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China’s anger at foreign brands helps local rivals

Tim Min has driven BMWs before. He considered buying a Tesla.

Instead, Mr Min, the 33-year-old owner of a cosmetics startup in Beijing, bought an electric car made by Tesla’s Chinese rival, Nio. He likes the interiors and voice control functions of Nio better.

He also considers himself a patriot. “I have a very strong inclination for Chinese brands and very strong patriotic emotions,” he said. “I also loved Nike. Now I see no reason for this. If there is a good Chinese brand to replace Nike, I will be very happy. “

Western brands like H&M, Nike and Adidas have come under pressure in China for refusing to use cotton produced in the Xinjiang region, where the Chinese government has waged a massive crackdown on ethnic minorities. Buyers have vowed to boycott the brands. The celebrities have given up on their endorsement deals.

But foreign brands are also facing increasing pressure from a new breed of Chinese competitors who are making high-quality products and selling them through savvy marketing to an increasingly patriotic group of young people. There is a term for it: “guochao”, or Chinese fashion.

HeyTea, a $ 2 billion milk tea startup with 700 stores, wants to replace Starbucks. Yuanqisenlin, a four-year low-sugar beverage company valued at $ 6 billion, wants to become Coca-Cola in China. Ubras, a five-year-old company, wants to supplant Victoria’s Secret with the most non-Victoria’s Secret products: wireless sports bras that emphasize comfort.

The anger over Xinjiang cotton gave these Chinese brands another chance to win over consumers. As celebrities cut ties with foreign brands, Li-Ning, a Chinese sportswear giant, announced that boy band member Xiao Zhan would become its new global ambassador. In less than 20 minutes, almost everything Mr. Xiao had about a Li-Ning advertisement was sold out online. A campaign hashtag has been viewed over a billion times.

China is experiencing a consumer brand revolution. Its younger generation is more nationalistic and actively seeks brands that can align with this confident Chinese identity. Entrepreneurs are rushing to create names and products that resonate. Investors are turning to these start-ups amid declining returns from tech and media companies.

When patriotism becomes a selling point, Western brands are at a competitive disadvantage, especially in a country that increasingly forces global companies to follow the same political lines as Chinese companies.

The protests by Chinese consumers are “a historic turning point and will have a lasting impact on Chinese consumers in the long run,” Min said. “Chinese consumers don’t want to eat the same shit foreign brands feed them. It is essential that foreign brands respect Chinese consumers as much as Chinese brands. “

Foreign brands are far from being made in China. Its drivers helped speed up Tesla deliveries. IPhones remain extremely popular. Campaigns against foreign names have come and gone, and local brands that put too much emphasis on politics risk unwanted attention if the political wind changes quickly.

However, the interest in local brands marks a significant change. After Mao, the country produced few consumer products. The first televisions that most families owned in the 1980s were from Japan. Pierre Cardin, the French designer, reintroduced fashion with his first show in Beijing in 1979, bringing color and flair to a nation that during the Cultural Revolution wore blue and gray.

Chinese people born in the 1970s or earlier remember their first sip of Coco-Cola and their first bite of a Big Mac. We watched movies from Hollywood, Japan and Hong Kong as much for the wardrobes and makeup as for the storyline. We rushed to buy Head & Shoulders shampoo because its Chinese name, Haifeisi, means ‘flying hair of the sea’.

“We went through European and American fashion, Japanese and Korean fashion, American streetwear fashion, and even Hong Kong and Taiwanese fashion,” said Xun Shaohua, who founded a sportswear company in Shanghai that competes with it. at Vans and Converse.

The time may have come for Chinese fashion. Chinese companies are making better products. Chinese Generation Z, born between 1995 and 2009, do not have the same attachment to foreign names.

Even the People’s Daily, the official daily newspaper of the Communist Party, is embarking on branding. He launched a streetwear collection with Li-Ning in 2019. In the same year, he published a report with Baidu, the Chinese research company, called “Guochao Pride Big Data”. They found that when the Chinese searched for brands, more than two-thirds looked for national names, up from only about one-third a decade earlier.

As with so much in China, it can be difficult to say how much politics is involved in the guochao movement. The creation of house brands corresponds perfectly to the desire of the Communist Party to make the country more autonomous. The authorities also want the Chinese to buy more: household consumption accounts for only about 40% of China’s economic output, much less than in the United States and Europe.

Patriotism aside, entrepreneurs say their businesses have a solid business foundation. Similar trends have occurred in Japan and South Korea, which are now home to strong brands. Local actors are more familiar with the capacities of the country’s supply chains and how to use social media.

Mr. Xun’s sports brand has half a million subscribers in Alibaba’s Taobao Marketplace and sells for the same prices as Vans and Converse, if not slightly higher. He said his brand competes by making shoes better suited to Chinese feet and offering locally preferred colors, such as mint green and fuchsia. It sells exclusively online and teams up with Chinese and foreign brands and personalities, including Pokemon and Hello Kitty. At 37, he is the only person in his company born before 1990.

The fashion for guochao has also revitalized old Chinese brands, such as Li-Ning. For many years sophisticated city dwellers considered the brand, created by a former gymnastics world champion of the same name, ugly and cheap. Its red and yellow color combination, after the Chinese flag, was mockingly called “fried eggs with tomato,” an everyday Chinese dish. Li-Ning was losing money. His actions were on a losing streak.

Next, the company showcased a collection at New York Fashion Week in early 2018. Its edgy look, combined with bold Chinese characters and embroidery, created buzz at home. Its shares have grown almost nine-fold since then. Now, Li-Ning’s high-end collections sell for between $ 100 and $ 150 on average, on par with those of Adidas.

As ambitious as these businessmen are, almost everyone I spoke to admitted that Chinese brands still couldn’t compete with mega-brands like Coca-Cola and Nike.

Alex Xie, a marketing consultant who works with companies in China, used the sportswear industry as an example. Nike has a research and development lead of several years over Chinese brands. He benefits from an extensive network of relationships in the world of sport. It works closely with athletes to develop better shoes, sponsors many events and teams, including Chinese national football, basketball and track and field teams.

“It just has a much more sticky relationship with its customers than any Chinese brand,” he said.

But for these Western mega-brands, the Xinjiang cotton dispute is a major challenge that could help their Chinese competitors. While the previous outrage against Western brands such as the National Basketball Association and Dolce & Gabbana has passed fairly quickly, this fight could persist, many people said.

“In the past, some Western brands did not understand or respect Chinese culture mainly because of a lack of understanding,” Mr. Xun said. “This time it’s a political question. They violated our political sensibilities. “

Then, like any savvy Chinese entrepreneur who knows what topics are sensitive, he asked, “Couldn’t we talk about politics?”

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