While China has proved to be tricky terrain for many fashion and beauty brands this year, some are finding it harder than others.
Adidas chief executive Kasper Rorsted recently told news outlet Handelsblatt Business Daily that the sportswear giant’s sales and profit targets up to 2025 could be hit by further crises in China, where backlash to the brand’s stance on Xinjiang cotton, alongside supply chain disruptions and dampened demand due to Beijing’s strict ‘zero-Covid’ policy, dented its regional and global performance. The company was forced to issue a profit warning in July.
But Rorsted, who Adidas later announced would step down as CEO next year, also acknowledged that the brands’ failure to sell localised designs with a “Chinese feel” slowed it down in the mainland’s increasingly competitive sportswear race. “We don’t understand consumers well enough, so we left room for Chinese competitors who are better off,” he said. Adidas declined BoF’s request for comment.
In terms of market capitalisation, Adidas has now been overtaken by Chinese rival Anta. At the time of writing, the former has a value of €25.98 billion ($25.73 billion), while the latter stands at HKD $242.19 billion ($30.85 billion). Though Adidas still trumps Anta when it comes to sales, the rapid growth of Anta’s valuation speaks volumes.
One of Adidas’ troubles in China is ‘guochao’, or national wave, a once-buzzy term which refers to the growing nationalism and pride Chinese shoppers feel in buying locally-designed or locally-made goods. Though originally linked to aesthetics rich in references to traditional Chinese culture, marketing experts say guochao goes far beyond product design or creative direction. It has since evolved to denote a more holistic understanding of Chineseness and Chinese identity.
Guochao entered the mainstream fashion industry lexicon in early 2018, after Alibaba-owned marketplace Tmall brought Chinese brands Li Ning and Peacebird to fashion weeks in New York and Paris. Li Ning, in particular, became tied to the term with its collection of athleisure tracksuits in China’s national colours, images of its eponymous founder at the Olympics, and the words ‘Zhongguo Lining’ (China, Li Ning) alongside the brand’s chunky sneakers, still then unknown to most outside the mainland.
Much has changed since the Chinese brands’ debut abroad. On top of pandemic travel disruptions prompting the repatriation of Chinese spending, many global brands have taken a reputational beating in the China market.
Last summer, Nike, Adidas, Burberry and H&M were among those boycotted by Chinese shoppers, retailers and celebrities after the brands expressed concerns about reports of forced labour and detention of Uighurs and other ethnic minorities in Xinjiang province. The backlash proved a boon for local competitors like Anta and Li Ning, which pledged support to cotton produced in the province. H&M, which was removed from Tmall as part of the boycott, only returned to the platform last month.
On August 31, the United Nations stated in a long-awaited report that “serious human rights violations have been committed” in Xinjiang. Even so, China continues to deny all such allegations, and many Chinese citizens are either unaware of the Western media reports due to censorship, or don’t believe them because Beijing’s state-run media outlets deem them to be anti-China propaganda. Either way, supporting Xinjiang cotton has become a pillar of guochao consumption for many consumers in the mainland.
Even when marketers find ways to circumvent Xinjiang cotton — and other polarising issues that highlight tensions between global brand values and the China market environment — leveraging more traditional forms of national pride can also be high risk.
A Tricky Strategy for Global Brands
Brands often think of guochao as a tenet of their localisation strategy but, in practice, it runs much deeper and can be more nebulous than operational initiatives like designing ranges around locally popular silhouettes, or adapting a brand voice to suit local social media platforms. China market experts suggest that guochao should now guide much more of the content, activations and products brands release in the market, as it should be seen as a fundamental cultural concept underpinning their entire business.
Navigating a principle fraught with many potential pitfalls, however, is not easy. Some types of guochao marketing used effectively by local brands simply won’t work when deployed by non-Chinese players. The latter cannot authentically deliver certain expressions of Chinese-ness and doing so could prove counterproductive.
It is hard to imagine a global brand relying on the same guochao approach as Hangzhou-based cosmetics brand Florasis, for example, which was founded on traditional Chinese beauty aesthetics and uses traditional motifs for its packaging combined with Chinese folklore and storytelling.
This inherent contradiction means that foreign firms looking to embrace the concept — whether for a single campaign or something longer-term — should also spotlight their own strengths in the context of China, rather than simply mimic local competitors.
