Western Brands & China

Following the boycott of brands in China earlier this year, PSEUDO invited Jayga Rayn, Tom Chung and Simon Pestridge to come together to discuss the ramifications of the boycott and what can be done moving forwards as a brand in China. Our first ‘panellist’ is Jayga, the Director and Founder of High Horse studios, a PSEUDO partner agency based in Shanghai. Prolific in China, whether directing commercials or consulting directly with brands, High Horse studios has worked with myriad names from the sector, including Nike, Jordan and ourselves. Tom, who has worked at Nike Shanghai as their IM, is the owner of ACU streetwear store in China. Edison Chen’s longest-running collaborator, the store the two of them set up went on to become Chen’s legendary ‘Juice’ store. Our final ‘panellist’ is  Simon Pestridge, Agency Partner at PSEUDO and ex-Vice President of Nike Inc, where he worked for 23 years. Within that tenure, he was also the VP of Marketing for Nike Greater China, ‘breaking’ the brand into the market for the business.

KEY INSIGHTS:

• For any Western Brand carrying out business in China, talking about sovereign issues will be seen as ‘this has nothing to do with you’. It is literally not our business. 

• The most sensitive issues are Xinjiang, Tibet, Taiwan, Hong Kong and the South China Sea, however, there are other matters and subjects to be mindful of.

• The Chinese government will retaliate to any outside brand ‘pointing their fingers' at the country. 

• Alongside this, acting as a ‘Western Saviour’ brand is highly offensive to all. 

• KOLs are the hardest audience to ‘win back’, often never returning.

• KOLs would rather be able to make money from inside China than outside of it. 

• Similarly, the Chinese government would rather look after domestic brands than outside brands.

• Working with, not against, the government and investing properly in China counts. 

• Investment must be appropriate, never what a Western brand thinks needs to be done. 

• Work in China must be humble, it must be grassroots, and it must be China-specific. 

• You have to harness the government’s agenda if you want to do business in China.

As we know, 2021 saw global brands come under fire from the Chinese government for talking about issues in China. In retaliation, the government literally wiped those brands off the digital landscape, to name just one rebuke... I think, for Western brands, it’s sometimes hard to understand the implications of speaking out when it feels like the right thing to do. Shall we start by having you explain that to us from a wide-angle lens? What those implications are? 

Jayga: If there’s ever a business talking about Chinese sovereign issues, they’re going to be met with the same reply: This has nothing to do with you. It’s always harsh. Especially if it’s around Xinjiang, Tibet or Taiwan, they’re the three most sensitive issues as well as The Spradley Islands and the Paracel Islands in the South China Sea. Because for China, this is definitely the biggest issue: China’s National Sovereignty and its ability to conduct itself the way it sees fit within its own borders, without hearing from other governments or other businesses.

Tom: I agree with Jayga. I think China played silent on the brand part, but they used the internet as a weapon for the citizens to step up and show nationalistic feelings. They only doubted the Xinjiang Cotton subject and used that to point fingers back at the Western Governments; they don’t like people pointing fingers at them and they point that back. The other problem is, people or brands are often commenting, or having an opinion when they haven’t been to China to really see what’s happening. Maybe there’s something in the background, maybe there’s a political reason… It’s not always easy to know. For example,  I have some Xinjiang friends and they’re like, "Back in the day, it was kids working in the fields, now it’s all machines so it’s not really using child labour."

I have to be honest, I was in slight awe as to what the government did to H&M, I mean, removing them from online maps, that’s technological bullying but also, impactful. It’s a harsh retort. Was their reaction to the situation harsh or as you’d expect? Was it as much of a surprise to you as it was for me? 

