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Still, many Chinese citizens were unable to afford – or unwilling to pay full retail prices – for foreign-branded items. A demand for counterfeit goods was thus sparked, fuelling a boom for local manufacturers and leading China to become the top global market for the production and sale of fake goods. In recent years, however, after China’s stringent crackdowns on copycats and the government’s ‘anti-extravagance’ laws, local Chinese have begun to shift their admiration for foreign products to domestic goods.
Added to a growing list of national holidays in China, May 10 was declared ‘Chinese Brands Day’, an event that proudly promotes “Made in China” and an attempt to shed the counterfeit and copycat stereotypes equated with overseas brands. JD’s Big Data Research 2020 report discovered well-educated, high earners are increasingly buying domestically, with females especially below the age of 25 showing interest in local brands.
CASE STUDY: National Nostalgia
The transformation of domestic labels into hip, trendy brands gave rise to the term ‘guochao’ (国潮) – directly translated as national hip, with many local brands reinterpreting Chinese heritage and culture with a dose of contemporary flair to establish a nostalgic chic. The most well-known example would be sportswear label Li-Ning – named and founded by the Chinese gymnast. Once popular in the 90s through to the 2008 Beijing Olympics, the brand was quickly cannibalised by Nike and Adidas, and eclipsed by other local competitors.
Luckily for the brand, a streetwear boom emerged from the rise of hip hop and rap culture – influenced by reality TV shows and successful Western brands. Within the context of the trend and young consumers’ desire for an individualistic style, streetwear is less gender-orientated and creates an expensive yet laid-back leisurely look.
Li-Ning captured the opportunity and redefined its brand with a fresh look incorporating today’s youth culture with Chinese elements, and its Taoism-inspired debut collection made waves on the runway of New York’s Fashion Week in 2018. The Chinese were proud to see their own national brand making it in New York and its popularity has been propelled ever since, and it’s now stocked at the trendiest upscale department stores around the world, from Selfridges to SSense. Today Li-Ning is valued at US$7 billion, chasing the top American and German sportswear giants.
Similarly, Feiyue, a Shanghai-based sneaker brand from the 50s, is now worn across the globe and recognised abroad as a little hipster gem on the streets of Paris. Originally famed for its basic canvas plimsolls worn by martial artists and monks, French businessman Patrice Bastian discovered Feiyue and bought the overseas rights to sell the brand in 2005. Subsequently, it took off in the West. Instead of Shaolin monks, skateboarders and celebrities like Orlando Bloom and Poppy Delevingne turned the signature Feiyue shoes into a street fashion icon, and even brands like Celine and Marvel joined up in collaborations.
The Rich and Humble
At the height of China’s economic wealth, boomers enjoyed flaunting their luxury goods as an indicator of their status – thus giving birth (figuratively, and literally) to the ‘fu er dais’ – second-generation kids born into nouveau riche wealthy families.
Yet this segment has become watered down over the years – not only due to the slowing economy, but also as a result of the government’s 2013 clampdown on exuberant luxury giftings, intended as an anti-graft initiative. Bain & Co reported growth in luxury-goods spending falling from 7 per cent in 2012 to 2 per cent the following year, with Western luxury brands in particular taking a hit.
Fascinatingly, the notorious ‘crazy rich Asians’ adapted their taste – from purchasing seasonal ‘it’ items to seeking out more affordable-luxury brands. These brands, often unique or even unknown to the market, satisfied the desire for individuality.
Chinese millennials began adopting the ‘Buddhism’ philosophy – where money is still being spent, but on the quality of living, rather than on flashy luxury goods. Health, wellness and travel became the new status symbols, swapped out for Rolexes and Birkins in a new spiritual way of living. This is not to say materialism vanished, rather that millennials began seeking to associate the values of brands with that of their own lifestyles.
CASE STUDY: Nio
Chinese automobile company Nio sells premium electric cars, but unlike Tesla, it also sells the dream. Tesla is an effortless status symbol, but Nio is an example of a brand that truly encompasses customer experience into its brand.
Instead of selling through car dealerships or third-party agents, Nio sells cars from its brand-experience centre ‘Nio House’ – a living space for owners, and their friends. First opened in 2017, Nio aimed to design an experience beyond just selling a car through its exclusive lounge concepts and on-site perks. Featuring a clubhouse, coworking space, cafe, daycare centre and an event space, the brand focuses solely on the user experience. Through an app, users can view events, chat with other Nio owners and even interact with Nio’s internal team, right up to its CEO.
Nio also has undertaken partnerships to complete its lifestyle ecosystem – from a fashion collection with Chalayan in 2018 to limited-edition car collaborations with Razer and Carrera.
Tesla had a five year head start in China, but Nio’s approach is different – like Apple, aiming to build a fanbase, encouraging customers to feel at home at their Nio Houses, but also returning to trade up to new models.
The Chinese electric vehicle is fast catching up to its American rival Tesla, but Nio’s vision signifies what the future of car ownership holds – let alone what retail should be like.
The Decline of the West
The surging popularity of domestic labels can in part be attributed to marketing failures by Western brands. The problems began with brands trying to impose their marketing tactics onto the Chinese market simply by translating their content without taking into account the importance of localisation. That said, some brands have succeeded more than others thanks to the help of local, third-party agencies.
