From Beijing's Nanluoguxiang to Hangzhou's Hefang Street: How Did the Business of Tourist Districts Get So Cheap, and So Alike?

Why do tacky little businesses find it easier to survive in tourist districts? And where can the businesses that take more imagination — the ones that are "more different" — go instead?

Shen Jianmin, a businessman from Hangzhou, could not work it out: his "slow-mail postcard" business, which had done well in tourist districts all over the country, had suddenly stopped working over the past couple of years.

At its peak, you could find his stores at more than twenty tourist spots nationwide — Beijing, Shanghai, Hangzhou, Suzhou, Huangshan, Pingyao, Yangshuo, Fenghuang and others. Everything the stores sold had to do with paper: travel notebooks, souvenir photo albums.

But the best seller was the postcard: 2 yuan apiece, stampable, and left with the store to be "slow-delivered" on some future date. In the early years, the story goes, their single shop in Xitang sold as many postcards in a year as the local post office did.

What drew Shen Jianmin to cross over from the wedding-candy trade in 2009 was a trend: business in tourist districts looked easier and easier. "Crowds of people, room to stroll, and they're bound to want something with a bit of local character."

The government's statistical bulletin said the same. In 2009, domestic tourist trips nationwide passed 1.9 billion, at an average of 535 yuan a head; by 2015 the two figures had jumped to 4 billion and 857 yuan. Independent travel became the norm, and more of the money went on decent food, drink and entertainment — everyone had been put off by the meals and the forced shopping stops of the group-tour era.

The "slow-mail postcard" idea — a little original, a little artsy — was once enough to support two of his stores at either end of Nanluoguxiang, a street under 800 meters long, and both did well. "So much cash came in every day that for a while I didn't know what to do with it."

Those days are long gone. The two stores are now wedged in among the kind of shops he detests, watching the life drain out of the whole street.

Take the snack stalls. At some point, without anyone noticing quite when, they became the mainstream on Nanluoguxiang, absurdly flying the flag of "Old Beijing" while selling nearly every cheap street food there is, from salt-and-pepper chicken to stinky tofu. And the moment the young men behind the counters start hawking, or a shop puts up a "buy one get one free" sign, the already crowded stream of tourists on the street clots into a jam right in front of them.

Or take the craft shops. Bamboo carvings, wooden knives, horn combs, silk scarves, ethnic-style pendants, Buddhist amulets, beaded bracelets, posters — identical to what you would find anywhere else, as if each shop were a branch of the Yiwu wholesale market. Their business is not steady, either: the moment a bright, Japanese- or Korean-styled ten-yuan shop opens down the street, the customers go there instead.

The crowds have also grown larger and more mixed. In 2005, Nanluoguxiang drew fewer than 60,000 visitors in a year; by 2009 the figure had risen to 1.6 million. At the height of the summer holidays the street once took in 150,000 people in a single day — carried along by a crowd that stops and starts, you could need more than an hour to shuffle from one end to the other.

Worse, the same atmosphere is spreading to the faux-antique tourist street that every city center now seems to have: Shanghai's City God Temple and Tianzifang, Chengdu's Kuanzhai Alley, Nanjing's Confucius Temple, Hangzhou's Hefang Street, Changsha's Huogongdian. These streets look as though they were built for nothing but a tourist's most basic urges: a snack, a drink, a bargain, a novelty.

And the good things that once grew here, or were preserved here, are falling back street by street.

Magpie, the café that made its name on Nanluoguxiang, had its storefront smashed in by its landlord in 2010 after a fight over rent. In Tianzifang, the "Painters' Building" known for Chen Yifei's studio still stands, but artists who had moved in there, such as Er Dongqiang, have left. And even if you have no idea what real Old Beijing flavors taste like, you probably would not believe that the 12-yuan cup of cheese sold by Wenyu Cheese still comes from the hands of a master of the time-honored Sanyuan Meiyuan.

Everything seems to have slid back to the bad old days of group tourism.

No trip is entirely pleasant; no shop inside a scenic area can be trusted; anything with real local character and not too much commerce on it is, naturally, in short supply. If you don't want to throw money away, keep a hand on your wallet and stay clear of every spot packed with tourists.

