Geography lessons: Brands keep failing an easy China test

In recent days, luxury brands including Coach, Versace, Givenchy and Swarovski, as well as footwear brand Asics, have faced backlash from Chinese internet users due to t-shirts and website maps that have listed Hong Kong, Macau or Taiwan as separate countries.

The fallout is undeniable: Celebrity brand ambassadors cutting ties with brands. Recalled products. Social-media apologies. And a reputation dent that will endure for who knows how long.

The latest brand caught up is Calvin Klein, which announced its Chinese ambassador—actress Lin Yun—on Monday, only to have her terminate her cooperation with the brand on Tuesday “due to unprecise wording about China’s sovereignty on the brand’s UK website".

Coach, which made the border-blunder on a t-shirt and websites, made an apologetic statement on its Weibo account: “Coach is committed to long-term development in China, respects the feelings of the Chinese people, and sincerely accepts the supervision and correction of the vast number of consumers.”

Industry analysts expressed surprise about brands' ongoing failure to be aware of need to take care with this issue.

“They may not be aware of the topic itself, because otherwise the luxury brands could have learnt from Marriott a year and half ago and could’ve easily fixed it,” Paul Galesloot, Asia CEO of brand consultancy Cowan, told Campaign Asia-Pacific.

“There is a perception that ‘This won't happen to me’ or ‘This is a storm in a teacup’, which hinders whole-of-oganisation action,” said Michael Norris, research and strategy manager of AgencyChina. “What the weekend's events teach us is that Chinese netizens are now actively looking for evidence to name-and-shame foreign brands. This may finally be the wake-up call that brands need."

The two analysts both predict the scrutiny of the sovereignty issue will expand to other industries, for example, technology, automotive and insurance.

Norris said that his company has alerted its clients in non-luxury categories to be prepared and undertake due diligence to protect their interests in China.

Julien Gaubert-Molina, managing director for Greater China at Same Same But Different, said that luxury brands don’t spend enough time to understand China market. “Powerful luxury and fashion brands are sending marketers [from China] to their headquarters, mainly in France, Italy and UK, more often, as they want them to learn the brand DNA," he said. "But they missed a point. HQ team should be the one spending time in China to better understand local culture and local clientele.”

Lack of understanding of local culture and people, and lack of communication between headquarters and China remains an issue—sometimes to an extreme degree. "As an agency, it happens often that our headquarters clients ask us to tell them what our local Chinese team is doing with their own local Chinese team,” Gaubert-Molina said.

Swarovski apologised on Weibo after listing Hong Kong as a separate country on websites.

Uncertain impact

As to how serious consumer boycotts will be, analysts maintain a wait-and-see attitude, saying it depends on how brands respond.

Galesloot gave the example of Samsung. “For example, previously we all talked about Samsung and its exploding phone, but it didn’t become a huge issue after they fixed the product problem and the talk disappeared. So the question is, is [the conversation] going to continue for a long period of time or just one or two weeks?”

However, Galesloot warned that the circumstance for luxury brands has become “very dangerous”, as endorsers and ambassadors start to speak up.

“The whole topic about China’s sovereignty is really hot right now," he said. "With protests in Hong Kong going on, there’s a chance that the topic continues. The longer it goes on, the bigger the topic becomes,” he added.

Norris echoed this, saying that “actions that are labelled '辱华' (anti-China) have a high potential to lead to long-term commercial implications.”

However, according to experts, these brands can do better to avoid getting involved.

“I think what a lot of brands need to start to thinking about China is not just thinking China as a potential market with a lot of revenue, but to start thinking about a China-centric strategy,” Galesloot asserted.

“A lot of the brands, so-called global brands, are not really in all global markets. There are a few markets that have international brands which have offices in the US and Europe, where there’s not many Asian or Chinese people sitting with them developing the global strategy. For the global strategy, it’s more towards western presences, rather than relevant to Asian or Chinese mentality.”

“If brands have more people who understand China and Chinese culture, fewer brands will make these mistakes,” Galesloot added.