7 Sept 2015
Tianjin: Profile of a Consumer Market
1. Economic Overview and Development Planning
Tianjin is one of the four municipalities in China directly under the central government. Together with a number of cities, including Beijing, Shenyang and Dalian, it forms the Bohai Rim Economic Circle, driving the development of the neighbouring areas. Tianjin port is the largest integrated port in northern China and the city is the maritime gateway of Beijing as well as an important foreign trading hub in northern China. Its GDP in 2014 was Rmb1,572.3 billion, registering a real growth of 10.0% over the previous year. Per capita GDP was about Rmb103,655.
According to Tianjin Overall Urban Planning (2005-2020), the city is designated as the economic hub of the Bohai Rim region, performing the functions of a modern manufacturing and R&D base. It has also been positioned as northern China’s international shipping centre, international logistics centre, regional integrated transport hub and modern services centre. It is entrusted with the tasks of optimising the layout of its logistics base and nurturing a modern logistics industry embracing warehousing, processing, transportation, information and services. By so doing, Tianjin will develop into a hub serving the regional logistics supply chain. Efforts are being made to strengthen development of such service sectors as finance, trade, convention and exhibition, technology, information, culture and education in a bid to build Tianjin into a regional service centre with buoyant trading activities and a high concentration of scientific research, cultural and medical institutions and talent.
Moreover, the government is striving to further the development of the Tianjin Binhai New Area by promoting domestic and foreign investment in the finance, modern manufacturing, services and information technology sectors. The aim is to develop the area into an internationalised commercial district comparable to Pudong New Area in Shanghai. Binhai New Area is made up of the three administrative districts of Tanggu, Hangu and Dagang, as well as Tianjin Economic & Technological Development Area (TEDA), Tianjin port free trade zone, Tianjin Port Area and parts of Dongli District and Jinnan District. To date, eight leading industries are gradually taking shape in Binhai New Area: (1) aviation and aerospace; (2) electronic information; (3) oil and chemicals; (4) new energy and new materials; (5) energy saving and environmental protection; (6) automobile and equipment manufacturing; (7) light industry and textiles; and (8) bio-pharmaceuticals.
Binhai New Area is being developed under the overall planning of the ‘one city, two ports and nine districts’ layout. ‘One city’ refers to the urban core zone of Binhai New Area; ‘two ports’ refers to the southern port area and northern port area; while ‘nine districts’ refers to nine industrial functional districts. Each functional district is dedicated to the development of three to four key industries, with efforts devoted to the formation of five major industrial clusters, namely port in the east, new and high-tech in the west, heavy chemicals in the south, tourism in the north, and services in the centre.
In the eastern part of Binhai New Area, where modern port logistics are developed, emphasis is given to international transhipment, international distribution, international sourcing, international re-export and export processing, building the area into the first free port of the mainland. In the western part, where advanced manufacturing industries are developed, emphasis is placed on new strategic industries, including bio-pharmaceuticals, new energy and new materials, turning the area into a high-tech industrial cluster and independent innovation pioneer. In the southern section, where heavy chemicals and heavy equipment are developed, focus is on petrochemicals, modern metallurgy, ship building and repairing, marine engineering equipment, and high-speed locomotives, developing the area into a world-class heavy chemicals industry and heavy equipment manufacturing base. In the northern part, where leisure and tourism are promoted, importance is attached to coastal tourism, headquarters economy, conventions and exhibitions, service outsourcing, cultural and creative industry, as well as high-tech environmental industry. As for the financial services cluster in the centre, modern services such as modern finance, modern commerce and high-end business services will be developed, building the area into the world’s largest financial service district in terms of area.
