Malls reinvent themselves amid fickle shoppers and a consumer spending slowdown

In the late evening at luxury mall Plaza 66, a lone shopper walks past the shopfronts of luxury brands. The sharp clack of her high heels on the marble floor echoes in the stillness, an eerie reminder of the subdued undercurrents in Shanghai's high-end retail scene.

The plaza, once a popular destination for shoppers, often feels more like a polished showroom than a bustling shopping hub nowadays.

Shanghai's innumerable sleek malls – once the signature of the city's reputation as a shopping haven – are in the throes of change as developers and retailers rethink ways of bringing life – and shoppers – back to these opulent spaces.

Numbers tell the story.

In 2024, Plaza 66 suffered a 6 percent drop in revenue and a 22 percent slump in tenant sales, according to the annual report of operator Hang Lung Properties (stock market ticker 0101.HK). The decline was attributed to "lower-tier customers exercising greater caution in high-end spending and searching for bargains internationally," claims the report.

Price-conscious shoppers may go to glitzy malls to view merchandise, but they often go home to order it online at cheaper prices. Even the loyalties of the mall's wealthier customers who still buy in-store haven't offset the broader slowdown.

The trend isn't isolated to Plaza 66. Its flagship sister Grand Gateway 66, a more lifestyle-focused mall, reported a 3 percent decline in revenue and a 12 percent drop in tenant sales.

HKRI Taikoo Hui, another high-end retail landmark, reported retail sales plummeted 14 percent in 2024, with a 93 percent occupancy rate – the lowest in the Chinese mainland portfolio of Swire Properties (1972.HK).

The company attributed the decline to ongoing renovation and repositioning efforts, but the figures underscore the wider challenge of addressing shifting consumer buying habits.

"People aren't buying to impress anymore," said a long-time Plaza 66 shopper, who asked to remain anonymous. "It's more about 'quiet luxury' now – understated goods that don't scream logos. But even then, I'd rather buy them in Japan or Europe, where the prices are better."

Adriel Chan, chairman of Hang Lung Properties, wrote a letter to shareholders last July that outlined the challenges facing the company.

"The decline in tenant sales, particularly in our Shanghai malls, was due to increased outbound luxury shopping (driven by the weaker Japanese yen) and reduced consumer confidence," he noted.

But the question remains: How can the sector turn itself around?

As the market for luxury goods sags, other commercial models are rising to take its place, each trying to carve out a niche in Shanghai's evolving retail landscape.

As a sign of changing times, Hong Shou Fang shopping center hums with energy.

The aroma of sizzling qiangbing (deep-fried cakes), a Shanghai snack, fills the air as grandmothers haggle with vendors, while young parents sip artisan coffee and watch their kids dart between stalls, clutching sticky tang hulu (sugar-coated fruit).

This new shopping center in the Changshou Road area thrives as the heart of its surrounding neighborhoods. It was developed by Shui On Land (0272.HK), operator of the popular Shanghai Xintiandi project, and is focused on serving a unique local community.

With a modest commercial area of 15,000 square meters, Hong Shou Fang managed to attract over 10 million visitors in the first year after opening in September 2023. The foot traffic is a mark of the mall's successful marketing strategy.

Its open architecture, with multiple entry points, encourages residents to stroll in, whether they intend to shop or simply enjoy the ambiance.

"This approach has fostered a sense of belonging, making it a daily destination for locals," said Erin Wang, general manager of Hong Shou Fang. "The inclusion of nostalgic elements, such as preserved shikumen-style architecture, also appeals to residents who have a deep emotional connection to the area."

Hong Shou Fang's focus on food and dining has been a key driver of its popularity. With a mix of traditional Shanghai cuisine eateries, modern cafes and trendy food stalls, the mall has become a culinary go-to spot. The emphasis on food is strategic, ensuring a steady flow of customers from morning to midnight.

"We didn't want to create just another shopping center," Wang said. "We wanted to build space where people visit regularly, where they meet up with their neighbors and where they can enjoy a meal or snack without feeling like they're stepping into a grand shopping experience. It's about accessibility in an engaging environment."

That philosophy permeates the mall's design and operations. From hosting community events to offering discounts to elderly residents who prefer paying in cash, Hong Shou Fang has gone the extra mile to ensure that people feel at home. It offers a sense of connection and belonging that online shopping cannot replace.

"We want to see how this community-first retail model will expand, not just in Shanghai, but probably across China," Wang added. "It's about understanding the local culture and needs, and adapting our commercial spaces to fit them. We live in a time when people are looking for more than just products. They want experiences and connections."

The community-first approach isn't the only one capturing the hearts and wallets of often fickle consumers. Diversity is becoming the hallmark of Shanghai's retail landscape.

Joy City on Xizang Road N., developed by Joy City Property Ltd (0207.HK), and Bailian ZX on Nanjing Road E., developed by Bailian Group (600827.SH), are two downtown malls that have distinguished themselves by adopting themes of fantasy to cater to younger shoppers.

Step into these spaces, and you're instantly transported into a neon-lit wonderland of anime and pop culture.

Teens in pastel wigs and elaborate cosplay outfits crowd around capsule-toy vending machines, their laughter mingling with the upbeat soundtrack of a Pokémon-themed café. Shelves are lined with limited-edition figurines, manga and related merchandise, with ardent fans willing to queue for hours and spend hundreds, or even thousands, of yuan.

"It's not just about buying," said Li Aixuan, a sixth-grader from Minhang District. "It's about seeing the cosplayers and feeling like you're a part of the world you're a fan of." She and her classmates regularly travel at least once a month for about an hour by Metro to visit the malls.

The appeal of these spaces is obvious. There's always something new and exciting to greet consumers – from commemorative ticket stubs from Jujutsu Kaisen and Neon Genesis Evangelion exhibitions to pop-up shops featuring Blue Lock and virtual idol events like Luo Tianyi's birthday party.

Bailian ZX opened in January 2023 from a makeover of the former Hualian Mall. It quickly earned a reputation as the "mecca of anime culture," the first of its kind in China.

The mall houses over 40 brands, including global first stores such as Tamashii Nations, MegaHouse, and Aniplex, alongside flagship stores from brands like Animate and GoodSmile Store.

Ye Xiaojing, project leader behind Bailian ZX, said the key to capturing the attention of Gen-Z lies in catering to their rapidly changing tastes.

"For the post-1995 generation, trends last three months or less," Ye said in an earlier interview. "The core of the business is 'content differentiation.' We need to continuously deliver strong content."

From pop-up stores to major events, Bailian ZX keeps energy levels high. In its first year, the mall hosted over 450 events, achieving sales of 300 million yuan (US$41.4 million) and attracting nearly 10 million visitors.

By November 2024, the mall's sales had increased 76 percent, with foot traffic up by 40 percent and a membership base swelling to over 260,000.

What was once a mall with daily foot traffic of around 6,000 people now sees an average of 20,000-30,000 visitors per day, with peak days reaching over 90,000.

This surge in popularity was further amplified by the 2024 BW Anime Festival last summer, which helped the mall achieve a record-breaking 210,000 visitors and sales exceeding 10 million yuan over just three days.

Indeed, the retail landscape is rapidly changing to adapt to new consumer trends and bolster limp balance sheets. Is it enough amid a general slowdown in consumer spending nationwide? Everyone in the industry is closely watching to find out what works and what is the best path forward.