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China’s anger over foreign brands is helping local rivals

Tim Min once drove BMWs. He was considering buying a Tesla.

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

He also considers himself a patriot. “I have a very strong penchant for Chinese brands and very strong patriotic feelings,” he said. “I used to love Nike too. Now I can see no reason for that. If there is a good Chinese brand to replace Nike, I will be very happy about it. ”

Western brands such as H&M, Nike and Adidas are under pressure in China to refuse to use cotton produced in the Xinjiang region, where the Chinese government has campaigned against ethnic minorities. Shoppers promised to boycott the brands. Celebrities dropped their approval offer.

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

HeyTea, a $ 2 billion starter of milk with 700 stores, will replace Starbucks. Yuanqisenlin, a four-year-old company with a low sugar content worth $ 6 billion, wants to become China’s Coca-Cola. Ubras, a five-year-old company, wants to replace Victoria’s Secret with the most non-Victoria’s Secret products: unused, sporty bras that emphasize comfort.

The wrath of Xinjiang cotton has given these Chinese brands another chance to win 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 Mr. Xiao carried a Li-Ning ad, sold out online. A hashtag about the campaign was viewed more than a billion times.

China is undergoing a consumer revolution. Its young generation is more nationalistic and is actively looking for brands that can adapt to the safe Chinese identity. Entrepreneurs rush to build names and products that resonate. Investors are turning their attention to these start-ups amid declining returns from technology and media companies.

When patriotism becomes a selling point, Western brands are put at a competitive disadvantage, especially in a country that increasingly requires global companies to tolerate the same policy lines as Chinese companies.

China’s consumer protests are “a historic turning point and will have a lasting impact on Chinese consumers in the long run,” Min said. “Chinese consumers do not want to eat the same shit that foreign brands have fed them. It is important that foreign brands respect Chinese consumers as much as the Chinese brands do. ”

Foreign brands are far from finished in China. Its drivers helped get a jump in Tesla deliveries. IP phones remain immensely popular. Campaigns against foreign names have come and gone, and local brands that emphasize politics too much risk unwanted attention if political winds change rapidly.

Still, interest in local brands marks a significant shift. Post-Mao, the country made few consumer goods. The first televisions 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 wore blue and gray during the Cultural Revolution.

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

“We have reviewed European and American fashion, Japanese and Korean fashion, American streetwear fashion, even Hong Kong and Taiwan fashion,” said Xun Shaohua, who founded a Shanghai sportswear company that competes with Vans and Converse.

Now it could be time for China fashion. Chinese companies manufacture better products. China’s generation Z, born between 1995 and 2009, does not have the same affiliation with foreign names.

Even the People’s Daily, the traditionally rejected official newspaper of the Communist Party, is in the process of branding. It started a streetwear collection with Li-Ning in 2019. That same year, it released 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 searched for domestic names, up from only about a third 10 years earlier.

As with so much in China, it can be hard to tell how much the guochao movement involves politics. Building homemade brands fits closely with the Communist Party’s desire to make the country more self-sufficient. Officials also want the Chinese to trade more: Household consumption accounts for only about 40 percent of China’s economic output, much less than it does in the United States and Europe.

Aside from patriotism, entrepreneurs claim that their ventures rest on a solid business foundation. Similar trends occurred in Japan and South Korea, both now home to strong brands. Local players know better the capabilities of the country’s supply chains and how to use social media.

Mr. Xun’s sports brand has half a million followers in Alibaba’s Taobao marketplace and sells at the same prices as Vans and Converse, or even slightly higher. He said his brand competed by making shoes that fit Chinese feet better and offering locally preferred colors, such as mint green and fuchsia. He sells exclusively online and goes along with Chinese and foreign brands and personalities, including Pokemon and Hello Kitty. At 37 years old, he is the only person in his company who was born before 1990.

Guochao fashion has also revived older Chinese brands, such as Li-Ning. For many years, sophisticated urbanites considered the brand, created by a former world champion gymnast of the same name, ugly and cheap. Its signature red-and-yellow color combination after the Chinese flag was mockingly called “egg fried with tomato,” a daily Chinese dish. Li-Ning lost money. Its shares were on a losing streak.

The company then introduced a collection at New York Fashion Week in early 2018. Its angular look combined with bold Chinese characters and embroidery created buzz at home. Its shares have risen nearly nine times since then. Now, Li-Ning’s advanced collections sell for an average of $ 100 to $ 150 on a par with Adidas.

As ambitious as these business people are, almost everyone I spoke to admitted that the Chinese brands still could not compete with megabrands like Coca-Cola and Nike.

Alex Xie, a marketing consultant working with companies in China, used the sportswear industry as an example. Nike has a year-long lead over Chinese brands in research and development. It has 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 football, basketball and athletics teams.

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

But for these western megabrands, the Xinjiang cotton conflict is a major challenge that can help their Chinese competitors. While past outrage against Western brands like the National Basketball Association and Dolce & Gabbana went pretty fast, this fight could continue, many people said.

“In the past, some Western brands neither understood nor failed to respect Chinese culture due to lack of understanding,” Xun said. “This time it is a political issue. They have violated our political sensitivity. ”

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

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