I

Beijing does still have a few quieter corners — Dashilar and Yangmeizhu Xiejie, made fashionable over the past couple of years by Beijing Design Week, though "a few" is the operative phrase. Beiluoguxiang and Baochao Hutong, one street over from Nanluoguxiang, run deeper into the alleys, but the fashionable shops, restaurants and shared courtyard houses you would want to see are multiplying there too.

The people driven out by cheap goods and tour groups keep looking for the next place to land.

Two years ago, with exactly that in mind, Li Bo cast around and finally put his studio, the Xingmu Wuxing Cooperative, in Guoxing Hutong. Near the Drum and Bell Towers, the alley is mostly lived-in courtyard housing with little foot traffic — just the quiet he needed to tinker undisturbed with ideas he had first had seven or eight years earlier, such as how to weld a table lamp out of assorted water pipes and elbow joints, with a bulb and some wire.

When he rented half a storefront on Yandai Xiejie near Houhai in 2005 and opened the first "Xingmu Handmade" shop, Li Bo's head, like those of the friends he had met playing in bands, was full of odd ideas like that. Kraft-paper notebooks bound with hemp twine, postcards done up like brown wrapping paper, army-green enamel mugs — these slightly rough, handmade originals sold badly at first, but hanging in the shop they drew plenty of curious looks.

The ideas only turned into a business after they opened a branch on Nanluoguxiang in 2007. The Dongcheng district government had just finished a round of infrastructure work on the street — paving the road, running commercial electricity, water and sewer lines — giving the place the bare foundation for doing business.

The run-down storefronts along the street were tidied up at the same time. Their history goes back to the Tangshan earthquake of 1978: when the walls of the courtyard houses gave way, everyone moved into makeshift sheds put up along the street. Once the houses were repaired the residents moved back in, but the sheds were never pulled down. They came in handy as wedding rooms for grown children, or as winter storage for the honeycomb coal briquettes used for heating.

The first people to see what these little houses were worth were the restless students at the neighboring Central Academy of Drama. In the 1990s, looking for work outside the state system, they began stepping out of the school gates to rent rooms nearby, where they took freelance jobs or argued about ideas all night. A producer who graduated from the academy recalls that back then only one thing mattered in choosing a room: how close it was. "The school kept a tight grip — they wouldn't let you work outside, and anyone they caught got disciplined."

As the rules loosened, these little houses became Nanluoguxiang's first cafés and bars. Jin Xin, who owns Pass By Bar, the street's first, says he opened it in 1999 almost entirely to satisfy his circle's endless need to talk:

"People in our line of work keep no regular hours — we'd drink all night, talk about interesting things. In the end, so as not to annoy the neighbors, we rented a place just for ourselves to use, and it turned into a business."

Together with the bars rising around Houhai, the livehouses on Gulou Street, the small theaters tucked into the hutongs and the strange assortment of people who gradually collected there, Nanluoguxiang became part of what The New York Times called "Beijing's Brooklyn": a melting pot that bred underground culture while also doing business and trading in ideas freely, exotic and up-to-the-minute at once.

And the "Old Beijing" label put a floor under these unsteady businesses. Say what you like, Nanluoguxiang really is a textbook example of the neighborhood grid laid out in the Yuan-dynasty capital. If you want to see hutongs running off in every direction, and the courtyard houses around them, it is still not a bad place to go.

But once Time had flattened it into one of "Asia's best neighborhoods," and once it had become a line more and more locals repeat — "While you're in Beijing you should see Nanluoguxiang" — it stopped being the small neighborhood that had grown up on its own.

II

Fake-antique tourist attractions wrapped in the idea of the "old city" have produced no shortage of failures — Qianmen Street, five kilometers from Nanluoguxiang, where leasing was handled by Pan Shiyi's SOHO China, among them.

But some projects have ridden out the criticism and are doing well to this day. Take Xintiandi, built in Shanghai by the Hong Kong developer Shui On Group: it combined buying and clearing the land outright, demolishing and rebuilding on a large scale, and preserving on a small one, and ended up with both new shopping malls and high-end Western restaurants set inside old shikumen houses.

