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Economy

The twilight of China's electronics malls in the online era

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  © Reuters

SHANGHAI -- China's electronics malls, the one-stop shopping centers where techies can get their hands on the latest Lenovo note PC or Huawei smartphone, are going the way of the floppy disk.

At the Metro City retail complex in Shanghai's Xujiahui shopping district, PC and smartphone sellers are due to vacate by the end of this month. Metro City is reportedly remodeling spaces to accommodate eateries and apparel shops.

Next door, a Pacific Digital Plaza has been torn down. A new shopping complex is being built in its place. At Zhongguancun, Beijing's Silicon Valley, the Hailong electronics market shut its doors in July after 17 years in operation.

Online retailing is a major factor driving the decline of these bazaars. Domestic consumption is growing at a 10% clip, but online purchases have kept climbing by 20-30%, leaving brick-and-mortar stores in the lurch. Many savvy customers check out PCs and other devices at physical stores, then buy those models for cheap on the web.

Another possible cause is the rise of property values. Despite measures rolled out by Chinese authorities designed to rein in a bubble, land prices continue to jump in the city centers of Shanghai and Beijing. Rates of return found by dividing lease revenue by property value fall short of interest rates, according to a Japanese bank. In that environment, property owners would raise rents and sell assets at high price tags.

Computer retailers, which generally have high turnover but slim margins, cannot absorb the higher costs of operating in leading business districts. On the other hand, restaurants have more leeway to control profit margins, such as by manipulating the unit price per customer. Compounding the trend is the tendency for otherwise price-conscious Chinese to splurge while dining.

Electronics malls are not the only physical retail locations becoming outmoded. Department store operator Parkson Retail Group, based in Malaysia, is selling off a Beijing outlet whose sales are suffering under the twin blows of a saturated urban consumer market and the migration to online stores.

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