J: For me, it’s similar to political correctness in the West. A lot of stuff people don’t actually care about gets protected or gets removed or is not spoken about for want of not offending a small group of people. When you’re talking about Chinese nationalism, it’s not most people in first tier cities. Most people don’t pay that much attention. Each group, each celebrity, each KOL, they are definitely afraid of falling victim to these keyboard warriors – any platform like the equivalent to Google Maps and eBay, we need to protect ourselves, we need to take this stuff down, so they don’t point the finger at us. After the Dolce & Gabbana stuff last year, a Chinese celebrity liked one of the brand’s posts seven months after it and she still got criticised for it. It’s an overly protectionist pragmatism which I don’t think is surprising when you’re dealing with such issues. I think if you’re dealing with a smaller issue, I wouldn’t expect it to be as harsh, but when you’re dealing with the South China Sea, Xinjiang, Tibet and Taiwan, these are key, key issues for the government. So, any reaction is not surprising! To be surprised there is a reaction is what’s surprising!

So with KOLs abandoning adidas, it was more about fear of what the audience would do or say than it was of the government? 

T: It’s more about the money-making situation. Their fanbase is mainly within Mainland China, and some parts of Taiwan and Hong Kong, they’d rather make money within China than make money outside, so that’s why they abandoned the brands right away.

J: For instance, Wang Yibo left Nike and signed a 500 million RMB contract with Anta within a week. Before he was probably on less money with Nike because he wanted to be a cool brand, as soon as Nike became the biggest risk, he decided to go to a brand with t-shirts and hats with a giant Chinese flag on it, no one can say anything to him and he’ll bag 500 million RMB. It’s win-win for him really.

You mentioned Tier cities, is this a problem for adidas in Tier 1 cities? When something like this happens, where are the epicentres?

T: It doesn’t really happen in Shanghai, people follow the hype online – when things rolled out after the whole incident, people were still wearing the main brands, Nike, adidas, New Balance. It’s the outlook! They still wear the things, but there is a different type of energy online. If they don’t repost something that is hype right now, they feel they’re lost within the crowd, but they’re still wearing it. From a Nationalistic point of view, because they are close to the capital, the north of China seem more nationalistic than the people in the capital themselves.

J: Nationalism globally follows a pattern, right? The less well-travelled, less well-educated you are, the more you’re likely to lean into populist policies; similar to Brexit, it’s not people from London.

What happens moving forward? Have you seen this happen with other brands? What do we need to anticipate next?

J: The most obvious parallel is D&G after the fashion show, with an insensitive fashion video and calling Chinese people dogs, their sales were down 98% in China. Now if you look at it, they’re never going to match that peak again, even though they’re very contrite. I think the awkward position to reconcile is the apology. If you apologise, you’re sacrificing your company’s morals and your ideology as an international brand, and you’ll be criticised abroad. You’re very much between a rock and a hard place.

J: Overall, this sits in the context of Xinjiang, if you look at the way that the Western Media portrays Xinjiang, if you look at the sources of the information, a lot of it is the Commemoration for the Victims of Communism. I’m not saying bad stuff isn’t happening, but it’s vastly overstated, or there’s a strong western bias against China. For Chinese people, there’s no news of Xinjiang here – you’re not going to hear about detention or discrimination. They think they’re treating them well, they think that the Chinese government is supporting them, saying that they should be grateful. So when an international brand makes a comment, or a stance, they’re not going to see it as a brave stand against forced labour.

One thing I’ve learned from working with you Jayga, is that if we see China through a Western Media lens, we’re setting ourselves up for a lot of trouble. And how that filter is detrimental to our view of China. You mentioned some topics that would create a similar reaction in the past with me and I think the most striking is that idea of not being a Western Saviour Brand, never being the Western brand that points a finger at China. What are the other topics?

J: South China Sea is another one – the main one is China Sovereignty. Those four places, Taiwan, Xinjiang, Tibet and South China Sea. If you want to talk about the environment, or alleviating poverty, these are base level good things, but the second you talk about Chinese sovereignty, or its borders, or military action, it’s going to be a terrible deal for everyone.