In terms of business development, according to the Commercial Network Layout Plan of Tianjin (2011-2020), the city plans to have a world-class commercial centre, a cosmopolitan commercial centre, nine city-level commercial centres, 31 local commercial centres and 300 community-level commercial centres. In the world-class commercial centre, with Haihe River as the axis, integrating the three traditional shopping districts of Binjiang Avenue-Heping Road, Dongma Road and Xiaobailou, establishing new commercial districts, such as South Station business district, Italian style zone and Yiredian district. The cosmopolitan commercial centre will strengthen the business service functions of the core zone of Binhai New Area, integrating Jiefang Road area, Tianjian area, Xiangluowan area and Yujiabao area to expand business development space.
2. Tianjin’s Consumer Market
2.1 Growth in Retail Sales
Tianjin’s retail market has always been an active one and overall purchasing power is on the rise. In 2014, retail sales of consumer goods in Tianjin increased 6.0% to top Rmb473.9 billion. Of which, online retail sales of enterprises above a designated scale was Rmb12.5 billion, representing a sharp increase of 62.1%. In terms of categories, food and clothing items registered steady growth, while automobile and related petroleum products dropped due to some changes in policy.
2.2 Per Capita Disposable Income and Consumption Expenditure
The income of urban residents in Tianjin has been rising steadily, with per capita disposable income of urban households reaching Rmb31,506 in 2014. Meanwhile, people’s spending level has also been climbing. In 2014, per capita consumption expenditure of urban households amounted to Rmb24,290 (+8.9%), of which expenditure on various items including food, wine and tobacco, clothing, daily goods and services, education, culture and entertainment, and health care registered growth of 10% or more.
3. Characteristics of Tianjin’s Consumer Market
3.1 Population Structure
In 2014 the permanent population in Tianjin reached 15.17 million, up 41.4% over the 10.43 million in 2000.
According to China’s sixth population census, in 2010 there were 3.66 million households in Tianjin’s permanent population, with an average of 2.8 members in each household, or 0.29 persons fewer than the 3.09 in 2000.
Of the city’s permanent population, 53.4% were male and 46.6% were female, with 9.0% aged 0-14, 81.7% aged 15-64, and 8.5% aged 65 and above. Compared with 2000, the share of people aged 0-14 in Tianjin’s population dropped 7%, those aged 15-64 rose 7%, while the share of those aged 65 and above was about the same as 10 years earlier. In terms of education level, 17.5% of the permanent population have reached university level, 58.8% have received secondary school education, and the rest have received primary school education or below.
3.2 Characteristics of Consumers
Tianjin is located in the northeast of the North China Plain and at the centre of the Bohai Bay rim. As an important port city and open coastal city in the north, and with the momentum of the Beijing-Tianjin-Hebei integrated development, as well as the launch of the Tianjin Pilot Free Trade Zone (TJFTZ), Tianjin displays new features in terms of trade flows. In recent years, the consumer market of Tianjin has the following characteristics:
Online shopping growing rapidly
According to the Tianjin Municipal Statistics Bureau, online retail sales of enterprises above a designated scale in 2014 amounted to Rmb12.49 billion, an increase of 62.1%. Online retail sales of wholesale and retail enterprises were Rmb4.2 billion in the first quarter of 2015, an increase of 110%; courier business volume amounted to 38.54 million pieces, an increase of 47.8%. However, traditional department stores are facing challenges with the emergence of shopping centres and e-commerce, as well as the increasingly diverse demands of consumers.
On the other hand, operations of several large shopping centres are flourishing. Riverside66 was opened in September 2014 and Wanda Plaza opened a second mall in Hedong District. Tianjin Joy City and Galaxy Mall are integrated complexes offering facilities for shopping, dining, entertainment and leisure, with better shopper traffic than traditional department stores.
FTZ a boon to imports
With the launch of the TJFTZ and the emergence of cross-border e-commerce, the bonded exhibition trading approach has gained in popularity. Examples include the European Trade Centre and Minyuan bonded goods store. Previously, foreign goods needed to go through manufacturers, foreign brand agents, domestic brand agents, or may even second-tier agents before reaching domestic shopping mall counters. The bonded goods approach eliminates many intermediate links. Currently, the underground portion of Tianjin European Trade Centre, 40,300 sqm in area, is being renovated. A total of 80,000-90,000 sqm, above and under ground, including the European style commercial street inside the central street, is expected to be fully opened in August 2015.
