29 July 2015
Foshan: Profile of a Consumer Market
1. Economic Overview and Development Planning
Foshan is located in the central-southern part of Guangdong province. It possesses substantial economic might and its manufacturing industry is among the top three in the province, on a par with those of Guangzhou and Shenzhen. According to the 2015 Blue Book of Urban Competitiveness issued by the Chinese Academy of Social Sciences, Foshan ranks 11th in overall competitiveness among all large and medium-sized cities on the mainland. Its GDP in 2014 was Rmb760.3 billion, representing a year-on-year growth of 8.6%. In terms of permanent population, the per capita GDP for Foshan was Rmb103,434. The total added-value of its primary industries grew by 2.6% to Rmb14.3 billion; that of its secondary industries increased 9.4% to Rmb468.7 billion; and that of its tertiary industries rose 9.6% to Rmb277.4 billion. The added-value contributed by the private economic sector was Rmb465.4 billion, making up 61.2% of the city’s GDP. The economic entities of Foshan are mainly small and medium-sized enterprises, accounting 95% of the total.
Foshan is dubbed China’s “brand economy” city and brand capital. Famous brands from Foshan include Midea Electrical Appliances, Foshan Electrical & Lighting and Jianlibao beverages. In addition, dozens of the world’s top 500 companies and China’s top 500 enterprises have set up investment projects in Foshan, including Samsung from Korea, China’s Baosteel, Siemens from Germany and Toyota from Japan.
Foshan is also a tourist destination. In 2014, it received 33.95 million visitors, of which 11.82 million stayed overnight, with 10.45 million domestic visitors and 1.37 from overseas, generating Rmb49.6 billion in tourism receipts, an increase of 15.1%.
Under the Urban Integration Development Plan of Guangzhou and Foshan (2009-2020), the development of road networks will be optimised to link up the two cities through major thoroughfares. These include the Guangzhou-Foshan Expressway, Guangzhou-Sanshui Expressway, Guangzhou-Zhaoqing Expressway, Longqi Avenue, West Second Ring Road, Guangzhou Outer Ring Expressway and Guangzhou-Heshun Bridge. With the Guangzhou-Foshan Metro underground railway fully operational, the concept of one-hour living circle within the Pearl River Delta (PRD) can be more quickly achieved, helping to attract consumers from the vicinity. According to the Foshan Municipal Planning for Commercial Network Development (2006-2020), the layout of Foshan’s future commercial network will be pivoted around a main commercial centre (including Zumiao commercial district, Guicheng commercial district, Dongping commercial district, Chencun commercial district and Jihua commercial belt) to propel the development of a cluster of six commercial centres (Ronggui in Daliang, Shishan, Sinan, Sijiang, Dali and Longjiang in Jiujiang).
2. Foshan’s Consumer Market
2.1 Growth in Retail Sales
In 2014, Foshan’s total retail sales of consumer goods hit Rmb256 billion, with a year-on-year growth of 13.1%. In the total retail sales of enterprises above a designated scale in 2014, growth by sector was as follows: cars 26.2%, foodstuff, beverage, alcohol, tobacco and wine 16.8%, daily-use articles 16.8%, petrol and related products 15.7%, home appliances and audio-visual products 13.1%.
2.2 Per Capita Disposable Income and Consumption Expenditure
In 2014, the per capita disposable income of Foshan’s urban households was Rmb36,555 and the per capita consumption expenditure was Rmb26,043.
3. Characteristics of Foshan’s Consumer Market
3.1 Population Structure
Foshan had a permanent population of 7.35 million in 2014, representing an increase of 26.7% over that of 2005. As compared with its household registration based population of 3.86 million, about half of Foshan’s population are non-native migrants.
According to China’s sixth population census, among its permanent population, 54% are males, 11.9% are aged 0-14, 83% are aged 15-64, and 5.2% are aged 65 or over.
The education level of its permanent population has notably risen, with 9% having received education at university level, 19% at senior high level, 44% at junior high level and 21% at primary level. As compared with the findings of the fifth census conducted 10 years earlier, Foshan’s education attainment ratio at university level has risen from 3,672 to 9,469 per 100,000 people.
