in Beijing. “First of all, Beijing has the strongest purchasing power in China. People can afford international, even luxury, brands. Second, Beijing is very inclusive and diversified.”

Among the notable store openings in Beijng in the past year were Miu Miu’s first flagship and an Alexander Wang boutique, both at the Sanlitun North Village; Forever 21’s Wangfujing flagship, and Tom Ford’s women’s boutique at the posh Peninsula Hotel in Jinbao Jie section of downtown.

Beijing is a beacon for China’s top talent, and millions of people from other parts of China live and work there, bringing a strong pool of wealth, creativity and growing consumerism. Meng said the diversity drawn from across the nation that collects in Beijing has opened a wealth of retail opportunities because of varied consumer tastes. Beijing has sustained double-digit retail sales growth throughout the global economic crisis, proving a strong incentive for brands seeking a new market.

Tian Huilan, a retail industry analyst with Minsheng Securities, summed up Beijing’s allure for brands succinctly: “Beijing is the capital city. It is the center of politics, economics and culture. It’s a very influential city.”

Of course, access to that powerful and influential consumer market comes at a premium. Real estate industry reports show ever-rising rental costs for prime Beijing retail space, in spite of growing capacity and widely available space. That translates to a downside for consumers: Beijing’s shopping scene is notoriously pricy, with expensive retail rents translating into steep consumer prices, ranking high even on a global scale.

Landlords in most of the city’s premier malls and most sought-after neighborhoods like the Sanlitun embassy area, the Zhongguancun business district and central business district have been able to maintain a steady momentum of rent hikes that began shortly before the Beijing Olympics in 2008 and have continued despite the global economic downturn. China was largely buffered by domestic financial policies from the international crisis, and the results show in Beijing’s retail boom, which is starting to mature as the most popular malls fill up to capacity and store turnover stabilizes.

Beijing’s consumers vary widely by neighborhood, according to industry insiders and analysts. The Central Business District tends to attract older, more seasoned luxury shoppers, as does Wangfujing, both neighborhoods being home to two of the city’s oldest luxury malls.

Younger, hipper consumers are more often drawn to the wide variety of brands that choose to locate in Xidan, the hip Sanlitun neighborhood and Zhongguancun, which has sought to position itself as China’s answer to Silicon Valley. But as Meng noted, the capital strength in consumers is its diversity — just about any category of shopper can be found in Beijing.

Retail analyst Geng Kun said Beijing’s shopping districts tend to cluster around important brands that appeal to distinct consumer groups, making location choices for brands somewhat easier. Branding has been critical to sales success as well and can make or break new mall developments.

“Brand recognition plays the biggest role in terms of the popularity of a neighborhood,” Geng noted. “If the overall sales volume of stores in the neighborhood is higher than other neighborhoods, it will attract more good brands to open stores there and welcome more customers.”

DEMOGRAPHICS

Population: 20.69 million
Population change: +3 percent in past year; +20 percent in past five years. (Note: The government now includes migrant workers in its official tally.)
Population projection: 23 million in 2018
Per-capita income: $2,400 annually (2012)
Disposable income: $5,360 (2012)
Key industries: Fashion, publishing, finance, manufacturing (high tech, automobile and equipment), tourism, government/bureaucracy, electronic information, real estate
Fast-growing neighborhoods: Sanlitun, Xidan, Zhongguancun, Wangfujing
Other major construction projects: New airport terminal construction, further subway line expansion to suburbs, linkage of satellite towns and rail lines to nearby cities in other provinces

HOT SPOT: SANLITUN

From Miu Miu to MAC Cosmetics and margaritas to McDonald’s, Beijing’s’ trendiest shopping neighborhood has packed just about everything into a couple of city blocks that just a decade ago were home to Soviet-style apartment buildings and seedy bars.

The Sanlitun district of Beijing, long home to dozens of embassies in the Chinese capital, became a hip retail spot with the opening of The Village shopping complex in 2008 and its upmarket sister, The North Village, two years later. In between the two Swire-built and run properties is the hip Nali Patio, which houses trendy, locally owned and run shops and restaurants. The street also holds the Opposite House, Beijing’s trendiest boutique hotel.

By day, the street is buzzing with shoppers and embassy workers and by night it transforms into something of a pageant, bringing out some of the capital’s best-dressed wanting to be seen.

Sanlitun does have a seedy side as well, with back alleys known for drug dealing and heavy drinking, but the edge only seems to add to its buzz.