T: I think the other topic lately is the Hong Kong situation – that’s been dialling up a bit, and all the riots and all of that stuff. It’s quite sensitive. People talk about it, it’s not as sensitive as Taiwan and South China Sea, etc but it’s definitely something to be aware of… 

Do you think an apology would actually be accepted though?

J: One of the problems with adidas is that you rely so heavily on KOL and influencers. You don’t have a culture to fall back on. So, when you apologise, it will be seen as a cynical money grab, because there’s not a bedrock of cultural identity. All the celebrities are gone, and everyone knows that. Chinese people are not easy to pull the wool over their eyes, but apologising is something you have to do in my mind.

T: Apologising would be the right thing to do – you’ll still have fingers pointed. I don’t think they will feel sorry for you guys. For Nike, they’ve been launching stuff lately, and sales are not as good as before. It’s all collaborations or Jordans. People are buying but it’s not as strong as it used to be. I think softly re-communicating locally is smart, just don’t come back real strong right away.

The second part to the question – related to D&G - is whether adidas will ever return to our former standing. Coming back to our apology, would you say that if we don’t do this in the foreseeable future, there will be no chance of returning to a similar level?

J: On a foreseeable timeframe, you’re never going to go back to where you were because no celebrity is going to be okay working with adidas. Your sales were definitely hinged on celebrities, and if you rely on your marketing being celebs, especially hot right now celebrities as opposed to epic, iconic celebrities, these guys will not hinge their whole future on working with adidas no matter how much money you give them. So, you’re definitely not get back to where you were anytime soon. 

It’s more about how do we get back to a place where it’s reasonable and be a little bit happy? Right now, if you go to any KOL or celebrity they’re going to ask about this. We just did a job with Vans with pretty small KOLs, and one million/two million followers on Weibo and beforehand, they were asking us, ‘Hey, have you made a statement? If you haven’t, we aren’t working with you.’ We said, even if we make the statement afterwards and you don’t like it, we won’t put you in the film and we won’t release you ever worked with us. They said, "No, if someone takes a photo on set and they see me, I’m done!" There’s a huge, huge fear. It’s a huge pivot as a brand, how do we rework an entire market without these spearhead celebrities? I mean, I hope that doesn’t sound too apocalyptic….

No! It’s facing reality, it’s important we hear this...

J: It’s that small minority who wields huge power as they’re backed by the government – all big business in China can only succeed if it’s intertwined with the government. If you look at the recent controversy with Alibaba, you can see Jack Ma was once the poster boy for the Chinese government and Capitalism, and now he suddenly retired and stepped out, and his giant IPO disappeared. If you look at T-Mall, Taobao, these huge commerce platforms, they’re all going to be risk averse... 

No one in this situation where they can make huge amounts of money by not working with one brand is going to sacrifice that. It’s going to take a lot of kind of contrite apologies. Those apologies, if they’re just for business reasons, is that really adidas? Is that acceptable as a modern, western brand? 

It can’t be coming back in and facing a Chinese “problem” with Western money, right?

T: Look at the history of China, with imperialism and things that are happening recently. It’s not for a missionary coming in to solve things. You’ve gotta come back – adidas try to push the sales with celebrities, it’s really a money-making machine but sometimes doesn’t stick to the roots with the stories of the products. But also, giving back to the community, some of the stuff that Nike does shows support for the community. Basketball courts for the kids, workshops and working with design schools, it’s really touching base with the community rather than just paying money to all the KOLs and celebrities for a nice photo shoot. They’re trying to push that background. Using money more wisely, using community from 360 degrees rather than one direction.

In many ways, it’s a nice way to reset your behaviour and culture in China. When we spoke about adidas, much of what we heard was, ‘they just chase celebrities and are not involved in the community at all’. It’s a way to rebuild authentically, make friends and, in a way, to respect the scene you’re a part of. Arguably using KOLS with huge followings that have nothing to do with the brand or aren’t inspiring isn’t the best way to do business. There’s a really nice opportunity to build an honest relationship with China, or at least, it feels there could be a silver lining here… 

You spoke about how that KOL moved over to Anta almost immediately, who else is benefitting from this situation?