There were 1.94 million households in Foshan, with an average size of 2.85 persons. The average household size had decreased by 0.37 person from 10 years earlier.
3.2 Characteristics of Consumers
Located in the interior of the PRD region and close to Hong Kong and Macau, Foshan can be described as a city which shares its wealth with its people. For historical reasons, however, its development has been tilted towards industries and its commercial sector is still being nurtured and has yet to take shape.
Practical in consumption style
Like most locally born and bred Cantonese, the majority of Foshan people are practical and low-key in their consumption. In the past, ordinary elderly citizens would only shop at small markets and small stores, while the rich would go shopping in Guangzhou and Hong Kong, rather than in Foshan. What is most obvious is that every weekend the Metro station at Kengkou will be crowded with Foshan citizens going to shop and dine in Guangzhou. Clothing, shoes and small accessories are the most common shopping items. During festivals and holidays, particularly Christmas and Valentine’s Day, a considerable number of the citizens will go to Hong Kong by land or sea for shopping binges. However, with the entry of even more large-scale shopping centres, such as Nanhai Wanda Plaza department stores, Foshan consumers’ awareness of home and overseas brands is growing. As the local commercial sector develops, shopping outside the city will be gradually reduced and staying in the city to spend will become the norm.
Lack of fashion awareness
Foshan people are mainly engaged in industries, and because they were among the first in China to benefit from the country’s reforms and opening up, most of them have considerable spending power. Nevertheless, because the city has only undergone a short period of commercialisation, its people still exhibit sensitivity to prices in department stores and have little impulse to make unplanned shopping purchases. In fact, they are willing to spend on merchandise with inflation hedging properties, such as real estate, cars, luxury watches and jewellery. They are also very generous in wining and dining, but do not spend much in dressing themselves up. Hence, Foshan consumers give people the impression that they are rather unsophisticated.
For instance, Foshan shopping malls will only be overcrowded when there are promotion events. The lopsided shopping and ‘me-too’ consumption characteristics of Foshan consumers are obvious. If there is no stimulus from major holidays or promotion, the consumer market will be rather quiet. In addition, there is not much evidence of individualised consumption: neither government employees nor white-collar workers would demonstrate a special propensity for fashion. A small proportion of consumers have a preference for specific brands or product features. Pursuers of styles are still keen to go shopping in Hong Kong and Guangzhou, particularly the case after the opening of all lines on Guangzhou-Foshan Metro in 2012, so it only takes 40 minutes to travel along the central routes within the Guangzhou-Foshan urban areas. The convenience in transportation has indeed boosted the desire of Foshan citizens to shop and spend in Guangzhou.
3.3 Modes of business operation
In recent years, the local retail market has gradually become active with the increase in migrant population and the growing demand for commerce. Apart from the entry of giant supermarket chains like Aeon, Yonghui Superstore, Lotus and Wal-Mart, shopping malls of diversified customer focus and product mix have also been blooming in Foshan. These include long-established department store Baihua Plaza, retail giant Foshan Tour Mall, trendy Xinghua Department Store, re-packaged Nanhai Plaza, chic and stylish Sunlink International Centre, charismatic Poly Canal Plaza, as well as the diversified and youthful CapitaRetail SZITIC Chancheng Mall. Suning-invested Suning Plaza in Foshan New Town will house shopping centres and grade A offices in one place and is expected to open for business in 2017. Since there are more shopping venues of different grades, indications that consumers are staying in the city to spend are increasingly evident.
As the consumption habits of local people are changing, some prestigious brands which were hesitant about setting up shops in second-tier cities are now operating in Foshan. For example, when luxury emporium Sunlink International Centre newly entered the market, it was generally regarded as too upmarket to have much chance of success. After continuous adjustments in brand mix and, in particular, after the introduction of home appliances, children’s wear and restaurants to complement existing sections, it now has a large group of loyal customers. Meanwhile, brands including Dunhill, Givenchy, Sammy, Kaltendin, Anmani, Girdear, G-Star, Starbucks, Marie France, Gymboree, Tissot and Tudor have found customers here.