"Liang Sicheng proposed 'restore the old as old' because he had seen so many sites over-renovated; the more exact phrase is really Feng Jizhong's 'restore the old to what it was.' Xintiandi used to be falling apart, and Shui On brought it back to how it looked in its prime — that one word, 'was,' cost an enormous amount of work." So said a veteran expert who had worked on the project, in an interview with Sanlian Lifeweek about Xintiandi.

In 2000, when the Xiacheng district government in Hangzhou set about renovating the downtown Qinghefang area, it hoped to hold on to that same sense of what a place once was. This was a cluster of old houses near West Lake that had nearly been demolished in a round of large-scale urban renewal. But going back to the Southern Song, the area sat close to the imperial palace and was threaded with waterways connecting to the canal — it had in fact been one of the most important trading hubs in the Jiangnan region.

Besides renovating every wooden house into a street-facing shop fit for business, the project's leasing team also worked hard to keep the Xiling Seal Engravers' Society, an institution with real weight in the southern Chinese art market, along with two time-honored traditional-medicine pharmacies, Hu Qingyu Tang and Fang Huichun Tang.

Walk down Hefang Street, the renovated main thoroughfare, today and you will find that these pharmacies have the largest and grandest storefronts and spirit walls on the street; they brew herbal tea in summer, cook laba porridge in winter, and keep resident physicians on hand to write prescriptions for herbal tonics. Tourists like them, and so do plenty of locals, who drop in regularly.

The Xiling Seal Engravers' Society nevertheless moved off Hefang Street, for lack of room to grow. While developing the project, the Xiacheng district government ran short of money at one point and had to sell off the operating rights to a large batch of the street's best-placed storefronts to raise cash. "Upstairs and down, they had only 2,000 square meters in total — genuinely not enough to work in. The person in charge told me they had hundreds of millions of yuan of artwork sitting there and they worried about it constantly. Because of temperature and humidity they couldn't move it to an underground store either. It was a real headache," says Shi Yihan, who once worked on leasing for Hefang Street, speaking to QDaily.

Because leasing went badly, Hefang Street stayed quiet for nearly two years after it formally opened in 2003. It only came alive as group tourism was pushed hard, bringing a stream of visitors and, with them, tea shops, clothing stores, souvenir shops and stalls of cheap goods. Gaoyin Street, the "food street" next door, opened soon after: Wenzhou food, Hangzhou food, Shanghai food, mostly run by established restaurants, later joined by Thai and Korean. The dining problem tourists complain about at every scenic spot seemed to have found a workable answer here.

III

Within a few years, though, Shi Yihan noticed that the food and snack businesses he had personally turned away — the ones that by rights could not operate on Hefang Street — were slowly reappearing. "Those are all old wooden buildings. Any food operation using high heat or an open flame is far too dangerous there."

But nearly all these vendors were renting storefronts the government had earlier sold off to private owners. During the lean years, when business on Hefang Street was slow, subletting them was cheap. Once foot traffic across the whole street picked up, not everyone could stomach the rents.

Nanluoguxiang is in a similar bind. There is not much publicly owned property on the street with proper paperwork at a sensible price; most of it is private property left over from those old makeshift sheds. Once Nanluoguxiang was written into a historic conservation zone, residents' hopes of relocation compensation faded, and renting out storefronts at opaque, inflated prices became one of the few easy ways left to make money.

And it was only after Nanluoguxiang was formally renovated, drawing in a wave of merchants hoping to open a little shop of their own, that many of them realized they might not get more than a few years of steady business on this street.

Jin Xin has watched these soaring rents churn through storefronts. To squeeze out more, landlords gradually gave up three-year leases; one-year terms became normal, with no promise the rent would hold even within the year; some landlords, trying to keep up with the climb, went to three-month contracts. The single hottest storefront in the street's history went through 38 operators in eleven months.

