Zhongguancun e-Plaza is reportedly facing the threat of closure, with management eager to rent the space to offices instead of electronics vendors. But many of the vendors have bought the space they use and are angry about the plans.

People walk on the first floor of Zhongguancun e-Plaza in Beijing's Haidian district on Thursday. Photo: Chu Daye/GT

Media reports of a "closure" of Zhongguancun e-Plaza in Beijing's Haidian district have increased concerns about the future of the building, once a landmark of the area and a vibrant commercial hub for vendors and buyers of computers, electronics and other gadgets.

In the first decade of this century, the towering buildings of Zhongguancun e-Plaza, Top Electronics City and Hilon Electronics City attracted thousands of people every day to northwestern Beijing's Zhongguancun area, which became known as China's Silicon Valley.

Zhongguancun e-Plaza has not closed yet, but the latest developments reflect some of the deeper issues faced by China's beleaguered brick-and-mortar IT markets.

The building has stopped leasing its shop space and will be closed on February 10 for the upcoming Spring Festival Holiday, which falls on February 19, 2015, according to a notice posted at the market's entrance.

The first floor of e-Plaza is now almost completely empty.

The building will probably be turned into an office building, housing high-tech firms or companies from the financial sector, the Beijing News reported Thursday, citing a senior manager of Zhongguancun e-Plaza Co, which manages the shop space in the building.

However, this plan has met with fierce resistance from vendors on the second and third floors of the building, most of whom own the space they use. 

Putting up a fight

Tu Qijun operates Beijing Runchangjiaye Technology Co, which sells processors, PC equipment and flash disks in the form of customized gifts. Tu owns a counter measuring about 10 square meters on the third floor of e-Plaza.

"The emptied first floor and half-emptied second floor give a false impression that Zhongguancun e-Plaza is closing and this has greatly affected our business, which is still going on as normal on the third floor," Tu told the Global Times on Thursday.

Talk about transformation by the management of the building has come up several times during the past three years, but has been opposed by vendors who own their areas of the shop floor, Tu said.

There are about 1,000 people like Tu, who purchased the property rights for small areas of shop space when e-Plaza was built.

They have said they will move out only if their property rights are bought back or if the management of e-Plaza pays them rent at a level agreed by both sides.

Meanwhile, rental prices in the building have plummeted.

An owner of a dozen square meters on the third floor of the building, who only gave his surname as Ma, told the Global Times on Thursday that the rent for the space he owns has decreased from 100,000 yuan ($16,112) per month when the plaza opened in July 2006 to less than 3,000 yuan a month now. The current rate is around one fifth of that in Top Electronics City next door.

Neighboring marketplaces such as Top Electronics City and Hilon Electronics City have been steadily reducing the area of shop floor space that sells IT products and services in recent years and using the emptied space for office leasing.

But owners of the two buildings have relatively complete property ownership and they have not faced a great deal of resistance from small co-owners during their transformation period.

The local government of Haidian district said in 2009 that it would no longer encourage traditional businesses such as electronics markets, shopping malls or catering, as it wanted to encourage growth of higher-end industries, including Internet and technology-related financial services.

The municipal government of Beijing has said that it will limit the growth of large marketplaces for goods and services as part of its plans to cure urban problems such as traffic congestion and air pollution, according to a report on Thursday by Beijing-based newspaper The Mirror.

Beijing has also prohibited the expansion of brick-and-mortar marketplaces engaged in wholesale and repair of electronics, according to guidelines on urban industry development posted on the local government's website on July 25, 2014.

In 2014, over 200 firms moved out of Top Electronics City and Hilon Electronics City, creating about 13,000 square meters of available floor space, the Beijing-based Legal Daily reported on Thursday, citing sources in the local government.

Fading fortunes

The recent developments at Zhongguancun e-Plaza have brought the area back under the media spotlight, and the decline of these marketplaces has been lamented by some.

Experts have pointed out before that the emergence of e-commerce sites such as JD.com Inc and other business-to-consumer (B2C) sites would affect the fortunes of electronics markets.

But there are also other factors that have damaged the markets, insiders told the Global Times.

Li Jing, a veteran vendor who has rented shop space at all the major marketplaces in Zhongguancun, blamed the growing use in recent years of shopping "guides" - people who are paid to guide customers into shops, sometimes in an aggressive manner.

It has also led to customers being cheated, Li said.

"It started several years ago. They will literally drag customers into their respective shops and coerce them into buying things that they don't really want or need. Many customers reported they had been cheated and had their shopping experience ruined," Li, who is in her mid-30s, told the Global Times on Friday.

Weak law enforcement and competition between the many vendors also played a part, said Li, who withdrew from Zhongguancun in 2008, having worked there for eight years.

A customer surnamed Wang said the fate of Zhongguancun e-Plaza could have been avoided.

These stores allow customers to have a closer look and to touch the gadgets they want to buy, which is an irreplaceable experience and an unbeatable advantage over e-commerce sites, Wang said.

"I once assembled a PC with a CPU that is only used by servers and I got it at one of those brick-and-mortar marketplaces in Zhonguancun. You cannot find such items and services on B2C sites," Wang told the Global Times Thursday.

Wang said similar marketplaces in Taiwan and Hong Kong are all still prosperous, adding that a city with a population of over 20 million could definitely support the existence and even the prosperity of several large-scale IT marketplaces.