Quite a number of students or recent graduates have turned to online shopping, mainly for clothing, books and daily goods. With attractive pricing lower than that of physical stores, online products are particularly favoured by young consumers. However, physical shops still have the advantages of giving customers a shopping experience, higher credibility and better product quality.
Foshan’s township economy is robust, but the towns are rather scattered and sparsely populated. Few towns have large-scale premises offering comprehensive consumption facilities. On the other hand, with the high household ownership rate of cars in Foshan and with improving road conditions, it should be a good proposition to develop commercial properties with large parking lots at locations within 15 to 30 minutes driving distance. One good example is the Poly Canal Plaza in Guicheng, Nanhai, which has lured car-owners from Guicheng, Chancheng and Fangcun districts as well as many other towns in the vicinity to come and spend. The Donghua Lane renovation project on Chancheng’s Zumiao Road is about to be completed. A 412-metre high, 90-storey commercial complex will be built on the last plot of land, which will be a landmark building after completion expected in 2018. With the completion of the Lingnan Tiandi Phase 1 & 2 in the Donghua Lane renovation, it will correct Foshan’s lack of an upmarket dining street with special features.
In face of the keen competition in the retail markets of Guangzhou and Shenzhen, commercial operators have turned to the second- and third-tier cities in the PRD region. Foshan’s lack of upmarket and international operators has already attracted the successive entry of companies in recent years. For example, Lingnan Tiandi has already landed in Zumiao commercial district; Beijing’s Wangfujing Department Store as well as international brands such as H&M and Uniqlo have also started operation in Jihua commercial district.
4. Profiles of Foshan’s Major Commercial Districts
Foshan is a typical emerging cluster city. The five districts under its jurisdiction are more or less independent from each other, so there is hardly any large, cross-district commercial area. Generally speaking, the commercial districts of Zumiao Road, Jihua Road, Tour Mall, Guicheng, Huagai Road (in Daliang) and LuckyCity (in Ronggui) are the more mature ones.
This commercial district started to thrive when Rose Shopping Mall (玫瑰商場) and Xinghua Department Store opened for business in the 1980s. Baihua Plaza, inaugurated in 1997, has assumed landmark status on Zumiao Road and is the top shopping venue for people from Chancheng and Guicheng districts.
After Sunlink and Century Healthy City successively marked out their territories here, Shui On Land is investing in the development of “Lingnan Xintiandi" in the Donghua Lane area. Meanwhile, renovation projects of various shopping malls are underway in this commercial district. For example, the old site of Youyue Department Store (優越百貨) will be renovated to become a commercial project, while reconstruction work on the original location of Rose Shopping Mall is expected to complete by 2015. New-style commercial properties will soon emerge and become commercial entities competing on a mutually exclusive basis, though they will all be selling mostly quality goods for the mass market. Problems such as narrow roads and inconvenient parking have affected the status of Zumiao Road in the past. Nevertheless, these difficulties are expected to ease with the transformation of Donghua Lane and the operation of the Guangzhou-Foshan Metro.
Located at Zumiao’s central lot of Donghua Lane, Foshan Lingnan Tiandi offers residential, office, hotel, retail, dining, entertainment, tourist and cultural facilities. It is different from Foshan’s traditional commercial districts in that it mainly targets high-end consumption with special features. Operating here are international brands including Starbucks, Hong Kong’s Honeymoon Dessert and Wing Wah Cake Shop, as well as Macau’s almond cookies, which have all become favourites of Foshan consumers. It is believed that on the completion of Lingnan Tiandi in 2018, the brands found in this location will be upgraded to make it a high-end consumption district in Foshan.