Western brands regularly developed ‘China exclusives’ specifically around Chinese New Year or even tackling unofficial holidays such as 520 Chinese Valentine’s Day. While this seemed like an easy and sure-fire strategy, such linkages no longer appeal to millennials today. More often than not, a Chinese exclusive item is red, emblazoned with a gold dragon and adding a lucky 8 charm to top it off.
‘Subconscious’ racism has become more visible in brands misappropriating Chinese culture. Dolce and Gabbana is a prime example, not just for dressing Asian models in a qipao at its spring 2016 show to resemble a stereotypical Chinese tourist, but also its controversial racist Chinese ad in 2018 that led to a nationwide boycott of the label.
In truth, Chinese shoppers are bored – and savvy. They now recognise the gimmicks Western brands try to pull just to part them from their money. The allure of foreign brands is beginning to dull at the same time as the domestic brands are garnering appeal because they are more authentic and in-touch with consumers’ beliefs and values.
CASE STUDY: Neiwai
Founded in 2012, lingerie label Neiwai (meaning ‘inside and outside’) is another direct-to-consumer label that began online. Famous for its wireless bras, the brand blossomed to 73 stores in China, and its first US store is due to open this year. Neiwai has to date received $38 million in seven funding rounds, putting its value now at more than $142 million.
In a category where Victoria’s Secret was once worshipped on the mainland, Neiwai stands apart from the sexiness of its American rival with successful campaigns that celebrate and empower the everyday woman, challenging Asians’ aspirations to traditionally high beauty standards. Neiwai won over its customers by building strong emotional connections celebrating body diversity and self-expression, and even hosts offline events such as women’s empowerment conferences targeting their core customer base of independent executive women.
Neiwai has recognised and embraced the trend among modern young Chinese women towards shedding the stereotype of being ‘marriageable’ in favour of achieving a university education and becoming financially independent.
In contrast, Victoria’s Secret has been on the decline since the time it debuted in China after the backlash grew from its Shanghai Fashion Show in 2017. Gigi Hadid’s racist video mocking Asians and previous dragon-themed looks were not well received by Chinese consumers.
CASE STUDY: Perfect Diary
Dubbed the Chinese version of Glossier, Perfect Diary is the fastest-growing Chinese cosmetics brand. Valued at $2 billion, Perfect Diary has raised $100 million in three funding rounds, including investment from Glossier investor Tiger Global Management. Even L’Oreal reportedly showed interest in acquiring the C-beauty brand in late 2018. On Singles Day last year, Perfect Diary became the first makeup brand to sell more than $14 million worth of product in one day, eclipsing foreign brands.
Perfect Diary took off during the past three years since it tapped into LittleRedBook using KOLs (Key Opinion Leaders) and KOCs (Key Opinion Consumers). Targeting millennials with high spending power, the brand achieved success from its reactive nature to trends, releasing frequent drops and partnerships that appeal to its shoppers across multiple interests.
Yet the most effective way Perfect Diary has tapped into the market has been through building its brand advocacy across its widespread customer base. Through WeChat under a private-traffic operating model, Perfect created a fictional persona, Xiaowanzi (also known as Abby), to befriend customers. Behind the scenes, a real human employee plays the role of Xiaowanzi and each account leads its own group chat, forming a ‘friendship circle’ with consumers. In each circle the character initiates conversations to keep the group engaged with the brand. Hundreds of Xiaowanzi accounts are duplicated to operate multiple private ‘sisterhood’ WeChat groups to discuss beauty, travel and other topics daily.
The success of Xiaowanzi’s character spun off into a brand of its own, ‘Abby’s Choice’ launched in June, focusing on skincare as opposed to cosmetics. Kept separate from the skincare brand, Abby’s Choice is sold online via a WeChat mini program, which also shares beauty and skincare educational information and a sole brick-and-mortar store.
Meanwhile, Perfect Diary opened its first offline store in January last year and has since expanded to 40 stores with a goal of 600 stores within three years.
As nationalism has found its way back into the mindset of China’s youth, there is a growing pride in local brands. ‘Made in China’ is no longer the embarrassing slogan it once was; nowadays it expresses confidence in China’s culture, and reflects the nation’s growing economic power.
Undeniably it is tricky for foreign brands to enter China, given the stark difference in consumer behaviour to the West. While international goods may have a higher perceived status due to their brand awareness and quality, local brands – in the form of both counterfeit or copycats – have caught up to the point of even eclipsing the brands that inspired them.
Local brands not only have improved their product quality, but have also been able to woo back the local demographic. In hindsight, talents who studied and worked overseas have been lured back to the country, bringing new experience and skillsets now being sewn into the new industrial revolution.
Since China opened its market to the world in the 80s, Western brands have eclipsed domestic labels – but this is no longer the case. With the ongoing political crisis between the US and China trade war, in addition to Covid-19 halting travels and even affecting daigou grey markets for tax-free luxury goods – consumers are happily steered towards embracing their own culture and domestic brands after years of worshipping western fashions. The Chinese consumer today thrives for the guochao look and values local brands that cast a more authentic appeal to its own citizens.
In an ironic twist of events, today’s Gen Z culture in the West are now all about flexing their Amazon luxury dupes on TikTok.