T: A lot of the Chinese sports brands are coming up, like Peak, Anta, TurboX. A lot of them reached out to me to work with me. They really want to learn the culture because they don’t know the culture. They have the ability to make products fast. They’re within the region and factories within the region and they are making things for the people. They’re just missing the design part and the culture part. They’re willing to spend a lot of money. A lot of the people are just surface; they dress a lot better, and have a lot better style, but they’re lacking the culture. So they’re trying to use money to make culture but that never works, so right now they know it’s an opportunity. For brands that haven’t been hit too hard, New Balance has been coming up real strong, as well as North Face, Vans, they are coming up a lot more and really touching the outdoor part. A lot of the brands from outdoors perspective are coming up a lot.

We heard this in our interviews this week. New Balance was also a part of the BCI though, weren’t they?

J: Yeah, and so were Vans. They didn’t release a big statement; they just released a B2B statement and were very quiet. I’m doing a big project for them right now, their biggest ever advert in China. At first, we were waiting for the statement to come out, and I asked them if they released the statement. They said they had, but we didn’t know about it. It was just super low key and under the radar. That’s just what they wanted.

One thing: once you’ve lost those KOLs, is it true they’ll never come back?

 J: Not never, but it’ll be an uphill struggle – there’s always going to be someone at the bottom of a Weibo post, saying, "You don’t love China". Some old man saying that in 20/30 years. It’ll gradually dissipate obviously, and it will slowly manifest less and less prominently but it’ll be there for a long while. Celebrities in China aren’t their own thing, they exist under management companies, much like Korean K-Pop model. The management team is responsible for a lot of their decisions. It’s not like in the West where a rapper can say, "Fuck you guys, I’m cool, I’m gonna do it". They’re under these big umbrella companies which have a relationship with the government –  they’re not going to jeopardise their own potential with an iffy brand. I can’t give a timeline on that though, it would be artificial and wouldn’t be accurate. There’ll be a time in the future where celebrities will want to work for us again, but it’s not going to be for a while.

T: Look at Tommy Hilfiger, how long did that take after making those comments around 10 years ago, I think? They’re finally coming back with collabs with sneaker brands like Patta. They were really hurting for a long time.

Is it worth adidas finding who inspires the China consumer internationally, in terms of influencers? And to reiterate, what would a grassroots, apologetic, and humble return look like?

J: With regards to international celebrities, the Chinese consumer takes inspiration from the west, but nothing can match the selling power of big China celebrities. People that you’re reaching with international celebrities means you won’t reach the people that are angry. The people who are angry are not going to be the people who have VPN and are on Instagram. If they have VPN and are on Instagram, they’re probably not nationalists, or probably will not disavow a brand for treating people better. Most rational first-tier people won’t think like that. The grassroots are much more important: a holistic and genuinely contrite response to the country.

So, the people we need to apologise aren’t on Instagram. Therefore, how do we reach the people most offended?

T: Weibo and WeChat. Everyone is on the Internet in China, even Tier 3 & 4 cities, everyone has access to a cell phone. Start with Weibo, WeChat and Little Red Book - that would be the best way to reach out to all of the audience. And also, if you want to use international key players like Kayne West, a lot of the stuff has already played out. It’s the same stuff but different colourways. Everyone thinks they’re an influencer now, with their own platforms. Why would I think Kanye is cool? Because, I’m also cool. Reaching grassroots and the right people, we should go back to the original collaborating system. Okay, we’re going to work with someone in Shanghai, but we’re only going to sell it in China/Shanghai, people love something more sought-after. It doesn’t have to be a worldwide release.

