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Suburban commerce in Shanghai: characteristics and development strategies

This is the fourth part of a series on Shanghai's key functional zones during the 12th Five-Year Plan period and business opportunities arising therefrom.

During the 12th Five-Year Plan period, Chinese cities will adhere to the principle of the integrated and balanced development of urban and rural areas, attach greater importance to suburban areas in the modernisation drive, and further shift the focus of development to the suburbs. Suburban commerce is moving along a fast track in the building of a new countryside. Shanghai's 12th five-year plan for the development of commerce takes the suburbs as the centre of a new round of commercial development and seeks to develop suburban commerce in the direction of urbanisation and modernisation. Shanghai's Outline Plan for Commercial Outlets clearly states that Shanghai will build a system of commercial outlets that covers new cities, new towns and key villages in areas outside the city proper. Commercial outlets in suburban new cities will become a crucial part of Shanghai's commercial layout.

I. Burgeoning suburban commerce

1. Commercial heavyweights head for suburbs

Commercial heavyweights are turning their eyes to the suburbs for business opportunities as commerce in the city centre becomes increasingly saturated and development is getting more costly and difficult. They are losing no time mapping out development strategies to open up the suburban market. The Bailian Group, for instance, has stepped up its opening of new suburban outlets in recent years by opening branches of Bailian Shopping Mall and Orient Shopping Centre in Jiading, Qingpu, Fengxian, Jinshan and other Shanghai suburbs. Wanda, Suning, Gome and other commercial operations have also stepped up their expansion in suburban areas. Six new shopping malls were opened in Shanghai's suburbs in 2011. The rise of big commercial operations, especially the entry of new modes of large-scale commercial facilities like shopping malls, has played a tremendous role in uplifting and improving the structure of suburban commerce.

2. Rapid growth in suburban sales performance

Besides promoting commercial development and satisfying consumer demand, commercial heavyweights have also achieved good economic returns in the suburban areas. For example, the Fengxian, Qingpu and Jiading branches of Orient Shopping Centre achieved increases of 50.5%, 33.3% and 18.1% respectively in their sales volume in 2011. Apart from these stores which opened in recent years, the Xiandai, Nanhui and Jinhui branches of Pudong Emporium that were opened in the suburban areas many years ago also reported good performance in 2011 with increases of over 20% in sales volume compared with the previous year.

In 2011, nine of the top 10 individual department stores in terms of sales growth over the previous year were in the suburbs. In 2012, suburban stores continued to outstrip those in the urban CBDs in sales volume. For example, the Fengxian store of Orient Shopping Centre achieved an increase of over 28.8% in sales volume over the previous year. The potential of suburban commerce cannot be underestimated.

II. Characteristics of suburban commerce

1. Different service scopes

The service scope of suburban commerce is different from that of commerce in the urban CBDs. Commerce in the urban CBDs serves not just the whole city but also the whole country and even countries abroad. Suburban commerce primarily caters to the consumer demands of local residents and local workers before seeking to attract consumers in neighbouring cities and extending to adjacent areas.

Purchasing power does not flow according to administrative divisions. The flow of purchasing power is mainly affected by transport and by tourism and recreational activities. It is also determined by the characteristics and attraction of the businesses themselves. Consumers will go to spend wherever is convenient and attractive to them. For example, in spite of its suburban location, Bailian Outlets Plaza in Qingpu still attracts many shoppers and serves the whole of Shanghai, even the Yangtze River Delta as a whole.

2. Commercial energy level will rise further

Suburban demand is no longer an old concept and we cannot simply dump obsolete business modes of urban CBDs and leftover goods to the suburban market. First, suburban purchasing power is rapidly growing. Second, suburban commerce does not just satisfy the needs of local residents. There are also offices and institutional consumer demands in the suburban areas. Some suburbs have beaches and large recreational facilities, such as Happy Valley in Songjiang and the Disneyland project currently under construction in Pudong. Some suburbs have botanical gardens, zoos, forest parks and ancient towns. Tourists generate demand for food and shopping.

Old suburban commerce needs to undergo transformation and upgrade their energy level by changing the present situation where businesses are small, disorderly and mixed and where a complete range of business modes and types is lacking. New suburban commercial operations must be precise in their market positioning and must combine modern with traditional concepts.

3. Clear hierarchy and functions

Suburban commerce will have a clear hierarchy and clear functional positioning.

