The NBA faces a billion-dollar crisis over one executive's tweet about Hong Kong. Here's why China is so hard for Western brands to break into.
- The NBA this week became the latest in a slew of foreign brands who have landed in hot water in China.
- Dozens of Western brands have angered Chinese consumers with their marketing or public statements, and many still appear to be struggling to learn their lesson at high costs.
- Though the mistakes range from apparently racist ad campaigns to a failure to represent China's perceived borders, it all boils down to one fundamental misstep, experts told Business Insider - a lack of respect.
- "People underestimate what the Chinese consumer feels and thinks," said Fenella Barber, founder of Bao business-relations advisory. "We assume from the West that this authoritarian state is sitting heavy on China [...] there's just more to the debate than that."
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The NBA faces a billion-dollar crisis in China as all of the league's partners in the country suspended their ties over Houston Rockets General Manager Daryl Morey's tweet in support of the Hong Kong protesters, and basketball fans threatened to boycott its games.The league is learning what many Western brands have in recent years - that China is an immensely difficult market to cater for.Advertisement
In recent months, a slew of companies from Dolce & Gabbana to Marriott International have had to apologize to Chinese consumers - for reasons from displaying maps that exclude Chinese-claimed territories, to showing seemingly racist ads - or risk losing billions of dollars in revenue.
Business Insider spoke to two experts to understand why China is such a fragile market, and why so many Western brands still appear to be struggling in the country. Both declined to directly discuss Chinese politics due to the sensitive nature of their work.
'It's about respecting your market'Here are some examples of how brands have landed in hot water in China in the past year alone:
- D&G's ad campaign last year appeared to mock Chinese culture. Amid the backlash a woman also published screenshots appearing to show co-founder Stefano Gabbana making racist comments about Asians.
- Brands including Versace, Swarovski, and Calvin Klein referred to Hong Kong, Macau, and Taiwan as Chinese territories. (Hong Kong and Macau are semi-autonomous Chinese cities. Taiwan is a self-governing island which China claims as its own.)
- Tiffany & Co published an ad campaign that depicted a Chinese model striking a pose similar to a symbol of the Hong Kong protests. Though the company said the photograph was shot in May - before the protests even began - the campaign was released in October, at the height of the tensions.
The majority of Chinese consumers are patriotic and willing to punish people who mock them - like consumers in any other country would be, said Fenella Barber, the founder of Bao Advisory, a business-relations advisory based in London and Shanghai."They're [Chinese people] proud of where they've come to," Barber told Business Insider, referring to the country's economic and social development into a superpower. "If they feel put down for whatever reason by a foreign company, they're quite happy to jump on the bandwagon."Advertisement
"But where they [companies] are targeting the money and they do bad advertising, and to be honest, that's just a lack of respect," she said, referring to the D&G ad. "They haven't really understood the market and they've done a pastiche of China in some way and expect that to work. That's just - really?"
China's leaders and citizens are particularly sensitive about issues of sovereignty - like Hong Kong, Macau, and Taiwan's perceived place in the country - and many foreign brands have had to issue apologies highlighting their respect for China's borders.
"[Sovereignty] is incredibly important to the Chinese people [...] so to have someone else be flippant about it" is particularly offensive to them, Barber said."Chinese soft power might not work well internationally, but it works very well at home," she added.Advertisement
"For example, Brexit is a political, legal, business, and social story that incorporates a range of views from other sides, with many based on inherent beliefs. People have to respect that."
"It's not really political, it's about respect," she added. "It's about respecting your market and your consumers and understanding them, and understanding the motivation, and being very clear that you understand them."Barber added: "I think people underestimate what the Chinese consumer feels and thinks. They're not all put upon. I think we assume from the West that this authoritarian state is sitting heavy on China - I think there's just more to the debate than that."Advertisement
Di Lieto noted, however, that public criticism of brands who have shown apparent disrespect to consumers isn't unique to China. Last year, BECCA Cosmetics received widespread criticism on Twitter after people accused it of darkening a white model's skin tone to demonstrate the deeper shades.
The Chinese are buying on their own terms nowThe Chinese market can bring huge revenues - mainland consumers spent 170 billion yuan ($23 billion) on luxury goods alone in 2018, according to consultancy giant Bain & Company - but it's also one of the trickiest to capture.Advertisement
Foreign brands can no longer operate on the belief that just because their campaigns work in the West, they will in China too, both experts said.
"For a long time, people were happy to buy Western products or a Western idea," Barber said. "That's not necessarily true anymore. In China's case, things are changing, and the nuances haven't necessarily changed within the Western businesses' mindset.""China doesn't like to be seen as a cash cow," she added.Advertisement
"China wants to be welcomed into the world and its people want to be given respect. The other thing that's often misunderstood is that Chinese don't necessarily want to buy into the whole American, Westernized dream, and the West is quite slow to catch on to that."Di Lieto also said: "For years Chinese consumers have been very patient with Western companies that have benefitted hugely from their income while not always giving appropriate consideration to their culture."But now, Barber says, "the Chinese are patriotic, nationalistic, happy to come down strong on a Western company if they upset the national image."Advertisement
The NBA risked billions of dollars in advertising and broadcasting rights not after Morey deleted his tweet and distanced the team and league from his views, but after Commissioner Adam Silver defended Morey's right to freedom of expression.
Di Lieto said: "A lot of crises escalate because of a lack of apology by the right person with the right sentiment, and there's no point in an apology that sounds like you're just reading off a script either," she added."Chinese consumers will see straight through that. The same applies in all countries."Advertisement
"If the market is important to a company, and where the money is really big it should be ... [that] you just need to tread a bit more carefully and not to treat it so lightly, to give the time and attention to do things properly," Barber added.
After Beijing banned "South Park" from the country's internet over an episode that addressed government censorship, the comedy show's writers show issued a mock apology and wrote a new episode in which character Randy Marsh says: "F--- the Chinese government.
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