Dining for mass consumption to grow faster
Turnover for the restaurant and hotel sectors in Tianjin amounted to Rmb74.859 billion in 2014, an increase of 11.4%. Of this, turnover below the designated scale was Rmb60.561 billion, an increase of 16.5%, higher than the city’s average increase of 5.1 percentage points, and representing 80.9% of the market. Turnover above the designated scale was Rmb14.3 billion, down 5.8%.
4. Profiles of Tianjin’s major commercial districts
Heping Road-Binjiang Avenue
Also known as the ‘Golden Street’, this district is formed by two large intersecting pedestrian walks – Heping Road and Binjiang Avenue. It is the most influential commercial district in Tianjin on the back of its long history, bringing together the essence of business, dining, and service sectors. It starts at Zhangzizhong Road from Haihe, extending southwest to Nanjing Road. Built in two stages, the district had two sections. The section from Zhangzizhong Road to Dagu Road was built in 1886 and the section from Dagu Road to Nanjing Road was built in 1900, which were merged in 1946, and named Binjiang Avenue. The hundred-year-old Heping Road commercial street, in particular, has been named “Famous Commercial Street of China” by the China Commercial Walking Street Committee.
During peak times in holidays, shopper traffic in this district can be as high as 800,000 to 1,000,000. With a total business floor area of approximately 500,000 sqm, this district comprises large department store complexes as well as a full complement of small to medium-sized specialty stores, general merchandise stores, eateries, appliance shops and furniture shops. Converging in this district are large-scale domestic and foreign-invested shopping malls, such as Zowee Department Store, Friendship Commercial Building, Wal-Mart, and Wanda Shopping Plaza.
This district is located in the middle section of Nanjing Road at the city centre. As the interchange station between Line 1 and Line 3 of the Tianjin Metro, the district has convenient transport links. Positioned as a unique district offering prime office space as well as mid- to upmarket shopping, entertainment and dining facilities, it is the commercial district with the highest concentration of luxury brands in Tianjin. The district boasts 11 medium to high-end commercial buildings and 10 large to medium-sized retail complexes, housing a number of upmarket department stores, such as Isetan, Robbinz Department Store, and Milenio, as well as many premium office buildings.
Situated at the junction between Heping District and Hexi District, this commercial district used to be a traditional commercial street area. In recent years, it has developed into a core area of Tianjin’s CBD and, backed by a full range of support facilities, is maturing into an upmarket commercial district.
Here one can find a 1902 European-style bar street, represented by the time-honoured Kissling western restaurant, as well as large modern commercial complexes like Binjiang Shopping Centre. In addition, there is a western-style concert hall and a French-style garden plaza. With the strong presence of corporate headquarters and financial institutions in the surrounding office buildings, the district has evolved into a business hub, dotted with upmarket shops and prime office buildings. With the entry of a string of luxury brands and high-end department stores, this commercial district is increasingly favoured by corporate executives and trend-savvy consumers.
The newly-built Drum Tower commercial street is located at the heart of Tianjin old city. This commercial district is defined by Xin An Shopping Centre (新安購物廣場), Tianjin Aqua City and Drum Tower commercial street. The commercial street is a new tourist attraction known for its folk merchandise. On this street, Tianjin Joy City and Tianjin Shuiniucheng Outlets, two recent establishments comparable to large shopping malls in Beijing and Shanghai, are attracting much attention from the young and trendy set.
Enjoying easy transportation and the presence of medium grade communities brought in by real estate projects such as Xin An Garden (新安花園) in the neighbourhood, a population of considerable spending power is formed in this area. Right next to the district are the Confucian Temple, Ancient Culture Street, Food Street and Inn Street. In particular, Food Street, as a place for eating out, shopping, sight-seeing and entertainment, is a rather influential area for eateries and snack foods in China. With such cultural advantages, Drum Tower commercial district is becoming a major area for youthful and trendy consumption in Tianjin.
