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QQ.COM: "The BalletTown", the Best Outlet in China

 

Drawing of Guangdong BalletTown Project
 
     How can a single commercial format, after being introduced into China, become a complex and multiple commercial format that releases great commercial power?
 
      Outlet (China) Limited and Beijing Capital Land, based on their distinctive commercial practice, have launched the "BalletTown Project" which is a national layout of commercial real estate business. This is a great vision (made up of four components as industrial district, industrial park, stylistic town and shopping village) which has received high attention from scholars and industrial experts both home and abroad.
 
      In fact, like the significant position of the gaming industry in Las Vegas, outlet is so important to Outlet (China) that it is core of the "BalletTown Project" which is exclusively created by the company. The "BalletTown" features a "3+X" model ("3" refers to outlet mall, modernized and comprehensive commercial cluster and eco-friendly residence; while "X" represents an industrial combination of the local characteristic resources). In the future, Outlet (China) and Beijing Capital Land will, take the southern, eastern, central, northern and northeastern areas for instance, pour investment to build the "BalletTown" – a new city center anchored by outlet at periphery of major cities or between cities. After it is fulfilled, there will be brand stores, conference and exhibition centers, office buildings, hotels, scenic spots, food shops, entertainment and health promotions clubs, theme parks, sport and recreational sites, residential areas and property management agencies. The BalletTown will create an interdependent and co-existing commercial environment, integrate multiple commercial formats into one, form a modernized industrial cluster, realize optimal allocation of resources, unlock value in a dynamic system, and disseminate the result of social civilization and economic development.
 
      To date, there are more than 70 local governments inviting Outlet (China) to survey their investment environment. While upholding the principle of "pressing ahead in a steady manner and paying attention to effects", the company plans to invest 4 or 5 areas in 2012.
 
      At present, most of the Chinese commercial real estate developers overlook the dialectical relation between commercial ecology and appreciation of shop value. They highlight attraction of international brands and gain profit through developing small shops, but fail to consider the subsequent and unified operation and management of such shops, as a result, the shop owners are fighting for profit on their own vulnerable to difficulties.
 
      Therefore, the BalletTown model has received prominent attention against such context. After a serious study, the Development Research Center under the State Council pointed out that "the BalletTown model is an effective way to advance urbanization while China is making effort to transform the economic growth pattern, and the specific steps are making outlet as core engine – driving development of industrial cluster – forming a new and fashionable city center – boosting development of city cluster – pressing ahead with the urbanization process."
 
      However, as to the promotion of the BalletTown model which is newer, larger and more functional than the European and American "shopping-and-recreation" model, some insiders have begun to worry for Outlet (China) Limited and Beijing Capital Land since it is not an easy job to achieve mutual support, interdependence, common existence and prosperity between commercial ecological chain and scientific planning of multiple business formats.
 
   What is the market prospect of the BalletTown model? While pressing ahead with the integration of urban and rural areas, how can the BalletTown boost the development of different commercial formats and release their commercial value through forming industrial clusters? How to redefine the Chinese new lifestyles in the future and make the BalletTown a genuine fashion city? A few days ago, at the news conference hall of Outlet (China)'s Beijing headquarters, a reporter interviewed Lin Zhuoyan, Chairman of the Board of Directors and Chief Executive Officer of Outlet (China), and Liu Xiaoguang, Chairman of the Board of Directors of Beijing Capital Land. They are souls of the BalletTown Project.
 
      Interview:
 
      The BalletTown's "3+X" model lights up the way to the Chinese market
 
      The BalletTown's "3+X" complex commercial formats
 
      Reporter: What is the market positioning of the BalletTown? From a single brand discount shopping mall to a commercial cluster integrated with ecological residence, business administration, tourism, recreation, catering and entertainment, how the preliminary planning was made to ensure sustainable development of the BalletTown?
 
     Liu Xiaoguang: The BalletTown targets to build a new lifestyle for the Chinese. Yet multiple commercial formats are an indispensable part to fulfill such objective. The BalletTown's "3+X" model involves multiple industries and complex commercial formats (i.e. outlet mall, modern commercial cluster and ecological residence) and combines with the local characteristic resources. Therefore, we have paid high attention to the commercial development and design at the preliminary stage. We negotiated with different brand operators, insisted scientific layout, brought in varied commercial formats after serious selection, and we even made strict requirements on the height of mall and area of each store.
 