To your point, the Chinese consumer loves to feel special, and no brand allows them to feel special. They see themselves as that beautiful unique snowflake, so if someone treats them as not unique or there to make money from, they’re easily offended. We said it at the beginning: they are astute, pragmatic and can see through greenwashing or an apology to make money from. What are the topics that align with that and which they’ll admire us opening a conversation about?

J: Ah, that’s a difficult question! Again, a lot of the time, those consumers don’t want a huge ideology or agenda behind the company, it’s more about just doing those small acts – like Nike building a basketball court. There are basketball courts all over China, but Nike builds them, giving impoverished people the opportunity to play sports, and giving them access. But they’re not going around saying how many basketball courts they built, instead it’s something they do low key. It would have to be a multi-faceted approach.

T: The Internet doesn’t go to sleep, it’s 24 hours. Things are changing by the second, everything is changing super-fast.. 

So when it comes to the characteristics we need to employ, it’s about being humble, being local, also not panicking. The most important thing is to not panic. Also, keeping in touch and not taking a position from a Western or German point of view, that we don’t test with China. Simon, I want to bring you in at this point, as someone who has run a global competitor brand in China [Nike], what are the things you learnt and wanted to pass on?

SP: First of all, it’s always humbling to be on a call with so many smart people and listening to what Jayga and Tom are saying, all of the key points have been said. A couple of things that I think are quite simple that get to the heart of building a brand in China is this though… The first thing I’d say is: you’re powerless. The Chinese government decides if you’re successful or not. And you just have to admit and accept that. Think of the media today, with Xi Jinping calling himself the helmsman, and you can see that consolidation of power, and Australia worried about going to war with China over South China Sea. You can see the massive wave of national pride, and all that’s happening alongside the post-COVID feelings.

You have to harness the government’s agenda if you want to do business in China. And you shouldn’t apologise unless it’s genuine. What are you apologising for? You’ll alienate one side of the world or the other. So, what is the authentic apology which will make people go, ‘Oh yeah I know what these guys are saying and doing.’ If there is no authentic apology, don’t apologise. Instead, you harness the government’s agenda. What is their agenda? We know it’s the environment, what else is it? Where can you then play in those areas to show the Chinese consumer that you give a shit about them? 

I’ll be careful with what I say here, it’s an inflection point, it’s a pivot point. The adidas brand has been built as a house of cards in China. It’s a place where trends come and go quicker than anywhere else. There’s a new generation every 3-4 years because of the One-Child Policy. There’s an influencer every 3-4 minutes which will give you a little ride, but there’s nothing authentic or genuine in there. 

When we were in China, with Nike, it was always a race to see how many doors you can open. At one point, former management were saying that adidas were over 8,000 doors and we were going backwards. It doesn’t matter how many doors you have, it’s about the quality of them and how you’re shifting culture in China. The old analogy, good brands reflect culture, great brands shift culture: what are you going to shift in your new strategy? A shift towards sport? A shift towards environmental concern? That’s how the Chinese consumer is going to look at you and be like, "These guys actually get me".

I think of that famous saying: the course of history always leans towards justice. You’re going to make mistakes, all brands will make mistakes but the fact that Tom says that people are still wearing Nike and adidas means there is going to be a market for you. Of course, there’s a market for you, you’re not going to drive it through KOLs, you’re not going to drive it through KOLS overseas. You’re going to drive it by showing consumers you actually give a shit about what’s going on in their lives and connecting with them that way. 

As the leadership team at adidas – step back, and go: who are we as a brand and what are we committed to? If you’re not committed to taking the Chinese consumer on a journey, then don’t do it. Because the Chinese government will sniff it. No Chinese sports brand is going to be successful overseas, and they’ve realised that. The Chinese government are like, "Shit, they’re going to be successful here then!" So, you have to commit to the journey the consumer is on there. That’s the step back you have to take, a lot of the answers from Jayga and Tom are absolutely spot on. I would just say it’s for you folks to go: how do we harness the agenda, or shift culture? That’s the way we’ll get back into their good graces over time, it’s not an apology.

