Chengdu showcases 'first-store economy' to stimulate demand

As China is on the way to building more world-class cities, Chengdu, capital of southwestern Sichuan province, will roll out more measures to attract global brands that have never reached the city or the region via first-store economy.

The concept of first-store economy is about factors behind opening the first of many stores that can boost local consumption. A first store of a well-known brand or chain operating elsewhere is said to stimulate local people's desires and demands. Consumers can understand the brand's products and services, said Ou Jianling, secretary-general of the Chengdu Retail Business Association.

Such a business model was first tried in Shanghai last year, and Chengdu followed suit.

In the first half of 2019, some 237 new brands set up storefronts in Chengdu－only behind Shanghai and Beijing, data from the local commerce bureau showed.

These stores, run by companies from countries including the United Kingdom, France, the United States, Japan and South Korea, boosted Chengdu's total retail sales by 10 percent year-on-year to 366.03 billion yuan ($52 billion) in the first half of this year.

Chengdu introduced its own policies to push the growth of first-store economy in April. Ou said the opening of new stores is just the first step. Chengdu also encourages locals to build their own signature or flagship shops that can potentially migrate to other cities.

"Major cities such as Chengdu are ideal to spread the first-store concept because it is supported by well-developed high-speed railway networks. There are several cities connected to the city by one-hour high-speed train rides. The stores owned by global brands in Chengdu certainly can serve consumers living in surrounding cities," she said.

Ou believes that growing number of international premium brands not only offered Chengdu residents the chance to keep pace with overseas trends, but also improved the city's ability to attract more tourists, business opportunities and investment.

After rolling out its first consumer car in 2017, Chinese electric vehicle startup Nio Inc opened its first showroom in Chengdu late last year. It is the company's first showroom in the city, as well as the first in Southwest China.

The local popularity was the main reason behind the carmaker's store opening, and another reason is that the city is keen to have more brands to support its first-store economy campaign, said Liu Chengjun, head of services operation at Nio's regional office in Chengdu.

According to the Ministry of Commerce, a number of measures were piloted in 11 pedestrian zones across the country since 2018, including Chengdu's Chunxi Road, Beijing's Wangfujing Street and Shanghai's Nanjing Road. Annual visitor volume in these renewed pedestrian zones is estimated to exceed 1 billion.

"Chinese shoppers, in particular those born in the 1980s and 1990s, love living a comfortable life ... they like traveling, care about their individuality, and have different pursuits to match their lifestyle," said He Xiaoqing, global partner at A.T. Kearney, the US-based management counseling firm.

She said many of them in big cities are also proficient in using digital tools. With e-commerce platforms making shopping so convenient, many companies have invested in stores that push the boundaries of what is possible to meet local consumers' expectations.

Similar to the trend in big cities, the number of consumers from third-or lower-tier cities has also surged in the third quarter of this year, according to data released by market measurement and data analytics company Nielson in late November.

This can be partly due to urbanization, said the report, adding more people who lived in rural areas before have migrated to cities. In this way, more jobs will be filled and as the payroll increases, there will be more room for them to shop and buy.

China's consumption has continued its surge, and would remain the main driver of economic growth, the Ministry of Commerce said during a regular briefing in November.

The ministry estimated that the country's retail sales would climb 9 percent year-on-year in 2019, contributing some 65 percent to overall economic expansion.