Chinese Economics Thread
- Thread starter Norfolk
- Start date
China Canceled H&M. Every Other Brand Needs to Understand Why
For global companies making big bets on China, the Swedish retail giant is an alarming cautionary tale.How do you come back from the most ferocious digital backlash ever unleashed on a foreign brand in China?
Swedish retail giant is trying to answer that question by asking another: How did it become a target in the first place?
H&M’s decision to stop using cotton from China’s provoked a furious social-media reaction in early 2021. But the brand—famous around the world for its extensive selection of affordable, often youth-oriented fashion offerings—was just one of several Western companies taking similar action. Many of the same brands have suspended or reduced their over the past few weeks, in response to the country’s invasion of Ukraine.
But while companies such as and felt some pushback from China’s increasingly nationalistic consumers, only H&M found itself wiped off the country’s e-commerce sites, maps and social media platforms. Almost a year on, sales in the country are yet to recover, slumping 41% in the most recent quarter alone.
When the retailer began looking into what had happened, it discovered the problem stemmed largely from what it wasn’t doing.
An H&M review found the fast-fashion giant wasn’t particularly valued by local authorities, according to people familiar with the matter who didn’t want to be identified because of fears of reprisal. The amount the brand paid in tax was not significant, and its failure to sponsor government-backed events was taken as a sign that building relations with the Chinese Communist Party—arguably the most important force in Chinese business—wasn’t a priority.
The significance of all this is clearest in contrast with the country’s most popular clothing retailer, Japan’s Uniqlo, which has so far been unscathed by shoppers’ shift towards nationalism. In Shanghai, no foreign apparel maker pays more taxes or employs more people, according to a 2021 government statement. Parent company also rented a bigger booth than any other clothing maker at last year’s China International Import Expo—a politically important event devised international criticisms about the country’s openness to foreign business.
“H&M was large enough in China to be noticed and made an example of,” said Mark Tanner, managing director of Shanghai-based marketing and branding firm China Skinny, “but not so large that wiping it off the Internet would upset the apple cart.” He added that Sweden is among the countries that are of China.
H&M has become an alarming cautionary tale for other big brands. A major company with an established presence in China can suddenly find itself on the wrong side of Beijing without doing very much at all. Burned by the trade war and fallout over the coronavirus, the nation has turned inward in recent years, meaning businesses that still want to tap the world’s biggest consumer market must thoroughly reassess how they operate there.
Merciless Reaction
The Stockholm-based apparel giant is less China-focused than brands like Uniqlo or Nike, but relationships in the country still matter. In the quarter that ended in November, the nation was still among H&M’s top 10 markets—accounting for about 3% of sales—and home to nearly one in 10 of its brick-and-mortar stores. It’s also the company’s biggest manufacturing hub, where more than a third of its suppliers are based.“China is a very important market to us and our long-term commitment to the country remains strong,” H&M Chief Executive Officer Helena Helmersson said during a recent earnings call. “We are dedicated to regaining the trust and confidence of our customers, colleagues, and business partners in China.”
Long before the outcry, H&M’s sales had taken a hit from the growing global and local competition in China’s fast-fashion segment.
But when Chinese social-media users discovered an undated company statement expressing concern about forced labor in Xinjiang’s cotton industry—which China denies—the reaction was . A Weibo post by the Communist Youth League lit the touch paper: “Want to make money in China while spreading false rumors and boycotting Xinjiang cotton? Wishful thinking!”
As the furore escalated, billboards got pulled down, the People’s Liberation Army blasted the Swedish retailer, and about 60 of its stores —roughly 12% of the brand’s total Chinese network.
The company’s decade-long efforts to nurture a social-media relationship with the nation’s consumers has also been all but obliterated. Data analysis by Bloomberg News shows that at least 10,000 Weibo posts were published between 2011 and 2021 by H&M, compared to about 1,700 posts by Nike. Since September, however, not a single post from H&M exists on the platform.
Comeback Strategy
Recovery will require a careful balancing act, one that other companies seeking a sustainable toehold in China might look to study.H&M needs to increase sales while keeping a low enough profile to avoid any further social-media ire; it must also nurture a better relationship with the government—the center of power in China—without upsetting shoppers in Europe and the U.S. who have concerns about the Communist Party’s . All of this has to happen while Chinese consumers are increasingly and products.
Guangzhou civil servant Jelly Li used to like that H&M was “very easy to reach both online and offline.” But the 28-year-old and her family have now abandoned the retailer, along with Nike and Adidas.
“My husband said the whole thing that brands distort the truth about China while making money here made him furious,” Li explained. “It’s sad because we’ve bought clothes from these brands for years and we are happy with their quality and style.”
Look like China is expected the worst by insulating itself from geopolitical tsunami with energy independent. Environmental concern would be put in back burner for now. 300 million tons would be enough to replace all imports. 620 million stockpile is more like preparing for worst case scenario.
The National Development and Reform Commission, the nation’s top economic planner, told officials from major mining regions at a meeting late last week that it wants to boost domestic production capacity by about 300 million tons, according to people familiar with the matter. It also plans to build a 620 million-ton stockpile of the fuel split between government, miners and users.
The National Development and Reform Commission, the nation’s top economic planner, told officials from major mining regions at a meeting late last week that it wants to boost domestic production capacity by about 300 million tons, according to people familiar with the matter. It also plans to build a 620 million-ton stockpile of the fuel split between government, miners and users.
why don't they just import from Mongolia and North Korea?
broadsword
Brigadier
It fails to mention that Uniqlo did not boycott Xinjiang cotton.
Not enough.
Just hike the rmb by 5% per year for the next 10 yrs.
Mongolia and North Korea have lots of coal.