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China’s “Silicon Valley” Malls Looking to Go Legit

Beijing’s Zhongguancun neighborhood, in the city’s northwest, has long been recognized as the center of its tech industry. Many of China’s largest internet companies make their headquarters in the area, and it’s also home to more than a few start-ups. But to the average consumer, Zhongguancun is probably best known for its several giant electronics malls. Now, the Haidian district government is looking to change that. Like most electronics malls in China, the Zhongguancun shopping centers are multi-floor monstrosities filled with hundreds of small vendors who are often selling a particular brand or multiple brands of a particular product. They are a PC nerd’s fantasy — in one mall, you can probably find twenty different retailers that are just dedicated to selling CPU cooling units, for example — but they’re a branding nightmare, as almost none of the stores are official. In fact, Beijing’s biggest officially branded tech store — the Apple store — is on the other side of the city. In an attempt to quickly cut down on the number of smaller vendors and raise the number of official branded shops, the Haidian district government announced two new policies today. The first offers financial rewards to mall owners for pulling out of retail space and attracting “top quality companies” to move into it. The second offers those companies compensation of up to 5,000,000 RMB (about $780,000) towards the cost of setting up official brand shops in the malls, assuming that the shops they build meet certain specifications. Specifically, to be eligible for the compensation money, shops must be at least 500 square meters in size — way larger than the average small vendor’s shop — and must contain a “product experience center” where potential customers can try out the goods. A shift to more branded stores would be a mixed blessing for consumers, who may or may not welcome the chance to buy from official shops. On the one hand, official branded shops are seen as more trustworthy. Their goods aren’t likely to be fake, and returns are generally easier than when dealing with a third-party vendor. On the other hand, though, larger branded shops means fewer choices, and probably higher prices, especially since most branded shops we’ve been to don’t allow haggling, which can save the skilled consumer quite a bit of money in the Zhongguancun malls now (though unskilled hagglers may just as easily find themselves overpaying for everything). Of course, the policies are brand-spankin’ new, and it remains to be see what retailers will jump on the “official store” bandwaagon and try to set up shop in Zhongguancun. But given the massive success of Apple’s branded shop on the other side of the city, and the lucrative compensation offered to companies willing to give it a shot, we’ll be surprised if there aren’t new brand shops popping up like flies in Zhongguancun within a year or two. In other words, if you like haggling with small-time vendors over computer parts, you’d better get your fix now, because in a couple years, those guys will be gone and you’ll be smack-dab in the center of some giant Samsung store’s “product experience center” wondering whatever happened to your favorite CPU cooling unit sellers.