Chinese shoppers with a taste for discounted luxury goods are in luck, as Florentia Village expands its network of designer outlets into central China and Hong Kong.
The chain of suburban shopping venues has recently unveiled its first location on the fringes of Wuhan, less than two months after the launch of its first non-mainland outlet in Hong Kong’s New Territories.
Like its stablemates, this fifth Florentia outlet in Greater China attempts to lure shoppers away from downtown shopping streets with offers of international brand fashion at discounted prices. Bolstered by its success so far, the mall chain backed by TH Real Estate, Gaw Capital and other international investors is gearing up for further growth in western China amid a rebound in luxury sales on the mainland.
Outlet Chain Lands in Central China
TH Real Estate, an investment affiliate of Nuveen (the investment management arm of TIAA), announced the official launch of Florentia Village Wuhan late last month. The mall is located in Ezhou, a tourist city outside the Hubei provincial capital, 20 minutes by high-speed train from Wuhan Railway Station and an hour’s drive from Wuhan Tianhe International Airport.
The RMB 400 million ($59 million) shopping outlet in the setting of an Italian village is expected to pull in strong tourist traffic. “We’re opposite the high-speed railway station, so we have good connectivity to an incredibly large, wider catchment,” John Sharp-Paul, TH Real Estate’s Head of Portfolio Management for Asia told Mingtiandi. “It’s about 45 minutes out of town, but with significant catchment in all directions.”
The new mall provides 360,000 square feet (33,600 square metres) of prime retail space featuring international fashion and accessories brands from Brooks Brothers and Follie Follie to Nike and Puma. Toy giant Mattel will also open a Barbie-themed store in the mall.
Hong Kong Likes Discounted Luxury Goods Too
The Ezhou opening follows Florentia Village’s first foray outside the mainland in June. TH unveiled the company’s fourth outlet in the Kwai Hing area of Kwai Chung in Hong Kong’s New Territories, about six miles north of Central. Located a five-minute walk from the Kwai Hing MTR Station, the 60,000 square foot (5,574 square metre) prime retail space offers 21 units of boutique shops operated by Armani, Prada, Salvatore Ferragamo, Versaci, and Lane Crawford, among others.
Unlike the sprawling outlets of mainland China, Florentia Village Hong Kong takes up two storeys within the podium of a newly refurbished office building. Hong Kong’s “density and geographic constraints mean it’s quite difficult to build a traditional mall,” Sharp-Paul noted. “We think this is the first time that this sort of outlet has been produced with such a focused approach, so we think we’re unique.”
Although the format is different from Florentia Village’s mainland locations, the Hong Kong outlet offers its luxury wares at similar discounts ranging from 30 to 70 percent. The mall is expected to draw shoppers from the city as well as across the border.
“It is located to the north of Central, and we expect that we’ll be able to get attention from the Pearl River Delta,” said Sharp-Paul. “We’re looking to increase tourism from the wider China region… seeking further afield than just the traditional 60-to-90-minutes drive catchment.”
The proximity to the mainland raises the possibility that buyers from north of the border will source goods from the Hong Kong outlet, carry them through customs and resell them in mainland China where prices are higher due to steep import taxes. The Chinese government has cracked down on this practice, known as daigou, but Sharp-Paul doesn’t see it as an issue.
“Our customers visit the centre for an enjoyable retail experience, it’s really a very positive experience rather than just being focused on price alone, although of course price is important,” said Sharp-Paul. “We’re clearly not a source of stock for daigou suppliers, even in Hong Kong, and we don’t expect that will really affect the store.”
Gaw-Backed Fund Targets $2B in Assets by 2021
The first Florentia Village opened in Wuqing between Beijing and Tianjin in June 2011. The success of the project spurred TH Real Estate to help create Silk Road Holdings in 2012, a Singapore-domiciled joint venture including RDM Group and Hong Kong private equity house Gaw Capital, to capitalise on China’s appetite for discount luxury goods.
The joint venture, which builds and operate the designer outlet chain, opened a Florentia Village near Shanghai’s Pudong airport in February 2015 and another in Foshan near Guangzhou in September of the same year. In June 2016, TH partnered with Gaw Capital to launch a new investment fund to fund a planned $2 billion expansion over the next five years.
Florentia Village Moves into Southwestern China
Two more Florentia Village developments are on the way, one scheduled to open in the southwestern city of Chengdu by the fourth quarter of this year, followed by another venue in the region’s biggest mega-city Chongqing in 2018. “Certainly with the success of the Florentia Village Group, we’re looking to build on this success and develop some more sites,” Sharp-Paul said, although he did not reveal specific plans for additional projects.
“China is where we generally see the most attractive opportunities, of course with the infrastructure and the track record we’ve built up. That’s still likely to be our next step,” Sharp-Paul said when asked whether TH was contemplating projects elsewhere in Asia. “But we are evaluating other opportunities so I wouldn’t rule anything out at this stage.”