It’s a really exciting opportunity for adidas to grow, and to grow with really strong roots. KOLs don’t give us roots – they give us moments and they give us hits – but they don’t give us any roots, so when the wind blows, we get knocked over as there’s no one there to protect us. We haven’t done anything except to have a Global POV, and global products and make global money locally. Our job is always to make sure every brand we work with approaches the market respectfully, you have to treat China with respect and really care about them and really give a shit about them. They’re so savvy as consumers and understand marketing on another level to other consumers across the world, because they have been marketed to in such aggressive ways! They won’t accept another Western brand coming in and making money without getting to know them first. They demand respect and demand to be known. There are archaic ways of doing business and not doing any building work locally.

adidas: Maybe building on that, you ask what that authentic apology is maybe. We build everything we do for the next 3-6 months around what we want to adapt onto things. One is maximising anything we do on environment/sustainability, which was part of our strategy anyway. We want to maximise that and do that in combination with sport. Such as Run for the Oceans, every 1km you run, we do something good for the planet. We want to dial that up to maximum percent. For example, the trash in Shanghai, what are we doing with that in the city of Shanghai? That is the core of everything we want to do now and build as a foundation as a brand. One challenge being thrown at that: Originals/Lifestyle standpoint, is it cool enough? How would you go about this?

Right now, you have more to worry about than whether you’re cool. Be humble. It’s not always cool, but it’s a cool characteristic. You've temporarily lost the right to be cool or hot, while you make amends in China. That’s going to have to be a part of your business plan, that you’re going to spend money without making money back. To reiterate, there is no trash in Shanghai. It’s imperative in subsequent conversations and in-house conversations that we don’t just talk about Shanghai. It has to be stuff outside of Tier One cities. It might not be stuff that makes the news, but people just talk about it. 

T: I’ve done so many research decks for Nike when I was there and my first page would always be ‘SHANGHAI IS NOT CHINA.’

J: Another thing is a nod to being unimpeachable. What Simon said is right, about finding that government agenda and working within the agenda, then you’re protected from all sides. We’ve done a lot of research about the environment and we know the government is pushing in that direction. Obviously, in some parts it’s working better than others but it might be collecting trash in one place, and making courts in one place, and Run for the Oceans in another. All of these things are going to be safe within the agenda. Obviously, Chinese people need to eat less fish, or there will no fish left in the ocean, but we can’t say that. It’s precarious and you’re on that knife edge, so everything has to be done in a way that’s positive! Taking risks is part of your DNA, your brand identity. Being cool isn’t being safe but being humble is a cool characteristic – that’s the path to tread right now.

S: The difference between China and many other countries in the world is t that China works in chunks of 10-20 years for their agendas, nothing is going to be solved over 3-6 months. If you guys don’t authentically feel that you can commit to a 5–10-year agenda, for something like Run for the Oceans, people will look at it and go, "What are you on about?" And I think because the KOLs strategy has perpetuated this idea of the latest craze of the day, and it hasn’t built roots, you have to plant those roots for when you look back in 10 years, this is what we did versus this is what we can do in six months. I know this isn’t what you’re saying, but I think you have to find agendas that can be driven over that amount of time and those results will come. It won’t satisfy the economic street, but it will satisfy the consumer longer term and you got the best chance of getting on the positive side.

adidas: It makes a lot of sense – we’re just running a couple of in-house KOL interviews across the world, and we hear that quite a bit, even outside of China: don’t pretend to be cool. I spoke to one individual and they were asking us what we were trying to be. We seem too hectic and that we’re chasing after something we don’t understand.

adidas have to make friends, not buy friends, find these niche cultures and genuinely support them. Celebrity is a precarious thing – having those fans and friends on the ground to protect you and look after you. This can be a push to change that’s been needed! As long as we’re in it for the long term, the Chinese want to know we’re committed and not just there to make money. That’s important to reiterate.