“Losing yourself isn’t what the Chinese market wants. They want originality, a unique look,” said Julio Ng, Shanghai-based director at brand development agency Seiya Nakamura 2.24. Take niche designers, he adds, where the appeal for shoppers in the mainland is largely that they are foreign, unique, and harder to get a hold of. Leaning too much into guochao marketing would undermine that. Instead, brands should incorporate local talent and customs into their roadmaps in a way that feels natural and chimes with their visual identity. Giving credit where credit is due to avoid being called out for appropriating Chinese culture is also key.
Yet even for luxury, which is the sector the least challenged by Chinese competition, executing guochao successfully can be key to engaging with younger shoppers, particularly where there’s no end in sight for the country’s strict travel restrictions. But marketing initiatives need to bring something new to Chinese fans while keeping things on-brand.
“Right now, we’re so isolated from the rest of the world, it’s more about the experience, the exclusivity, the privilege and excitement we can enjoy here. We don’t want 20 new red pieces every Chinese New Year, that’s still the misunderstanding we have with the rest of the world,” says Ng. He lists Prada’s recent repeat Autumn/Winter 2022 show in Beijing’s Prince Jun Mansion Hotel as an example of a brand spotlighting both traditional and modern Chinese culture in a respectful, true-to-brand way.
Besides setting up retail storefronts, pop-ups and events in culturally significant locations and hosting re-shows like Prada, collaborations provide western players a discreet way of tapping into the goodwill that local consumers feel for a Chinese brand. They can also be a learning experience for both sides.
Lacoste recently launched its capsule collection with Chinese streetwear player RandomEvent, a beloved guochao brand that has already linked up with Dickies, among others. Meanwhile, MAC launched its collaboration with emerging Chinese designer Sensen Lii whose brand Windowsen is a darling of Shanghai’s creative scene. This addition to its portfolio of mainland crossovers follows previous editions with Angel Chen and couturier Guo Pei.
Dwyane Wade’s Way of Wade 10 basketball shoe collection for Li Ning in collaboration with Shanghai-based retailer Acu, which featured two mythical Chinese figures above shan-shui art, shows how brands can get more mileage out of traditional motifs when presented through the lens of Chinese partners.
Though local holidays, like the recent Mid-Autumn Festival, are still a crucial marketing touchpoint for global brands, some players are starting to carve out refreshing and creative interpretations to avoid tired routines. Take Marni, which released a mooncake gift box alongside a branded picnic mat and frisbee as a way of tapping into the growing popularity of ultimate frisbee and camping among Chinese Gen-Z.
Beyond collaborations with local designers and craftspeople, festive product launches, pop-ups in cultural quarters and subtle Chinese motifs in store design, many brands still anchor themselves to strategies that rely on local celebrities as brand ambassadors. This, however, is only getting harder to navigate.
No matter how effective any single guochao activation may be, say local industry leaders, the key is for brands to plan longer-term.
“A programme needs to span years and maybe a decade, instead of thinking of this season only and jumping to the next thing,” said Edison Chen, who founded the brand Clot with Kevin Poon in 2003, contrasting this with an instantly gratifying approach. “It takes time, perseverance, and dedication.”
Cues from Local Players
Within the streetwear space, Clot has ridden the success of its China-inspired design collaborations with the likes of Nike, which saw sneakerheads queue up for in malls across the mainland to buy shoes inspired by acupuncture, terracotta warriors and the Silk Road since 2006. “We never thought of guochao or [tried] to be a leader in guochao specifically,” says Edison Chen. “[But] we are trying to bridge the East and the West.”
Interestingly, it is Chen’s subconscious — or at least intuitive — approach which might explain why his products resonated. It is also important to remember that guochao means different things to different people and that context and timing are key considerations.
In recent years, the guochao concept has evolved and started taking on a different colour as the trade war with the US became even more acrimonious and long-running geopolitical conflicts over Taiwan, Hong Kong and territories in the South China Sea intensified.
“At the beginning, guochao was just about modern fashion with traditional Chinese elements. Now it’s more about national pride and cultural confidence,” says Miro Li, Hong Kong-based founder of Double V Consulting. “Now, if you only have elements like dragons or the colour red, your campaign will immediately be considered cliché.”
Such strategies must look glib or at least superficial to many consumers, given the increasingly prevalent narrative of the West ‘decoupling’ from China. But patriotic consumption, which is a phenomenon that exists to a greater or lesser extent in most other markets around the world, takes on a greater sense of urgency when consumers feel the stakes are high.