New city commerce refers to main commercial clusters formed in the CBDs of new suburban cities. These cities have a high commercial concentration in addition to fairly good commercial services and mainly serve local residents as well as outside consumers. The functional characteristics of new city commerce are: They serve both local residents and the neighbouring areas, even the entire region. They usually have a harmonious blending of modern and traditional features. New city commerce must reflect the city landscape and show relative agglomeration in layout, with blocks of commercial facilities forming the mainstay, supported by a number of commercial streets in the neighbourhood. The old parts of these cities must preserve the features of the historic old cities, with emphasis on upgrading the major commercial streets and encouraging the building of specialty shopping streets lined with old and established firms in an effort to combine commerce with tourism and culture.

New city commerce is intended to satisfy the diverse consumer demands of local residents for shopping, catering, recreation and leisure. The development of department stores, supermarkets, convenience stores, professional shops, specialty stores, service outlets, specialty restaurants, and recreational and leisure facilities is encouraged. Also encouraged is the development of commercial centres that offer comprehensive community services. Appropriate steps will be taken to build shopping centres, large supermarkets, wet markets and outlets for everyday services.

New towns should develop special forms of commerce with distinctive features, such as commerce providing comprehensive services, commerce led by industries, commerce in transport hubs and commerce in modern residential areas, based on road transport networks, population scale, industrial foundation and other conditions of individual towns.

Village-level supporting commerce can combine commercial service with community service, with retail outlets for daily necessities providing convenient, safe and high-quality goods and services to villagers.

III. Development strategy for suburban commerce

1. Adopting measures that highlight local conditions

Due to differences in economic development level, demographic distribution, industrial structure, geographical environment, and historical and cultural background, there is great disparity in purchasing power and consumer demand between different suburban areas. Suburban commerce is not the simple extension of commerce in the urban CBDs and cannot be mechanically copied from the CBD or other models. Suburban commerce and urban CBD commerce are mutually complementary and different development models with distinctive characteristics of their own should be adopted according to local conditions.

The layout of suburban commerce should feature new breakthroughs in the formation of suburban new city functions, the embodiment of new suburban image and the clustering of suburban services, as well as harmony between the industrial structure and cultural landscape. It must correspond to the level of social and economic development, demographic distribution and the level of purchasing power in the suburbs. Commerce should play the role of a facilitator in the building of "eco-friendly and livable communities with a combination of business services, recreation and tourism facilities" in the city suburbs.

2. Close integration with business development

With limited space and rapidly rising cost in the urban CBDs, business districts in the suburban areas are flourishing. They all enjoy a good ecological environment with clean air and lots of trees. Business cost there is relatively low and the steady improvement of transportation shortens their distance with the urban areas. Thus, the development of suburban commerce will go hand in hand with the building of office blocks, hotels, restaurants, shopping centres and other business and service facilities. This will improve the entire business setup and ensure a steady customer base and purchasing power.

3. Close integration with tourism and cultural development

The advantage of Shanghai's suburban areas over the urban CBDs is that they have a lot more space and enjoy many unique natural conditions. Suburban commerce should make full use of these advantages and develop side by side with tourism and cultural undertakings in a mutually complementary manner.

For example, they may take advantage of seaside, lakeside or riverside areas to develop waterfront recreational facilities that combine commerce with tourism, water sports, resort vacation, convention service, yachting, camping and fishing. They may take advantage of ecological resources to develop lakeside picnic areas, floating bars and lounges, and specialty restaurants. Examples of these are Bihai Jinsha Beach in Fengxian, City Beach in Jinshan and Dianshan Lake in Qingpu. They may capitalise on modern agriculture and eco-friendly agriculture to develop sightseeing agriculture, agricultural tourism, and organic farm tours. They may also tap the cultural advantages of ancient towns and villages on the southern shore of the Yangtze River. Zhujiajiao Old Town, Qibao Old Street, Fengjing Ancient Town and Zhaojialou Ancient Town are some of the examples.

Suburban commerce may also combine with regional industries to develop industry-based tourism. For example, package tours may be organised to promote car or yacht culture.

4. Providing support to campuses, science parks and development zones

Suburban commerce will focus on providing support to university campuses, science and education parks, high-tech development zones and other types of industrial parks and zones. For example, in Nanqiao, projects for the development of hotels, office towers and exchange platforms, such as the Nanjiao Hotel, the Agriculture Equity Exchange, the Petroleum Exchange Platform, and Jurun Plaza, will give a great boost to businesses like food and beverage and retailing.

5. Providing support to transport hubs

Commerce in transport hubs mainly covers newsstands, bakeries, drinks shops, convenience stores and other service outlets. Attention should be paid to the changing roles of commuters and business customers. The neighbouring areas of transport hubs may develop into residential districts, in which case suburban community commerce may be developed. The building of office blocks may turn the neighbourhood into a suburban business and commercial district.

from special correspondent Qi Xiaozhai, Shanghai

Content provided by Picture: HKTDC Research
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