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Shanghai Shopping Mall Catering Growth Outperforms Sector Average

While the city's wider catering sector has struggled of late, food sales in Shanghai's shopping malls have boomed.

Photo: Food halls: Fat profits for Shanghai’s shopping malls. (Xinhua News Agency)
Food halls: Fat profits for Shanghai's shopping malls.
Photo: Food halls: Fat profits for Shanghai’s shopping malls. (Xinhua News Agency)
Food halls: Fat profits for Shanghai's shopping malls.

Shanghai's catering industry has come under twin pressures in recent years, with both a slowdown in national economic growth and rising corporate overheads bedevilling the sector. Given its slack growth and drop in profitability, the industry's performance has proved a source of widespread concern.

Despite these problems, catering services now account for an ever-increasing proportion of the trade in many of the city's shopping malls. In fact, catering now accounts for in excess of 40% of the total sales in more than a third of Shanghai's shopping malls.

It has become increasingly apparent that catering services clearly help to drive footfall in these retail environments, often becoming a key attraction of many malls. This is in sharp contrast to the overall performance of the catering sector, again causing concern for many in the industry.

As a result a joint research report on the catering businesses in Shanghai's shopping malls has now been published by The Shanghai Council of Shopping Centers, Shanghai Restaurants Cuisine Association, and RET China Commercial Property Research Centre. Overall, the study considered 58 shopping malls in order to develop an in-depth analysis of the development trends of the shopping mall catering businesses in Shanghai. The results have proved highly illuminating for both shopping centres and catering enterprises.

Most obviously, it was noted that shopping mall catering businesses are a rising trend, outstripping the growth levels of such businesses located elsewhere in the city.  According to the survey, shopping mall catering sales posted an average annual growth of 24.9% over the past six years. This far exceeded the citywide average of 8% for the same period.

In addition, the average growth rate for shopping mall catering sales is much higher than that of overall shopping mall sales (17.4%) for the same period. It was also noted that catering services have also contributed significantly to the 27.7% average sales increases reported by the city's shopping malls.

Typically, shopping malls are categorised into four specific groups, based on their target consumer groups and extent of reach – downtown, district, community and direct sales. The new research shows that district shopping malls have the highest proportion of catering sales, with four main reasons being identified for this.

Firstly, in terms of geographical distribution, district shopping malls are usually located at city sub-centres. These areas usually comprise high-density residential communities and offices, thus serving multi-level consumer communities with around-the-clock catering needs.

Secondly, from a business format perspective, the reach of urban and direct sales shopping malls extends to the whole city and even to the surrounding provinces and neighbouring cities. With consumers obliged to travel to such destinations, retail purchases – rather than dining – are often their sole motivation for such a visit.

Community shopping malls, on the other hand, mostly support people's daily living retail and service needs. It was also noted that in the case of district shopping malls some 25-30% of their business is catering-related.

Finally, from a pricing perspective, consumers visiting district shopping malls usually have higher spending power and are more willing to spend on food and beverages. As a result, the catering prices at these shopping malls are generally higher than those in community shopping malls.

Ada Li, Shanghai Office

Content provided by Picture: HKTDC Research
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