Bloomberg Businessweek - USA (2020-05-18)

◼ BUSINESS Bloomberg Businessweek May 18, 2020

● A LosAngelesdeveloperseesa futurein

buildingofficeswhereSearsusedtobe

14
SoWhoBuysaMall

DuringaPandemic?

Evenbeforethenovelcoronavirus,Walmartand

SearshadshutdowntheirstoresattheBaldwin

HillsCrenshawPlazainSouthLosAngeles.The

shoppingcenter’smovietheaterandmanyofits

otherretailershavebeenclosedinrecentweeks,

too,becauseofa stay-at-homeorder.Somemay

struggletoreopen.

Thatdidn’tstopdeveloperCIMGroupfrom

agreeingtobuythemallformorethan$100mil-

lionlastmonth.Theallure,likesomuchinreal

estate,camedowntolocation:Theshoppingcen-

tersitsata soon-to-openlightrailstation.Onecon-

ceptis toconverttheformerSearsandWalmart

intooffices,whichcouldhelpdrivefoottrafficto

theremainingretail.“Thisis whatwedowell,”says

ShaulKuba,CIM’sco-founder.“Wetrytofigureout

difficultsituationsandhowtomakethembetter.”

Investingintimesofdistressis a classicrecipe

forgeneratingoutsizereturns.Butit’sa partic-

ularlyriskystrategyduringa globalpandemic

THEBOTTOMLINE Almost40%oftenantsin China’snewlybuilt

mallsareeateries.Lingeringvirus-sparkedfearsaboutdiningout

couldhurtmalloperatorsalreadycopingwithbatteredretailers.

chainsareaskingforrentcutsanddiversifying

businessestooffsetlosses.

Hot pot chain Xiabuxiabu Catering

ManagementChinaHoldings Co., whichhas

morethan1,000eateries,is takinga hardlinein

itsnegotiations.WhilelandlordsareofferingChief

ExecutiveOfficerZhaoYiherchoiceoflocationsas

othertenantsflee,herteamis focusedoncutting

costs.“Wewon’topennewstoresunlesswecan

geta verylowrentora verylongrent-freeperiod,”

Zhaosays.“Chinais nolongerinarapid-growing

economicstage,sowe’reunlikelytoseea strong

consumptionreboundcoming.Infact,thefearof

losingjobsandgettingintorecessionmayhitthe

societymorethanthevirus.”

Lessprofitablemallsmayfailbecauseofthe

pandemicfallout,andnewcenterscoulddelay

theiropenings,accordingtoanAprilreportby

theShanghaiCouncilofShoppingCenters.“The

pandemicis causinggreatpressuretoretailprop-

ertyprojects,astheretailers’pressurewon’tdis-

appearovernight,”Citic’sZhangsays.“Landlords

willfacemanyrequestssuchasrentholidayand

leaseextensionforfree.”

Withthechallengesfacingtheirrestaurant

business,Chinesemalloperatorswillneedto

embracenewwaystolureconsumersback.This

strategyincludesincreasingtheuseofdigital

pitchesformarketingandsales,creatingmore

family-orientedexperiences,andembracingretail

projectsthatcatertohealthierlifestyles,accord-

ingtoa recentShanghaiCouncilofShopping

Centersreport.

TheK11ArtMallinGuangzhou,forinstance,

a project of New World Development Co.,

introducedvirtualrealityshoppinginFebruary.

Customers can visitToryBurch orEmporio

Armanistoresthroughtheirphones,chattingwith

staffviaWeChat.Themall’sonlinestoreattracted

morethan200,000visitorswithintwoweeksof

itsopening,generatingmillionsofyuaninsales.

Atthesametime,Covid-19hasforcedChinese

restaurantchainstoreducetheirrelianceonphys-

icallocations,a movethatmayhelptheirchances

ofrecoveryandgrowth.YumChinaHoldings

Inc.,operatorofKFCandPizzaHuteateriesin

thecountry,isexperimentingwithdeliveringraw

steaks—completewitharecipewithprecisefry-

ingtime—forhomecooking.Andhotpotrestau-

rantoperatorHaidilaoInternationalHoldingLtd.

startedsupplyingcustomerskungpaoshrimpand

stewedchicken,alongwithvegetables and sauces,

that can be cooked at home in about five minutes.

The virus outbreak “has stepped up the need to

diversify the channels apart from dining in—new

areas like takeaway, delivery, or products sold

atdifferentchannelsarealloptions,”saysAnne

Ling,a consumeranalystatJefferies.“Ithink

consumers’ assumption is that this kind of out-

breakwillcomebackagainandagain.”

Xiabuxiabuin Beijingstarteda fresh-food

delivery service to offset the weak traffic in its

restaurants, and it limits how many customers can

dine in at the same time. It’s selling vegetables,

beef,andotherfreshfoodviatheWeChatsocial

networkasa waytoaddressconsumertrends

fueledbythecoronavirusoutbreak.

“We are seeing people coming back to

restaurants now, but mostly during weekends to

meet friends,” CEO Zhao says. “The traffic during

weekdays is still weak, and I don’t think it’s just

because of the seating restrictions, but also a

mindset change of customers.” �Daniela Wei and

Emma Dong

2019

41.9k

2009

4.3k

▼ Shopping centers

in China