      Lin Zhuoyan: In fact, the BalletTown has a giant commercial capacity. And our project sites are different from those of Wanda Group which develops commercial real estate projects in city centers and seeks for mutual promotion between residence and commerce. In contrast, the BalletTown is built at the periphery of cities or between cities, it is a new city center anchored by outlet. In order to sell out the residential houses, we must depend on bigger, stronger and better commercial projects.
 
      Liu Xiaoguang: Outlet is our strength. Outlet carries its own value, it can also drive up the value of the surrounding properties. Recently, I visited an outlet in the US, I came across a Chinese who bought 50 pairs of pants. I asked him why he bought so many pants, he said that it only cost USD22 in the US, but RMB1,000 in China. It can be seen that outlet is really tempting, if making outlet as a center, the value of the surrounding property will be appreciated.
 
      Adjust strategy of development
 
      Reporter: Currently, lots of developers have turned to the commercial real estate sector which is accompanied with more risks, and the largest one is tight fund. How can the BalletTown evade such risk? Not long ago, there was a speculation that the BalletTown was facing tight fund and difficult invitation of investment, some media even reported that the two major shareholders as China Infrastructure Group and Beijing Capital Land had secretly departed, is that true?
 
      Liu Xiaoguang: In my opinion, if a developer is not powerful enough, he shall not recklessly turn to the commercial real estate sector. An outstanding operation team and professionals are decisive force. Take outlet for instance, if you intend do outlet on your own rather than cooperating with an international operator, you are destined to fail. What we depend is not only fund, but our own operation team, international operator and complete operation model.
 
      As to your second question, it is a pure misunderstanding. Actually, we have adjusted the strategy of development. Any international and farsighted company will adjust its development strategy to cope with challenges at different period and developmental stages. It is a fundamental philosophy for an enterprise to survive and succeed.
 
      Lin Zhuoyan: Outlet (China) has not changed its development objectives in China or constitution of shareholders. However, due to the new economic situations in China and the world at large, as well as adjustment to the national policies, we will properly adjust our development and operation strategies at due time, it is an inevitable choice for an enterprise to sustain development and finally fulfill its objectives. It also embodies the value of the BalletTown model.
 
     Reporter: Being a new-type urban composite, the BalletTown has a giant commercial capacity, so it calls for vast amount of fund. How can you collect funds and rapidly have them withdrawn though operating the commercial real estate projects? 
 
    Lin Zhuoyan: First, as early as from the stage of site selection for each project, we have made necessary plans to fund the project, and identified fund channels to guarantee execution of the project, e.g. equity capital, bank credit and investors, they must be well planned ahead of time to guarantee smooth execution of project. We have discussed various effective fund solutions including capital operation platform. Recently, we set up Outlet Property Right Exchange to dissolve the commercial investment pressure, activate commercial asset and capitalize part of capital in advance.  
 
    As comparing with the practices in foreign countries, the Chinese banks provide few development loans to commercial real estate business, and set high threshold on approving operating loans for commercial property, it is the biggest challenge in front of the commercial real estate developers. Therefore, before the project qualifies to apply for operating loans, we must resort to new financing means. As what I have mentioned, innovative financing means play an essential role in accomplishing the project.  
 
    Reporter: Why the BalletTown is said to build the best outlet in China?
 
    Lin Zhuoyan: What is the best outlet? I think the answer is not limited to outlet, but supported by a cluster of the best commercial formats. In terms of the BalletTown, first, the project site boasts convenient traffic conditions; second, there is an enjoyable and beautiful environment; third, due to its giant scale, the BalletTown needs to be supported by complete and new-type commercial clusters; fourth, the BalletTown is subject to an innovative operation model which is internationally advanced and based on the Chinese special situations; fifth, there are sufficient funds and an international operation and management team which acquits with the Chinese situations. I think none of the other outlets in China can meet these five basic conditions; therefore, the outlet to be built by the BalletTown will be the best and unique one in the world.
 
When building the best outlet, in addition to the conditions and operation models for traditional outlets, the above five strengths shall serve as a backup force. For instance, there are some outlets only covering an operation area of 50,000m2 without many commercial supporting facilities, in contrast, the outlet of the BalletTown covers an operation area ranging from 100,000m2, 200,000m2 to 300,000m2, there are global and domestic products, luxuries and daily necessities, pan-outlet commercial supporting facilities, some urban service functions, venues for entertainment, recreation and catering; customers can have a wonderful shopping and entertaining experience and learn more about new consumption patterns, this is what I mean the best outlet. 
 