Shen Jianmin thinks the rent is a large part of why his business could not last on Nanluoguxiang. "The store near the subway entrance opened in 2010; it's only 16 or 17 square meters. The rent was 180,000 yuan a year when we signed. It's 700,000 now." At the company's best, when it had the most stores open, rent alone came to 7 to 8 million yuan a year nationwide.

That squeezed his margins hard. And had he kept running the stores in places like Gulangyu and Xitang, where rents had climbed even faster than on Nanluoguxiang, he would soon have been losing money. For a cautious businessman, losing 200,000 to 300,000 yuan a year for a reason like that was hard to accept.

The only businesses that survive in these conditions are small, opportunistic ones with rock-bottom costs.

"Snacks and cheap goods carry high margins and move fast, so you barely have to worry about high rent. And a lot of these people fire one shot and move on — on the surface they run a single shop, but they can be working several regions at once. Whatever makes quick money in Beijing, you copy it and take it to Shanghai; the moment business looks bad somewhere, they clear out. As for the franchise brands you see around, behind them it's really just individuals, dressing things up to look a bit more upmarket, to make the products look a bit better than they are."

Tricks like these are not known only to people like Shen Jianmin, who studied the food trade while trying to expand his market.

After a few months at a food-service training school in Changsha, Yang Dan could already pitch a whole lineup of snack franchises common in tourist areas — big sausages, rice-noodle rolls, sweet-potato fries, egg waffles, stinky tofu — across her WeChat Moments. She had tacked "Food Upgrader" onto her WeChat ID, and to look more professional she sometimes wrote up bits of business wisdom she had worked out herself:

"Business in a scenic area looks like commercialization run by the government, but it isn't — it has a great deal to do with the local land brokers. So getting into a scenic area isn't something money alone can do, or power alone; what you need is real, solid connections. The fact that business in scenic areas is controlled this way, that the barrier is this high, also shows, without anyone saying it, how much value there is to be had. If you're lucky enough to have that kind of resource, seize it and use it — the snack trade in scenic areas is pure profit."

IV

Shen Jianmin does not seem to see that his own model — selling the same artsy sensibility in tourist spots all over the country — may be one of the things that ruined this market.

He does admit he lacks any drive to upgrade his old products, because developing new ones is simply too painful and his last few attempts did not go well. But he insisted, with some heat, that he was content with this small business; that expanding was only natural, to keep his own factory and stores running; and that the real culprit destroying his scenic-area business, and the whole brick-and-mortar economy with it, was the rise of e-commerce.

"Our things are no good for an online store, because they aren't necessities. Take the slow-mail postcards — that's an impulse purchase, a purchase tied to a place. Only in that setting does mailing a postcard mean anything. Would you see a postcard on a trip to Beijing, then go home, buy one online, write it and send it? By then the impulse is gone, so it just doesn't work online. But once there's no desire to buy, online or off, things only get cheaper and cheaper, and then whole streets die."

He never once raised the question of how to improve the customer's experience.

After transferring to another department, Shi Yihan never went back to Hefang Street.

Its decline was already plain — never mind how much business had been pulled away by the shopping complexes that went up around West Lake in recent years, Hubin Intime and in77, or by Hangzhou's already thriving e-commerce. Just from the number of tour buses parked at nearby Wushan Square, and the tourists they let off, he could feel a weariness setting in:

"Hefang Street was at its liveliest around the 2010 Shanghai World Expo — for half a year there was no difference between a weekday and a weekend, people everywhere. But it must already have been sliding by then, because we could see the age of the tourists going up, toward older visitors. They spent less time on Hefang Street, and less money on the restaurants and hotels around it."

In the last stretch of his tenure he badly wanted to try a few so-called "Internet Plus" changes aimed at younger customers inside this 13.66-hectare scenic area — putting in free Wi-Fi routers, moving entertainment and promotional information onto social media, pushing mobile payment, bringing more "experiential service" into the shops and restaurants. Around Hangzhou, the restaurants that had gone viral online for cooking in front of their customers all looked to be doing fine.

None of those plans went anywhere. He shrugged.

(Shen Jianmin and Shi Yihan are pseudonyms, at the interviewees' request.)

Cover image via Lu Tianyu, Wikipedia