(ECSN) -- One-third of China's overabundant shopping malls will close down in five years and the rest will have to transform to survive, according to a report by the Chinese Academy of Social Sciences.
Shopping centers are rapidly losing appeal to consumers in many cities due to their lack of competitive strengths, the report said. Qingdao in East China's Shandong Province, Chongqing Municipality, and the northeastern city of Dalian in Liaoning Province all reported closures of large shopping centers at the end of August.
The report said that one-third of the malls will change into wholesale or retail marketplaces, with an emphasis on customer experiences. Another third will have to integrate online shopping with brick-and-mortar outlets.
Hong Tao, director of the commercial economy research institute at Beijing Technology and Business University, said stores are closing their doors as a result of economic restructuring, especially the rise of online shopping. Hong's studies show that 138 department stores, 262 supermarkets and 6,209 sports stores closed from 2012 to 2015.
But the decline is also due to the oversupply of shopping malls encouraged by regional governments, reported the 21st Century Business Herald.
China has nearly 4,000 shopping centers, three times more than the United States. Estimates say another 7,000 shopping malls will open by 2025, bringing the total number to over 10,000.
Among the world's top 20 cities building large shopping malls, 13 are located in China. In the southwestern city of Chengdu alone, shopping centers under construction total 3.2 million square meters, the second-most in China after the financial hub of Shanghai.
Data shows that shopping mall space per person in China's second and third-tier cities has reached 2 square meters, much larger than 1.5 square meters in Hong Kong or 1 square meter in Japan and South Korea.
In addition to oversupplied space, another fatal flaw is that many shopping malls are homogenous, often with little difference between one another.
Jing Linbo, director of the Chinese Evaluation Center for Humanities and Social Sciences, said shopping malls need to reform their business models to compete with e-commerce.
Jing also said the key to survival lies in diversified competition and value-added services to customers.
Hong suggested that the government help lower the business costs for physical stores, which are faced with rising rents.
Wang Xuefeng, a researcher with the National Academy of Economic Strategy at CASS, said shopping malls need to integrate with e-commerce rather than remain at the receiving end of its shock effect.
The report urges local governments to be prudent in approving commercial real estate projects.