Date
20 September 2017
Aoyuan chief operating officer Yang Zhong says the company ensures there's always room for business expansion by its tenants.
Aoyuan chief operating officer Yang Zhong says the company ensures there's always room for business expansion by its tenants.

Aoyuan O2O theme makes old new again

Build it, flog it online and they will come.

That is the basic concept behind the latest e-commerce iteration known as O2O (online-to-offline).

Businesses are increasingly embracing O2O to drive online traffic to their physical stores to boost sales. It’s as simple as putting a product on a website and directing potential consumers to the nearest store selling it.

The strategy is reviving traditional retailing and encouraging online consumers to rediscover the joys of shopping. It’s also creating excitement in brick-and-mortar stores, which is good news for the companies that build them.

One such developer is Guangzhou-based Aoyuan Property Group Ltd. (03883.HK) which is writing O2O into its building plans.

“We expect to launch some arrangements with retailers in our shopping malls in the first half,” chief operating officer Yang Zhong told the Hong Kong Economic Journal’s EJ Insight.

“We will start with Guangzhou Aoyuan Plaza and go on to other malls, depending on how successful we are.”

The property-wide rollout will be mainly determined by two factors — 20 percent sales growth at the Guangzhou mall and a certain hit rate for its website.

In the meantime, Aoyuan is preparing for that eventuality by making room for expansion by its tenants.

“We never rent out 100 percent of our available space, so we are more flexible in accommodating the business environment,” Yang said.

Value-added come-ons

Aoyuan is among an increasing number of property developers that are resorting to value-added features to attract customers amid slowing home sales in the mainland caused by the harshest government curbs in years.  

Powerlong Real Estate Holdings Ltd. (01238.HK) introduced O2O in two of its shopping malls last year and plans to launch it in two to four additional properties before the year is out. Its O2O mall in Fuzhou has attracted 500 shops and 300,000 regular consumers since its launch in November. It mainly targets customers within a six-kilometer radius.

Although property developers are only now warming to O2O, the concept has been around for some time.

Soufun.com, China’s largest real estate internet portal owned by Soufun Holdings Ltd. (SFUN.US), helped popularize it by providing marketing, e-commerce, listing, and other value-added services for China’s fast-growing property-related service sector.

Sina House, a unit of Sina Corp. (SINA) is another vertical real estate media and information service provider. It uses extensive industry data from its Real Estate Society registry.

Like Powerlong, Aoyuan has a targeted approach to its O2O strategy but with a sharper focus on residential customers.

“Our commercial properties are mainly complementary to our residential property development projects. Home sales are still our main source of revenue,” Yang said.

Aoyuan’s commercial property sales accounted for 58 percent of all sales in the first quarter, up about 45 percent from the same period in 2013.

The developer posted unaudited contracted sales of 2.1 billion yuan (US$337.54 million), up 84 percent from same period last year. It had 10 billion yuan of contracted sales last year, exceeding its 8.5 billion yuan target.

Still, in the face of Guangzhou’s slowing property market, that impressive performance seems ages ago.

Home sales in Guangdong province, of which Guangzhou is the capital and largest city, were 16,194 units in the three months to March, down 40 percent from a year earlier, National Business Daily reported on April 14, citing data from property information provider Netease. Sales by floor area tumbled 42.5 percent year on year to 1.84 million square meters.

Pre-emptive action

Aoyuan is leaving nothing to chance.

It’s stepping up partnerships with e-commerce operators to boost its contracted sales by “riding the internet platform”, Yang said.

The target is 15 billion yuan (US$2.41 billion) this year, up 50 percent from a year earlier.

“We’re planning strategic partnerships with Soufun.com and Sina House after working together last year. This year, we will offer our customers more services including advertising, promotion, property tours and financing information for potential buyers,” Yang said.

Also, buyers can directly contact a salesperson on messaging apps such as those operated by Tencent Holding Ltd. (00700.HK) and skip the traditional process.

The strategy helped Guangzhou Aoyuan Beyond Era project sell out within two hours of its launch in October, locking in 800 million yuan worth subscriptions before the day ended.

Meanwhile, Aoyuan said a Guangdong project with a cultural and tourism theme is in the pipeline and is expected to be completed in 2015.

This is part of the developer’s thrust toward thematic developments, such as its Guangzhou Aoyuan Health Plaza and Zhuzhou Aoyuan Shennong Health Plaza, which are focused on health and sports. 

– Contact the reporter at [email protected]

RA

Ayishah Ma is a financial reporter on Greater China issues.

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