Guochao can also exacerbate existing challenges for foreign brands that have already started to fall behind. Those that resonate less with young Chinese have started to see sales slip, and even players that weren’t embroiled in boycotts or major controversies have slowly retreated from the market. The pullback has been especially dramatic in the fast fashion sector, where the likes of H&M, Topshop, New Look, Bershka and Pull&Bear reduced their China footprints in recent years.
It’s no accident that guochao’s rise mirrored that of the country’s own creative scene. While some brands and creatives continue to reference traditional aesthetics or even hanfu-inspired products, Ng of Seiya Nakamura 2.24 thinks of guochao as a class of locally-based, digitally-native brands appealing to younger shoppers; he lists streetwear players Attempt, RandomEvent and Roaring Wild, as well as designers Angel Chen and Sankuanz, as examples.
Meanwhile, local brands of varying size continue to riff on guochao in increasingly original ways. Double V’s Li raises Chinese jewellery brand Yin as a recent success story: the eight-year-old label collaborated with China Aerospace Science and Cultural Innovation (CASCI) to release a limited-edition collection of rocket-inspired pieces ahead of China’s Space Day, April 24. It cleverly taps into growing pride in the country’s technological prowess by aligning itself with aerospace, Li explained.
But even national pride marketing from Chinese players can get oversaturated. “A lot of people right now are forcing the guochao vibe and trying to speak loudly that ‘this is made in China’” says Chen. According to Li, shoppers are getting tired of repetitive strategies or brands come under greater scrutiny further down the line. Florasis, for example, which rose to fame for its elaborate traditional Chinese packaging, recently saw customers question whether products were really worth the price, he noted.
Looking ahead, Chen stresses that success will increasingly be a factor of how organic the national pride marketing feels to consumers — not only in terms of content but also in its delivery and tone. “Creating with a unique perspective, and it originating from a Chinese background, is already representative of guochao,” he said. “Guochao isn’t something that you can force… [it should be] something that genuinely comes from an identity that is Chinese.”
THE LATEST NEWS FROM CHINA
by Zoe Suen
FASHION & BEAUTY
Beijing Court’s Christian Louboutin Ruling Marks a Win for Global Brands
In mid-September, Beijing’s Intellectual Property Court ruled in favour of the French footwear brand in an unfair competition case, where it had accused a local firm, Guangdong Wanlima Industrial Co, of selling copies of its famous red soled heels on both Alibaba-owned Tmall and at a department store. The court held that Louboutin’s red soles had gained “certain influence” and “sold connections with the relevant public” since entering the market. It consequently ordered Wanlima to pay the firm 5 million yuan (around $702,336) in damages and 445,000 yuan in legal fees. The decision is a win not only for Louboutin — which has since the 2010s worked to secure its red sole trademark in China — but foreign brands at large, signalling that Chinese courts are more willing to protect brands’ IP rights in the lucrative but counterfeit-ridden market. Indeed, just months ago Monolo Blahnik won a 22-year-long legal battle enforcing its name rights in the mainland market. (Jing Daily)
Hong Kong Luxury Retailer Joyce Unveils New Flagship
After announcing the closure of its iconic 24-year-old flagship boutique on Hong Kong’s Queen’s Road Central, the luxury retailer founded by Joyce Ma is kicking off a new chapter with a flagship at local luxury mall Pacific Place. The 11,000 square-foot space, designed by Studio Collective, spans categories from fine jewellery and beauty, to womenswear, accessories and menswear, as well as a curated homeware and gift edit. It also houses ongoing collaborations under the retailer’s Only at Joyce initiative, which will bring brand marketing activations and capsule collections to the new space. Currently, shoppers see a Yohji Yamamoto capsule designed exclusively for the store, as well as one by Raf Simons featuring the work of local photographer Wing Shya. Considering the city’s long-awaited decision to end mandatory hotel quarantine for overseas visitors, the new location could soon prove popular among locals and tourists alike. (Joyce)
Beauty Industry Livestreaming Star Makes Comeback After Mysterious Absence
