The Mall and the Cinema in China – Who Supports Whom?

In recent years, the rapid development of the Internet and the rise of E-commerce have spelled bad news for shopping malls. However, online services like group purchase and online seat selection are attracting people to cinemas, which are often located in malls.

 

Relevant research indicates that in 2015, there were around 400 kinds of malls (including department stores, shopping centers, and outlets), in China with a total of 4,500. There were 1,200 new cinemas, pushing the total to 6,400-plus. Almost all cinemas are located inside or near malls, except Workers’ Cultural Centers, conventional comprehensive theatres, and independent film cities. Cinemas and malls have different consumer bases and can improve the business performance of both. For this reason, land agents reserve space for cinemas in development projects, and make more profit by renting or running it independently at a later stage.

In recent years, the rapid rise of Internet shopping has spelled bad news for malls. However, online services like group purchase and online seat selection are attracting people to cinemas, which are often located in malls.

According to the Business Performance Statistics Report of 179 Malls in China 2015, issued on the internet, sales at 56 department stores and malls in China in 2015 was over 2 billion yuan, among which SKP’s sales ranked first, at 7.8 billion yuan. The total sales of the top eight exceeded the total national box office performance in 2015 (44 billion yuan). Although the business performance of over half of the malls in the list has decreased over many years, the performance of cinemas has grown massively.

Cinemas seem to have the leverage to negotiate with malls. This position is worth pondering.

Malls have not taken advantage of the popularity of cinemas.

 

Analyzing the correlation between malls and involved cinemas reveals that they are positively related. By contrasting the value of correlation coefficient, it becomes clear that directly involved cinemas in malls exert a much bigger influence. Malls have some influence on the performance and ranking of cinemas, especially newly opened cinemas. The popularity of malls can increase the performance of cinemas.

The main reason that malls want to host cinemas is to attract customers. However, do malls make full use of the large visitor flow brought by cinemas?

From the perspective of a wide time dimension, the respective sales curve of cinemas and malls are almost accordant, conforming to generalities like low sales on regular days, high sales at weekends, and huge sales during holiday periods. However, from a more specific time dimension (an hour), an important observation can be made. Looking at the one-day visitor flow of a mall in Beijing and the average one-day box office takings of the cinema in this mall, hypothetically speaking, audiences come to the mall half an hour before the two-hour film starts. The popularity value of the mall and cinema (visitor quantity percentage in unit time and region) is indicated in Figure 1.

Figure 1: Daily popularity of malls and cinemas

By comparing the two curves, it is possibly to conclude that discount film tickets for a 9:00am screening would bring the first batch of customers to the mall, but these customers do not want to shop. At lunch and dinner times, a cinema’s visitor flow changes considerably, and the mall sees its busiest time. At the weekend, since people tend to eat at different times, the decreasing number of cinema visitors does not bring peak value to the mall. The mall and cinema’s business hours are almost the same. Generally, the mall closes at 10:00pm, so audiences watching films after 8:00pm contribute almost nothing to the daily sales of the mall. The evening is when the cinema has the most people, but they do not consume heavily in the mall.
Passively attracting visitors

Consumption methods in the mall include shopping, dining, and entertainment, which attract consumers actively by the means of updates, discounts, and point accumulation. Shopping updates are more frequent than dining or entertainment, and cinemas will attract consumers only with new and high-quality movies. Figure 2 indicates the activity period of both the mall and cinema in terms of attracting consumers.
Figure 2: Intervals between publicity stunts by malls and cinemas

 

In 2015, 358 new movies were shown. Audiences could see a different one every day. In a month, 5-6 hot movies accounted for about 85% of the monthly box office performance, attracting over 80% of audiences. One hot movie was shown every two weeks, bring in extra numbers. Every movie has its own PR agency, and cinemas only need to take passive responsibility for consumption. At malls, women’s clothes are updated faster – generally every two weeks. Discounts and sales have to follow seasons and holidays. Reliance on distributing flyers, making streamers, or printing posters means a lower exposure rate, following daily shopping habits and social demands of consumers.
The Internet – pressure or impetus?

The overall decrease of business performance of malls in 2015 is analyzed as follows:

  • Economic slowdown

In 2015, the growth rate of GDP in China was 6.9% – the lowest since 1990.

  • Impact of E-commerce

E-businesses like Taobao, Tmall, and JD.com have a larger impact on the sales of middle and low-class products, but they are gradually covering high-class products as well. In 2015, online retail transactions in China grew 33.3% year-on-year.

  • Competition within the industry

Critical mass in the mall should be obvious. A variety of malls in the same place are emerging, which makes experience shopping the default.