Dahutong-Ancient Culture Street
Located on the banks of Haihe River, this district dates back several hundred years and is the most important wholesale mart in Tianjin. There are wholesale markets, commercial centres and specialised markets in this business area of 500,000 sqm. Here low-end merchandise is traded mainly through wholesaling. It ranks first among specialised markets in northern China as well as being is a famous hub for small commodities. Targeting the average consumer, the cheap but fine quality clothing and small everyday articles available here enjoy a good reputation. The Ancient Culture Street, with its cultural heritage and a dazzling array of folk merchandise, attracts large crowds of residents and tourists from home and abroad for shopping and sight-seeing. Currently, the Dahutong-Ancient Culture Street commercial district has a full range of dining, sight-seeing and shopping facilities, catering for 200,000 to 300,000 consumers on an average day and up to 300,000-400,000 on holidays.
Located in Nankai District in southern Tianjin, this newly developed urban district spans an area of 4 sq km. Its commercial facilities are mainly found at the dining and entertainment districts along Shuishang North Road and Shuishang East Road, Shanggu leisure business district, and the commercial complex of Magnetic Capital. Its sight-seeing, leisure, culture and sports resources are outstanding.
The 1,400-metre long Shuishang North Road places emphasis on developing high-end dining businesses, while Shuishang East Road focuses on developing leisure-entertainment businesses, such as bars, coffee shops and night clubs. The Shanggu district currently has 38,000 sqm in eatery and entertainment business areas. In future, it will focus on leveraging the night scene of the Tianjin Sky Tower to develop a night market economy. Revolving around the commercial space in its vicinity, the commercial district at Magnetic Capital focuses on the development of large department stores, hypermarkets, large professional stores and specialty stores. The district is characterised by high quality residents, high consumption level, extensive coverage, superior location, and is set to become a regional commercial hub in future.
Tianjin Railway Station
This commercial district is located at the Haihe River economic development belt and is well served by a highly developed transportation network comprising an underground railway system, a light rail system and the Beijing-Tianjin Railway. As such, it is the most important integrated transport hub in Tianjin. The four functional zones in this district each has its own characteristics. Station Front Plaza and Station Back Plaza will concentrate on developing conventional retail businesses, such as department stores and supermarkets. Their target consumers – passing travellers and tourists from home and abroad – can reach 40 million person-times annually. Jinwan Square focuses on high-end business, such as upmarket dining, entertainment, shopping and theatre shows. The Italian-style zone, on the other hand, places emphasis on dining, wine shops, culture and art rich in international and cultural flavours caters to leisure seekers and tourists.
Tanggu is situated right at the centre of Binhai New Area and lies adjacent to Bohai Bay. Development planning for this commercial district is to make Tanggu the CBD of Binhai New Area. Stretching to a length of 1,350 m, Jiefang Road commercial street is home to a dozen or so large commercial buildings. In addition, there are a number of banks and insurance companies here. It receives more than 50,000 tourists on a daily basis.
This commercial district comprises three functional zones: the commercial centre on Jiefang Road, the leisure park on the bank of Haihe River, and the specialised market cluster at Xintianyang. It is not only a top choice for the hundreds of thousands of Tanggu residents and a large horde of tourists, but also provides comprehensive commercial services to workers in TEDA, Tianjin port free trade zone, etc.
The commercial street is a modern urban economic zone featuring leisure, entertainment, shopping and dining facilities. The scale of its design, its suite of facilities and its lighted night scenery are comparable to downtown Heping Road commercial street. For example, known for its classic European architectural style and unique offer of ‘western goods, western flavour and western brands’, the Xintianyang market cluster attracts tens of thousands of domestic and foreign tourists a day. This commercial district is evolving to become an upmarket golden commercial section of Binhai New Area. Because of its enviable location in the economically developed Binhai New Area, its development potential should not be overlooked.