Monday, June 11, 2012

Does Nanluoguxiang have a future?

I think not.

Most of the bars and restaurants down there have now been forced out by insanely greedy landlords, and it seems inevitable that the few decent survivors - Reef, Salud, 12 Square Metres - will suffer the same fate sooner or later.

It has become unviable to run anything other than an upmarket restaurant or a poncey boutique on that strip now. 

Well, such, at least, is the perception of Chinese entrepreneurs. I think they are mistaken. Nanluoguxiang is too small and narrow, and too remote from the main commercial hubs of the city to function effectively as a tourist magnet/upmarket shopping district. Most visitors to the street are not free-spending out-of-towners or the affluent upper middle class; they are young Beijingers who think it's a cool place to go promenading with their boyfriend/girlfriend or their mates. It's strictly about hanging out and window-shopping; hardly anybody actually buys anything from the fancy shops. The only people making money on that street are the blanket vendors and the snack-food stalls. (But they only make money because the quaint boutiques attract so many window-shoppers. Canny businessmen would run one or two small boutiques as a loss-making promotion [convenient for avoiding paying any tax!], while surreptitiously pulling in big bucks from an unassuming little snack shop. But I doubt if anybody operating down there is at all canny. The boutique owners obstinately soldier on, convinced that they will start making money one day. The snack food vendors make the most of the current bonanza, oblivious of how fragile their trade is, how dependent it is on the presence of all those shops that are making no money.)

The popularity of the area has quickly become counter-productive. The sheer volume of foot traffic clogs the street, often renders it almost impassable, and so makes it much less attractive. The Chinese seem to be much more tolerant of suffocating crowds, but Westerners are increasingly approaching their destination bar or restaurant down one of the side streets - or giving up on Nanluoguxiang altogether. When the new subway station opens at the south end of the street (supposedly at the end of the year, but the work is running well behind schedule) the crowds will get even worse - to the point, I would imagine, where the street will be completely killed for Western punters, and even some of the Chinese will start getting discouraged.

My advice to anybody with a bar or restaurant - or a shop or anything - on NLGX would be to get out NOW, because in a year or two almost every warm day is going to be like the craziest days (such as the 'street festival' days) we've seen in the past, with the crowds so thick that it's almost impossible to move.

That will make it even harder for businesses down there to make any money. But landlords will see only the numbers of people passing, not the actual level of custom, and will crank their rents up even higher. And there will be a catastrophic collapse of the economy. In three years, most of the sites on NLGX will be empty, and there'll be tumbleweed rolling down the nearly deserted street.

If landlords refuse to yield to common sense (likely in Beijing!)... well, the street might perhaps start to entice in the big-money foreign chains like Starbucks, McDonald's and The Disney Store. I think this has always been the dream of the local government's 'planners'. But without a strong community of shops, and some flavour of traditional Chinese culture, where will the custom come from? I can't see people visiting the area just for Starbucks and Disney.

A more hopeful scenario would be that landlords slash their rents to more realistic levels, and we gradually return to the vibrant mix of diverse bars, restaurants, and shops that we used to have on that street a few years ago when its splurge of development first got going. But I'm not sanguine about that happening.

It's a horribly fascinating socio-economic experiment, a microcosm of China's economy as a whole. Nanluoguxiang is a bubble fuelled by delusion and greed; and it's now facing imminent crisis and collapse. How will it come through this crisis, what will we see afterwards? 

[I wouldn't like to speculate! But I'm glad I'm now watching it from a safe distance away.]

1 comment:

Mike said...

Good post. I am not really a fan of NLG itself: 12SQM is great and Mai is good, but the rasping fried food and shops selling things you'd never buy do not endear it to me. Could easily be a case of overreaching.