Livestream sensation Li Jiaqi (also known as Austin Li) made his comeback on Alibaba-owned Taobao on September 20, three months after one of his regularly scheduled streams ended abruptly due to what his team later called a “technical issue.” During that stream, Li and his assistant presented an ice cream cake shaped like a tank on the eve of the anniversary marking Beijing’s heavily censored 1989 Tiananmen Square massacre event. Neither Li’s team nor Alibaba spoke about the matter in the intervening months. The unexplained disappearance of the beauty industry influencer dubbed the “Lipstick King” is just one of many scandals involving top livestreamers in recent months, with Viya and Xueli Cherie receiving record tax evasion fines, spurring talk of virtual livestreamers being China’s next big (and less transgression-prone) marketing trend. Li made his return by way of a two-hour-long show, which drew over 60 million viewers — almost three times his daily average traffic before the incident — but the KOL did not give fans any details on future appearances. (Nikkei Asia)
TECH & SUPPLY CHAIN
ByteDance and Pinduoduo Plot Overseas Fast Fashion Apps to Rival Shein
Bytedance, the Beijing-based owner of both TikTok and Chinese sister app Douyin, has introduced a fast fashion e-commerce platform named If Yooou targeting European markets including the UK, France, Germany, Italy and Spain. The move is Bytedance’s second push into the lucrative ultra-fast fashion space, where the likes of Shein and Cider currently dominate. So far, Bytedance hasn’t had a great track record with its international efforts beyond TikTok. Late last year, the firm unveiled Dmonstudio, another Shein-like e-tailer, but announced its abrupt closure just months later. Meanwhile, Alibaba rival Pinduoduo reportedly launched Temu, a cross-border e-commerce platform targeting the US. Temu seeks to offer a more curated selection of products by hand picking which Chinese merchants’ goods will make it onto its site and storing those goods in a warehouse. (Pandaily, BoF)
Nike to Continue Sourcing from China Despite Activist Shareholders’ Efforts
As reports of forced labour and detention in Xinjiang mount on the back of a United Nations report concluding that China has committed “serious human rights abuses’’ against Uighurs and other ethnic Muslims in the province, shareholders of the American sportswear behemoth voted to reject a proposal that would “pause” the sourcing of “cotton and other raw materials” from the mainland. The proposal, by Domini Impact Investments and fellow activist shareholder Vancity Investment Management, urged Nike to halt sourcing from the country until the US government’s business advisory warning on Xinjiang was lifted or rescinded. It is no surprise that the proposal was rejected, given the backlash brands including Nike faced after expressing concerns about the Xinjiang reports last year. “Nike has very strong growth equity with Chinese consumers,” said CEO John Donahoe said before the results were announced. During its 2022 financial year, the brand made around $7.54 billion in sales in China — around 16 percent of its global revenues. Meanwhile, the EU is preparing to ban products made with forced labour from being sold across the single market; the ban could become law by early 2023 at the earliest. (Eco Textile News)
Kuaishou to Launch Online Shopping Mall Channel
In a bid to monetise its user base, the short video player is preparing to launch an e-commerce platform with a similar interface to those of Taobao and JD.com, having reportedly tested it in August, local media outlets report. Kuaishou is said to be recruiting merchants, and offering traffic-driving promotions to sellers through channels like livestream shopping. The news comes ahead of Singles’ Day in November, the largest of China’s many online shopping festivals; it also signals a shift in the country’s lucrative but highly competitive e-commerce space, where merchants expanded from major marketplaces to short video platforms due to high traffic and marketing costs. The same problems, however, are also plaguing livestream platforms and short video apps, which have become saturated. According to news outlet Jiemian, confirmed sellers on Kuaishou’s app include a number of fast-fashion players, and the platform is set to bring on “well-known” merchants in the future. (Jiemian)
CONSUMER & RETAIL
Lululemon Founder Aids Anta-Owned Amer in Sales Push
Chip Wilson, the founder of Canadian activewear giant Lululemon and minority partner in Anta Sports-owned Amer Sports Group, is now working to help the latter company grow its sales through direct-to-consumer channels. Amer, which has a portfolio spanning Salomon, Atomic ski equipment, Arc’teryx and Wilson, was acquired by Chinese sportswear giant Anta for more than $5 billion in 2018. Wilson, who left the Lululemon board in 2015 and proceeded to publish a book critiquing its performance, says he owns 20 percent of Amer. “We lost our power there and that’s the way it went, and there was a difference of opinion,” he told Bloomberg. “But now I get to take all my knowledge — our knowledge — and put [it somewhere] where it’s in its relative infancy,” he said, adding that Amer’s current focus on winter sports presents an opportunity for growth into women’s categories, as well as spring and summer products. (Bloomberg)
Condé Nast China Managing Director Li Li Steps Down
