As China targets H&M and Nike, local brands see their chance
By Li Yuan
Tim Min once drove BMWs. He considered buying a Tesla.
Instead Min, the 33-year-old owner of a Beijing cosmetics startup, bought an electric car made by a Chinese Tesla rival, Nio. He likes Nio’s interiors and voice control features better.
He also considers himself a patriot. “I have a very strong inclination toward Chinese brands and very strong patriotic emotions,” he said. “I used to love Nike, too. Now I don’t see any reason for that. If there’s a good Chinese brand to replace Nike, I’ll be very happy to.”
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 broad campaign of repression against ethnic minorities. Shoppers vowed to boycott the brands. Celebrities dropped their endorsement deals.
But foreign brands also face increasing pressure from a new breed of Chinese competitors making high-quality products and selling them through savvy marketing to an increasingly patriotic group of young people. There’s a term for it: “guochao,” or Chinese fad.
HeyTea, a $2 billion milk tea startup with 700 stores, wants to replace Starbucks.
Yuanqisenlin, a 4-year-old low-sugar drink company valued at $6 billion, wants to become China’s Coca-Cola. Ubras, a 5-year-old company, wants to supplant Victoria’s Secret with the most non-Victoria’s Secret of products: unwired, sporty bras that emphasize comfort.
The anger over Xinjiang cotton has given these Chinese brands another chance to win over consumers. As celebrities cut their ties to foreign brands, Li-Ning, a Chinese sportswear giant, announced that Xiao Zhan, a boy band member, would become its new global ambassador.
Within 20 minutes, almost everything that Xiao wore on a Li-Ning advertisement had sold out online. A hashtag about the campaign was viewed more than 1 billion times.
Foreign brands are far from done in China. Its drivers helped power a jump in Tesla deliveries. IPhones remain immensely popular. Campaigns against foreign names have come and gone, and local brands that emphasize politics too much risk unwanted attention if the political winds shift quickly.
Still, interest in local brands marks a significant shift. Post-Mao, the country made 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 of my generation remember their first sip of Coco-Cola and their first bite of a Big Mac. We watched films from Hollywood, Japan and Hong Kong as much for the wardrobes and makeup as the plot. We rushed to buy Head & Shoulders shampoo because its Chinese name, Haifeisi, means “sea flying hair.”
“We’ve gone through the European and American fad, the Japanese and Korean fad, the American streetwear fad, even the Hong Kong and Taiwan fad,” said Xun Shaohua, who founded a Shanghai sportswear company that competes with Vans and Converse.
Now could be the time for the China fad. Chinese companies are making better products.
China’s Generation Z, born between 1995 and 2009, does not have the same attachment to foreign names.
Even People’s Daily, the traditionally staid Communist Party official newspaper, is getting into branding. It started a streetwear collection with Li-Ning in 2019. That same year, it issued a report with Baidu, the Chinese search company, called “Guochao Pride Big Data.” They found that when people in China searched for brands, more than two-thirds were looking for domestic names, up from only about one-third 10 years earlier.
As with so much in China, it can be hard to tell how much of the guochao movement involves politics. Building up homemade brands fits snugly with the Communist Party’s desire to make the country more self-reliant. Officials also want Chinese people to shop more: Household consumption makes up only about 40% of China’s economic output, much less than it does in the United States and Europe.
Patriotism aside, entrepreneurs argue that their ventures rest on a solid business foundation. Similar trends happened in Japan and South Korea, both now home to strong brands. Local players better know the abilities of the country’s supply chains and how to use social media.
As ambitious as these businesspeople are, almost everyone I spoke to admitted that the Chinese brands still couldn’t compete with megabrands such as Coca-Cola and Nike.
Alex Xie, a marketing consultant, used the sportswear industry as an example. Nike holds a yearslong lead over Chinese brands in research and development. It enjoys a deep network of relationships in the sports world. It works closely with athletes to develop better shoes, sponsors many events and teams, including China’s national soccer, basketball, and track and field teams.
“It simply has a much stickier relationship with its customers than any Chinese brand,” he said.