Real Estate Costs Crushing Retail

One overlook aspect of a real estate bubble are the costs to business. China's real estate bubble is destroying the retail sector: 是什么压死了实体店？商务部：实体店租金每年增20%

In recent years, China's electronics business is booming, and a large number of stores closed. A lot of the store at the time of clearing and processing played this slogan: "online shopping business is difficult to combat," "derivative crazy, crazy online shopping, business downturn, Ma Yun I hate you."

So, is e-commerce squeezing brick-and-mortar stores? Insiders believe that Taobao is not the cause, rather high rents have crushed the stores.

According to Xinhua News Agency, yesterday (April 8), Assistant Minister of Commerce Wang Ping-nan said that in the domestic circulation, shop rent-store operating costs have risen by about 30% in recent years, shop rents increased at a rate of 20% per year, about twice the average growth rate of sales, which is giving stores a lot of pressure.

As early as the end of 2014, there are media reports that Shanghai rent costs and labor costs are 5 times and 10 times those of 20 years earlier, but almost no increase in gross merchandise sales, a large number of foreign-funded enterprises have closed stores.

Other media statistics, in second and third tier city commercial street shops, rent 2 to 3 million yuan a year, a lot of stores have annual sales of several million dollars, after paying labor, tax, water, electricity and other expenses, profit is gone.

Even some large chain brands because of the heavy pressure on rents is facing a dilemma, some good location which, over the years have been in the vicinity of the shop cultivate a large number of loyal customers, it is a pity to give up the story, but to not give up means meager profits.

Wang Ping-nan said that the Ministry of Commerce in conjunction with relevant departments to promote the local governments actively learn from the mature experience, building up public market, take the first lease then rent, rent after first buy a variety of measures to actively guide the physical stores to reduce the rent.