Jihua Road commercial district is distributed along both sides of Jihua Road, characterised by its diverse business modes, spacious roads and convenient parking. Here one can find not only Sunlink International Centre, an emporium for luxury, but also CapitaRetail SZITIC Chancheng Plaza and Century Healthy City, both purveyors of mass fashion. Also present are Wal-Mart, Park’n Shop supermarket and appliance retailers, Suning and Gome. In addition, there are many eateries with special features. In Sunlink International Centre alone, for example, many famous brands, such as Dunhill, Kaltendin, Pizza Hut and Starbucks, have converged. Shopper traffic on an average day differs not much from that on festivals and holidays for this commercial district. Jihua Road commercial district has a 15 year history and houses business, finance, office buildings and commerce in one setting. Located in the Foshan axis line, the commercial district has very convenient transport links. With the construction of the Jihua central business district starting, the development of Jihua commercial district will be carried to a new level.
In Tour Mall commercial district one can find department stores, restaurants, entertainment facilities and general merchandise stores, such as Belle, Aeon, Trust-Mart, Pearl Department Store, Sapphire City, Deshenglou Restaurant, Little Sheep Hot Pot, Suning Appliance, Gome Electrical Appliances, Xinhua Bookstore and a children’s playground. First developed in early 2004, this commercial district targets mid-market consumption and is always overcrowded during weekends. Of particular popularity are the various dining facilities offering cuisines from Guangdong, Sichuan, Hunan, Vietnam and Taiwan.
The urban landscape of Guicheng has a relatively fresh look and a strong commercial ambience. Most commercial facilities are concentrated on Nanhai Avenue, including CapitaRetail SZITIC Chancheng Plaza, Nanhai Plaza, Sensational Mall, Huichao Tiandi (匯潮天地), Nanhai Xinhua Bookstore, among others. Within Guicheng, traffic is convenient and many shops can be found in the vicinity of the City Plaza (城市廣場), such as Baihua Times Square and Lotus. The newly opened Poly Canal Plaza is on Qiandeng Lake, helped by its huge in size and anchor stores such as Aeon, Suning Appliance and Winman Department Store. The Nanhai Avenue commercial district features a high concentration of shops. With the successive openings of Uni Park in 2013 and Vanke Plaza in the second half of 2014, Nanhai Avenue has even attracted a lot of purchasing power from neighbouring streets and towns in Shunde and Nanhai, making it one of the leading commercial districts of Foshan, with extensive reach.
The people of Shunde District have high income but its commercial development is relatively weak. In Shunde proper, Aeon, Dafuyuan supermarket and Huagai Road Pedestrian Walk near Daliang are the only places with some appeal to average consumers. In addition, in the Shunde’s Ronggui area, a commercial district has taken shape around Lucky City, a complex offering gourmet dining, entertainment, movies and department store shopping. It attracts locals as well as residents from neighbouring Zhongshan to come and spend.
Guangzhou-Foshan “Golden Corridor”
Against a backdrop of the urban integration of Guangzhou and Foshan, much of the action will take place along the Nanhai Section of Guangzhou-Foshan Metro Line 1. As the connecting link between Guangzhou and Foshan, the “Golden Corridor” has given rise to the development of commercial districts in Dali, Lishui and Pingzhou. Dali has benefited tremendously from its location along the Guangzhou-Foshan Expressway for more than 20 years. Consequently, along a stretch of less than 20 km on Guangzhou-Foshan Expressway, some 30 specialised markets have been formed. These include, for example, Kaimin Tea Expo City, Nanguo Commodities City, Zhongda Leather City and Zhongjian Bomei Decorative Hardware City. The following can now be found In Dali township: Dali commercial district, centring around Dali Paris Spring and Guangyun Road commercial street; Huangqi commercial district, made up of Huangqi commercial pedestrian walk and Galaxy Mall; and Yanbu commercial district, centring around Yanbuzhi Street and Times Square.
Following the opening of the North Extension of Foshan First Ring Road and other roads, an industrial belt for modern logistics and specialised markets is now taking shape along a 30 km stretch of the Lishui Section of Foshan First Ring Road. Currently, six industrial clusters in home appliances, car assembly and auto parts, pharmaceuticals and chemicals, hardware and machinery, footwear and textiles, and wooden furniture have formed.