In early 2022, H&M unveiled its first menswear concept store in Beijing. While such a milestone would normally be marked by a star-studded grand opening event, fashion or artist collaboration, or, at the very least, social media coverage, the opening was grossly understated. As described by local media, it was hard to tell that a new location had even been built without asking the staff.
But the desire to lay low is understandable, given the past year the Swedish clothing company has had. In March 2021, H&M landed in hot water after being called out by the Community Youth League on Weibo for “spreading Xinjiang cotton boycott rumors, while making big profits in China”, becoming a symbol foreigners interfering in Chinese affairs. Nike and Burberry quickly joined this growing list of offenders after their statements on Xinjiang were redistributed online.
Unlike some clumsy marketing campaigns, this was no small faux pas. Seen as an attack on China, the fallout was quick and severe – and a year later it is still being felt to some degree. Looking at H&M, Nike and Burberry, how much has this consumer boycott really set them back? And what are the lessons for other brands going through market crises?
Although many brands have raised concerns about alleged human rights abuses in China, the fast fashion giant has been hit the hardest. H&M was stripped from Taobao, JD.com and Pinduoduo, its app was delisted, stores were wiped from online maps and around 20 physical locations were closed. In the three months to May, H&M reported that sales in China fell 23% year-on-year, a staggering loss of $74 million. While the country was its fifth largest market in the second quarter of 2021, it fell out of the top ten the following quarter.
However, H&M is committed to “[regain] the trust and confidence” of its Chinese buyers. While its eponymous label has quietly done its business (it hasn’t posted on Weibo since September), the group has accelerated the development of its most expensive brands. In fall 2021, ARKET, known for its minimalist aesthetic, and womenswear brand & Other Stories both opened their first physical stores in Beijing and Shanghai, respectively. Prior to that, the two had tested the waters by launching on Tmall, attracting over 1 million and 256,000 fans respectively.
ARKET recently opened a cafe in its Beijing store, reinforcing its premium brand image. Photo: ARKET’s Weibo
But is it enough to develop into a new form? “There are reports that some consumers are still turning their backs on the two brands after finding their connection to H&M, which shows that the brand has still not been fully forgiven by Chinese consumers,” said Arnold Ma, founder of China-focused digital marketing agency. Qumin.
“On the other hand, the latter two challenged H&M’s image as a ‘roughly made’ fast fashion brand by offering higher quality products at a higher price,” he continued. . “So premiumization, to some extent, helps both win over some Chinese consumers who pay more attention to quality and design.”
The world’s largest sportswear company has not been spared China’s wrath either. Nike lost brand ambassador Wang Yibo, got scrambled on local TV shows and saw Tmall sales drop 59% year-over-year in April, though it still managed to earn $1.9 billion from the market this quarter. But business hasn’t quite returned to normal, as evidenced by the 24% drop in sales in China in the second quarter of 2022.
Yet these numbers mask Nike’s many victories. Even in March, Air Jordan 4 sneakers and Nike Dunk Lows were flying off virtual shelves. Thanks to its strong digital footprint, the brand also boasted a successful singles day, garnering 70 million views on its live streams, gaining 13 million new members and defending its position as the #1 sports brand. on Tmall. At the same time, Nike recruited more local influencers, including basketball player Yang Shuyu, sprinter Su Bingtian and snowboarder Cai Xuetong, who helped it regain credibility.
Nike has diversified its sponsorship by teaming up with snowboarder Cai Xuetong (left) and sprinter Su Bingtian. Photo: Nike’s Weibo
Considering its 40 years in China, Sarah Yam, co-founder of Red Digital, noted that “Nike still has a strong brand heritage in China and that’s pretty hard to top right now.” She predicts that it may be around 20 years before a local sportswear player can overtake the western titan.
Burberry also lost brand ambassadors and its collaboration with popular video game “Honor of Kings” during the cotton crisis. However, he managed to turn the script around: on July 21, the British house announced that it would donate 1.5 million yuan and 500,000 yuan worth of supplies to Henan flood relief efforts, becoming the first foreign brand to donate. Netizens hailed the unexpected move, writing that they would “love Burberry forever.” In contrast, when H&M and Nike followed suit, netizens retorted that they would not forget how the two insulted China.
As such, the famous trench coat maker said the Xinjiang issue had “relatively limited impact on business”, with market sales exceeding pre-pandemic levels by more than 55% during the of the quarter from March to July. Building on this momentum, Burberry continued to drive engagement throughout the first half of the fiscal year by creating highly localized campaigns, dedicated capsule collections and partnering with local Chinese artists. To further reinforce its image as a responsible business leader, Burberry has also partnered with local organizations to promote youth culture.
Burberry has teamed up with young Chinese artists to present the first anniversary exhibition of Burberry Generation at TX Huaihai. Photo: Burberry’s Weibo
So when Burberry opened its new flagship store at Shanghai Plaza 66 in November, it didn’t need to keep a low profile. Instead, the brand lambasted the news on social media, racking up 18.2 million views on Weibo in five days. Sales also held steady, with Burberry recently reporting full-price same-store sales in China rose 37%.
The bigger picture
While H&M, Nike and Burberry have all advanced in China, they have done so with varying degrees of success. Burberry, which rebounded faster than the others, partly benefited from its status as a luxury brand. As Yam, who has over a decade of Chinese digital marketing experience, said, “It’s harder to replace – you don’t have another Burberry. For Nike, [consumers] can find Chinese version, Li-Ning, which is popular in China now. And for H&M, there is so much fast fashion.
More importantly, Ma points out that Burberry has always remained neutral on politics. “Burberry chose to focus on non-politicized marketing, while H&M chose to risk its brand image in China in favor of improving its brand image with its global customer base.”
None of this is surprising, as China accounts for less than 5% of H&M’s global revenue, while Burberry’s China revenue accounts for nearly half of their global total, Ma noted. Indeed, China is just one, albeit very important, market for these global companies. Therefore, recovery involves not only reassessing China’s tactics, but also ensuring a strong global network in the event of a crisis.