Li, who served as managing director for two years, will exit effective October 11. Gill Zhou, who most recently worked as IBM Asia Pacific’s chief marketing officer, and before that, Motorola China’s communications chief, will step into the role while Condé Nast China looks for a permanent replacement. Li succeeded Sophia Liao who departed in autumn 2020. Liao later won an unlawful dismissal case against the company (Condé Nast China has reportedly appealed that decision), and spoke out against its global reorganisation and consolidation efforts on WeChat. Before joining Condé Nast China, Li worked as Bose’s head of Greater China, general manager of the VIPLux division at local e-commerce platform VIP.com, and director at Fosun Group. “It has been an honour to help and guide Condé Nast China for the last two years. Now it’s time for me to return to my passion for branding, marketing, and retail,” Li wrote in an internal email seen by WWD. (WWD)
China’s August Retail Sales Are Up but Demand Is a “Significant Problem”
Data from the National Bureau of Statistics reveals that the country’s retail sales were up 5.4 percent in August year-on-year, beating a Reuters forecast of 3.5 percent growth. The monthly growth rate is the mainland’s fastest since January-February this year, before months-long lockdowns in cities like Shanghai shuttered physical stores and dampened demand. But experts attribute the boost to car sales and a low base in August 2021, rather than other categories or wider improvement in consumer sentiment. Alongside furniture, cosmetics is among the few categories on the decline from last year’s figures. When the figures were announced, National Bureau of Statistics spokesperson Fu Linghui told the press that reduced domestic demand presents a “significant problem,” but predicted that investments into infrastructure and manufacturing would help drive growth during the “downward period,” alongside a stabilisation of China’s ailing real estate market. (CNBC)
POLITICS, ECONOMY, SOCIETY
Beijing Will Goes ‘Its Own Way’ on Ukraine Despite Pressure to Curb Russia
Though China continues to hesitate from pressuring Russia on Ukraine, its foreign minister Wang Yi told his Ukrainian counterpart Dmytro Kuleba on the side-lines of the UN General Assembly that it has “never stood idly by, nor has it added fuel to the fire, nor will it take advantage of the opportunity to gain self-interest.” Wang added that Beijing will continue to promote peace amid Russia’s invasion of Ukraine, and he urged both sides to de-escalate the situation during a foreign ministers meeting. Last week, Russian president Vladimir Putin raised the topic of using nuclear weapons in Ukraine, following several setbacks suffered by the Russian army in the country’s north-eastern region. During the UN talks, Ukraine, the US and other nations urged Russia to be held accountable for its military decisions, and the EU pressured Beijing to leverage its influence on Moscow to end the war just the day before. But Wang told EU foreign affairs chief Josep Borrell that China would “play its role in its own way.” (South China Morning Post)
Concerns Mount for Fosun Amid Beijing Regulatory Crackdown
Though some investors are optimistic that Beijing’s regulatory crackdown affecting China’s biggest companies has relaxed for good, others are less certain. The latest firm to enter the mix is none other than Lanvin Group owner Fosun International, which also owns Club Med, a Premier League football club and Portugal’s biggest bank. The group’s stocks and bonds recently saw sharp selloffs. Global rating agencies are citing refinancing risks, reflecting investors’ anxieties over regulatory interference. The company said in a statement that earlier last month, its own communist party secretary visited the State-Owned Assets Supervision and Administration Commission of the State Council (SASAC) in Beijing, for a routine information collection survey. But investors are nervous, particularly in light of recent pressure Fosun has come under to sell companies in its portfolio. (Bloomberg)
Envoy Vows China Will ‘Fight’ United Nations Xinjiang Resolutions
As Beijing continues to deny accusations of human rights abuses in Xinjiang province, Xu Guixiang, a Xinjiang official and Chinese envoy to the UN, told Western nations that the country would “fight” with countermeasures any “so-called ‘Xinjiang-related motions’ or so-called ‘resolutions,’” he said in Geneva. This comes after a long-anticipated report by the UN High Commissioner’s office deemed it likely that crimes against humanity have been committed in the region against Uighurs and other ethnic minorities, which countries like the US are now calling a “genocide”. Though Xu acknowledged that the human rights situation in Xinjiang was undergoing “a process of further [improvement],” he denied the existence of a mass violation of human rights. Earlier this month, Fernand de Varennes, the UN special rapporteur on minority issues, said the UN’s inaction over Xinjiang was putting its credibility at stake. (The Guardian)
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