China’s shopping malls are rolling out fashion incubators, a move aimed at attracting style-conscious consumers and warding off the challenge of e-commerce.

Mall operators have embraced multi-brand stores – where smaller labels can get their big break – in order to add novelty to their tenant mix. Two of the biggest incubators – Magmode and Any Shop Style – now have 54 shops in big malls around China, compared to just seven stores in 2016, according to JLL data.

The boom in multi-brand collections “suggests the physical retail industry still has room to grow, with consumers willing to engage with labels in store rather simply shopping online,” says Warner Brown, head of China retail research.

Typically offering boutique labels, fashion incubators are seen as places that can launch the next big brand. For example, Sean by Sean, which now has 40 of its own stores, got its start in Magmode.

Other fashion labels popular in China like Art Atelier, Mattitude, and Seeingman also started at Magmode. Fellow incubator chain Any Shop Style successfully launched the label Yes by Yesir.

Youthful trends

Incubators are infiltrating some of the biggest malls in the country. For example, Magmode just opened its new store in Taikoo Li, located in one of the most popular districts in Beijing.

China’s malls have long been keen to promote their fashion credentials. Incubators, which offer fresh styles for fashion-forward crowds, give their credibility a further boost and draw in consumers – especially Millennials – looking for products that are more unique than those on offer from mainstream brands.

At the same time, Chinese designers gradually have increased their influence on the international stage, giving them scope to set up in bigger shopping centers – and win a share of the growing purchasing power of China’s middle class.

“The middle class now has more money to spend than ever before but they’re getting more selective about what they buy. More people now want distinctive products that reflect their personal style rather than just luxury items,” says Brown.

Not one-size-fits-all

It’s not just on-trend clothing that makes fashion incubators welcome additions to malls. They’re also bringing the latest technology and data-driven insights.

Magmode profiles consumers’ online and offline shopping habits to understand their preferences and purchasing power. They then feed this back to the fashion companies like Mattitude. Such insight helps them decide on merchandise selection, site selection, and targeted promotions.

Instead of stocking stores with a pre-set variety of goods and hoping that customers will consider everything, they analyze customer behavior data to determine the ideal number of SKUs (stock keeping units) a shop needs to maintain consumer interest without wasting space.

Retail challenges remain

While fashion incubators may be en vogue, they still face many of the same challenges impacting the wider retail market, from site selection to intense competition. E-commerce has rattled retailers worldwide over the last decade, leading to major shifts in real estate markets as shopping mall strategies shift to align with changing consumer habits.

“These stores aren’t exempt from the issues facing bricks-and-mortar retail,” says Brown. “Landlords need to be aware that this is just another type of retailer.”

However, the multi-brand store’s efforts to leverage new technology and other strategies “demonstrates valuable innovation in China’s bricks-and-mortar retail scene,” Brown concludes.

This article was originally published on JLL Real Views, JLL’s news site exploring the big trends shaping the real estate industry’, with ‘Real Views’. www.jllrealviews.com. Reprinted with permission.