      A historical opportunity
 
    Reporter: How many BalletTown projects are underway, where are they, and what about their progress and return cycle?
 
    Liu Xiaoguang: According to the requirements of Outlet (China), the BalletTown projects in Foshan of Guangdong, Huzhou of Zhejiang, Fangshan of Beijing and Wanning of Hainan are basically completed. As regards the BalletTown in Tieling of Liaoning, it is a large and comprehensive project covering a vast area. Therefore, only one outlet and even pan-outlet are not enough, it calls for more commercial formats to be a genuine new city center. In the future, every outlet will be slightly different from each other, since it will be adjusted according to the specific site and scale of the BalletTown. Guangdong BalletTown will open for business at the end of this year, and the others will do so one after another since the beginning of next year.
 
    Reporter: It has been 3 years since Outlet (China) launched the BalletTown Project, can we say the pace is somewhat slow? Are there any problems blocking the progress of the project?
 
    Liu Xiaoguang: Why Outlet (China) opens outlets at such a slow pace? I have been always studying outlet which is quite complicated, and I have drawn three important conclusions: First, it relates to the cooperative international outlets, they cannot promptly adapt to the vast and fast-developing Chinese market. It will require you to open only one outlet in one year and objects to lots of outlets in a short time. I think it is an inevitable issue due to the outlet history. Second, in outlets there are goods short in size, out-of-season, or exclusively produced for them, then the producing line for brand products may be adjusted since it cannot meet the demand of so many outlets which are open at the same time.
 
     Outlet is an international brand discount store, so it cannot exclusively sell the Chinese brands and it needs time to adapt to the Chinese market. First, we will insist on opening pure outlets; second, keep cooperating with the international operation and management companies; third, engage in decentralized management and cooperation, i.e., cooperate with several global brand operators at the same time. We intend to work with all of the world outlet operators to alleviate the pressure upon each of them. What China badly needs is integrated international brand operators, in another word, none of the Chinese companies has possessed all of the world discount brands, so I believe it is a historical opportunity. 
 
      Build a new lifestyle
 
          Reporter: If there are mature models for outlet operation and development in foreign countries, can you bring them in to develop the Chinese market?
 
    Lin Zhuoyan: The BalletTown aims to create a new lifestyle which will not only facilitate people to buy discount brands but watch movies, attend conferences or join in entertaining, recreational or health promotion activities. There will be everything people desire for and urban residents will be tempted to pay a visit. We can satisfy what they want. Each BalletTown project covers a large scale, and there are small, medium and large combinations of commercial formats. In addition to outlet, there will be other commercial formats and cooperative operators. What we intend to do is to create a new lifestyle. We will make effort to build a consumption destination which is desirable and more tallied with China's situations.
 
    The Development Research Center under the State Council has fully affirmed the BalletTown model. It remarked that the BalletTown is a new trend in exploring the development of the Chinese cities. It plays a significant role in pressing ahead with the urban-rural integration and creating new urban lifestyles. It is worth of being vigorously promoted. 
 
    Liu Xiaoguang: It is actually the concept about high-end service industry, including some derivative sectors which may be quite large. A pure outlet must be clarified: First, all the international brands shall be directly imported from foreign countries. Second, the first-tier brands shall occupy a prescribed share. Third, there shall be exclusive products. Fourth, the commodities are usually sold at a discount of 50~70%, and no more than 40%. They are indispensable components to constitute a pure outlet. Can an outlet sell the Chinese brands? Of course, it can. Generally speaking, the international and Chinese brands each occupy a 50% share, yet the latter shall be the top brands in China. In two decades, China may develop at the same rhythm with the world, i.e., what the world enjoys today will access to China tomorrow. In the future, China must upgrade the quality of such industries as foods, clothes, residence and travelling since it does lags behind the developed countries.
 
    Reporter: Why the BalletTown projects are distributed in second and third-tier cities rather than the first-tier ones?
 
    Liu Xiaoguang: First, land is a kind of critical resource. It costs too much to acquire land in the first-tier cities. Second, in such first-tier cities as Beijing, Shanghai and Guangzhou, the brand stores are everywhere. Third, outlets will not be the only brand stores developing at the periphery of first-tier cities with a large population. So satellite cities will be highly potential to build outlets. 
 
    Lin Zhuoyan: Moreover, as to the BalletTown Project, we will draw up large, medium and small plans, and formulate specific development strategies pertinent to the first, second and third-tier cities. And we must adopt different development models in different areas or cities. 

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