Testing value of the Bund

Several big-name global brands have left Shanghai's old luxury hub

The summer heat is taking its toll on the crowds of tourists on Shanghai's Bund where there are hardly any trees big enough to shade them from the merciless sun. Many seek refuge on the pavement under the shadow of the imposing old buildings that double as resting areas where sweating tourists sit on the steps or lean against the walls outside plush fashion boutiques and jewelry stores.

Nobody seems to mind. These establishments catering for the rich who made a fanfare of visiting the Bund a decade ago are quietly leaving one by one.

Of course, they aren't pulling out of Shanghai, which has remained a shopping paradise for rich entrepreneurs. But the Bund, as the retailers see it, has fallen victim to its own historical allure.

Yes, the rich still come in droves to the exclusive restaurants where they can savor haute cuisine against the backdrop of one of the most spectacular city views in Asia. But they have largely lost the urge to wander out in the streets among the tourist crowds to buy something.

Over the past two years, the once luxury hub of Shanghai, if not all of China, the historical buildings along the Bund area have been losing a galaxy of brands, including Patek Phillipe, Giorgio Armani and Dolce & Gabbana.

"The Bund area is no longer the acme of luxury shopping. It cannot be even regarded as one of the steadfast luxury shopping destinations," said Wei Zeming, retail head of property services provider DTZ East China.

While some consider it to be the latest sign of a stagnant or even shrinking Chinese luxury market, other industry insiders argue the Bund per se is losing its attraction for these brands, which are desperately wooing the world's second-largest consumer market at an especially "difficult time".

Consultants Bain & Co said the growth in sales of luxury goods cooled to a single digit on the Chinese mainland in 2012 — and there looks to be no improvement in 2013. The industry's largest growth engine, the watch sector, "dropped sharply" in 2012.

"The Bund is more of a tourist attraction than a shopping destination, let alone a luxury one," said Zhou Ting, director of the Fortune Character Research Center in Beijing.

"Most, if not all, of the people in the area are tourists from other places in China. They come here to take pictures, for sightseeing but hardly do any shopping. The staff selling some well-known brands have complained to us that there are tourists sitting outside their stores eating their lunches, which greatly vulgarizes their brand image," said Zhou.