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How Is BHG Retail REIT Positioning Itself Against the E-Commerce Threat?

BHG Retail REIT (SGX: BMGU) is the first pure-play China retail real estate investment trust (REIT) listed in Singapore. The REIT’s portfolio currently comprises of five brick-and-mortar retail properties: Beijing Wanliu (60% stake), Chengdu KonggangHefei MengchengluXining Huayuan, and Dalian Jinsanjiao.

Recently, the Chief Executive Officer of the REIT’s manager, Chan Iz-Lynn, was interviewed by stock exchange operator, Singapore Exchange, under the “kopi-C: the Company brew” interview series. One of the topics of discussion was the threat of e-commerce in China.

In 2016, it was reported that the Chinese e-commerce market grew by 26.2% year-on-year, accounting for 15.5% of total retail sales. The market is set to expand further. A report from Goldman Sachs predicts that e-commerce in China will rise at a clip of 23% per annum till 2020.

However, despite the burgeoning online retail market the country, Chan is unfazed. She said during the interview:

“Many people think our challenges are the rise of e-commerce and oversupply, but these are not really our biggest concerns. Our properties are not located in areas where many malls are present, and while e-commerce is growing, consumers continue to engage with brands both online and offline.”

On top of that, the interview pointed out that according to a survey, consumer satisfaction was greater with physical stores than the ones online. The interview added:

“Two-thirds of Chinese consumers in the survey noted that shopping is the best way to spend time with family, and malls that combine shopping, dining and entertainment experiences for the whole family have benefited most from this trend.”

Currently, BHG Retail REIT’s properties are located in Tier 1, Tier 2 and other cities of significant economic potential in China.

Retailers are also evolving with the needs of the market, taking up an omni-channel strategy. This strategy gives a seamless shopping experience for consumers. Chan mentioned:

“The physical mall will be relevant as long as the tenant mix is relevant, and our malls have adopted an experiential focus.”

Investors of BHG Retail REIT would be heartened to know that the REIT may not be seeing that much of a threat from the online space, as highlighted by Chan. In fact, with omni-channel marketing, retailers are able to reach out to more consumers and give them a better shopping experience.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.