  • A self-fulfilling prophecy

Conventional business operation methods and layouts are no longer attracting the new generation of consumers.
The impact of E-commerce on malls is strong, and covers more than just consumption. Many malls have problems with online seat selection set up by cinemas. They believe that online seat selection makes it possible for people to come to the cinema 5 minutes before the movie starts, which decreases the potential for extra consumption. However, before this technology was popularized, audiences would come to the mall earlier, since they had to queue for tickets in advance, adding the possibility of extra consumption.

Regarding the rising of the Internet, some conventional industries are challenged as well. What is the influence of popular online videos on cinema attendance? The scale of the online video market in China in 2015 exceeded 40 billion yuan, of which the year-on-year base growth rate was 61.2%. The paid video market scale was 5.13 billion yuan, of which the year-on-year base growth rate was 270.3%. The number of users paying for videos reached 28.841 million, of which the year-on-year base growth was as high as 264.1%; online movies took about 10% as much as online videos.

Is the threat posed by online videos to cinemas as strong as the one posed by E-commerce to malls?

As indicated in Figure 5, shopping in malls have few advantages over online shopping; they tend only to meet social demands for a shopping experience. With technical developments like virtual fitting, the difference between shopping in malls and online will be further reduced. However, the advantages of brick-and-mortar cinemas trump online viewing services, such as 3D, sound effects, and atmosphere. When a new movie is shown, it will not be screened on line at the same time. In future, online video and brick-and-mortar cinema will leverage their own advantages, seek diversity, share resources, promote each other, and provide better services.
Dining > shopping?

Ever sinceAs soon as audiences who buy tickets online step in into the mall, a 2-hour war of consumption begins among shopping, dining, and entertainment. In general, “the golden ratio” of this trio in conventional malls is 52:18:30, but it tends towards 1:1:1 with the rise of the experience economy in recent years. What kind of mall design attracts extra consumption from people who come to watch films?

Lithography-data Research Institute has given a simple estimation of sales of pure consumer goods using Yupiao, WeChat Film Tickets, and QQ Film Tickets. It has collected a large number of votes, and analyzes and calculates every subjective expectation and habit of each user. The results are indicated in Figure 6, among which “Entertainment” represents other activities held at the mall outside of watching movies.
Figure 3: Audiences’ consumption expectations in malls

As indicated in Figure3, audiences tend to have dinner before or after the movie. Regarding other entertainment activities, audiences seem to have no interest in things like game centers and parent-child parks. Regarding dining, over one fifth of users choose dessert only, which takes less time and is easy to pick up. Considering the different “golden times” of the mall and the cinema, the mall could extend its business hours to cover desserts.

 

Wanda takes the lead in cooperation

Wanda has cooperated strongly with cinemas, while other cinemas and malls are still negotiating with each other. By the end of 2015, Wanda Group owned 133 Wanda plazas; 129 out of 228 Wanda cinemas are located in Wanda Plazas, one is in a Wanda Culture Center, and one is in a Wanda Tourist Town. In other words, Wanda cinemas are located in 97% of Wanda plazas. What’s more, Wanda Group will open 50 Wanda plazas in 2016 and two Wanda Culture Tourist Towns.

Compared with other cinema chains in China, Wanda has the following advantages: Wanda cinemas are run by Wanda Group itself. Wherever Wanda Plaza goes, Wanda Cinema goes as well. This kind of real estate binding is naturally popular, and hugely profitable. For example, in 2015, the Wanda cinema chain gained 14% of national box office takings with Wanda cinemas, and 3.5% of the national total. Forty-one Wanda Cinemas ranked among the top 100 of China’s cinemas. In terms of box office performance, market share, and audience numbers, Wanda Cinema leads the pack.
Table 1: Wanda Cinemas in China’s top 100 cinemas (2015)

 

There is no doubt that this cooperation mode is successful. Even if it is hard to imitate, it has major advantages for the industry. The binding of cinemas and malls is the best choice for both of them, now and in future.

 

Conclusion

  1. Malls and cinemas are positively correlated in regard to performance and ranking. Direct involvement between them is stronger than indirect involvement. Locating in malls is the first choice for newly opened cinemas that want to develop fast.
  2. Different “golden times” for cinemas and malls means that malls fail to take advantage of visitor flow in the morning and evening.
  3. Cinemas sell mostly virtual consumption, which is easier to update, attracting more visitors more often than malls.
  4. Online shopping has a great impact on malls, but online video does not impact brick-and-mortar cinemas. On the contrary, it brings profit to cinemas as a means of publicity.
  5. Audiences like to dine at malls. If malls develop in cooperation with cinemas in future, they should improve their dining options and provide a wider variety of food and drink.
  6. Even if Wanda Group’s cooperation model is hard to imitate, it is still worth studying.

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