China used to be the dream market for American companies, but now it has become a headache for many American brands.
The American consumer news and business channel (CNBC) reported in an article on August 21 local time that American brands such as Nike, Starbucks, and General Motors, which once had a strong presence in the Chinese market, have been experiencing stagnation in growth, declining market share, and even business restructuring in recent years. Faced with the rapid rise of domestic Chinese brands, many American companies have realized that the business models that made them successful are becoming increasingly ineffective in China.
"The real question isn't whether China has a problem, but why haven’t other parts of the world experienced such a change?"
In the retail industry, Nike is described by CNBC as the most typical example.
Once upon a time, China was one of Nike's fastest-growing markets globally. However, today, this American sports brand giant is facing the most severe challenges since it entered the Chinese market. According to data cited by CNBC, since 2021, Nike's business in China has shrunk by approximately 30%, and its revenue has dropped to its lowest level in nearly eight years.
What makes Nike even more embarrassed is that China's sports consumer market has not declined at all.
On the contrary, with the rise of the national fitness movement and an increase in sports events, the Chinese sportswear market has more than doubled in size over the past decade. The market continues to grow, but more and more consumers are turning their attention to local brands such as Anta and Li Ning.
Analysts believe that Chinese brands not only have an advantage in product design and supply chain response speed, but also have a better understanding of the needs of local consumers. In contrast, Nike has long relied on a global unified product and marketing system, which becomes increasingly sluggish in the rapidly changing Chinese market.
Some industry insiders even said that Nike has become insignificant in China.
The changes in the coffee market are also representative. After entering the Chinese mainland market in 1999, Starbucks has long dominated the high-end coffee consumption market. In 2015, China became its second-largest market globally.
But in recent years, there have been significant changes in the Chinese coffee market.
Local brands like Luckin Coffee have rapidly expanded through digital operations, delivery services, and low-price strategies. Currently, the number of Luckin Coffee stores in China has already exceeded that of Starbucks by more than three times.
For Chinese consumers who are becoming more rational, a cup of coffee that costs just a dozen or even less yuan is often more attractive than Starbucks' products that cost dozens of yuan.
Faced with competition pressure, Starbucks had to adjust its strategy. Last year, the company established a joint venture with BoYu Capital, hoping to leverage local capital and operational experience to revitalize the Chinese market.
This means that Starbucks, which once relied on the “American lifestyle” as its selling point, has to admit that it can no longer win over Chinese consumers today just with its brand reputation.
A similar trend has occurred in the consumer goods sector. CNBC pointed out that China is Procter & Gamble’s second-largest market globally, but the company's sales growth in China has been significantly pressured in recent years. Its high-end skincare brand, SK-II, has experienced a decline in sales, due both to the impact of consumer devaluation and the intensification of competition in the market.
Yasmin Darling's situation is also not optimistic.
The company’s executives admitted that it will be difficult for the Chinese market to resume its previous double-digit high growth in the short term. With the rapid rise of domestic beauty brands such as Purlia, Han Shu, and Kefumei, international brands are facing increasing competitive pressure.
It is worth noting that these Chinese brands do not succeed by offering low prices, but by demonstrating stronger local advantages in research and development, marketing, and e-commerce operations.
In the past, consumers were willing to pay a premium for “international brands”. Nowadays, more and more people are seeking “value for money” and products that suit them personally. The importance of the brand’s nationality is declining.
Perhaps the most affected are American automakers.
CNBC believes that the Chinese automotive market has transitioned from being a "growth engine" in the eyes of global automakers to a brutal elimination contest.
General Motors is a typical example. As one of the American car companies that entered China earliest, GM relied heavily on SAIC-GM to make huge profits in China. Around 2018, GM’s profit from its Chinese business still reached around $2 billion per year. But now, the situation has completely changed. With the rapid rise of Chinese brands such as BYD, Geely, Li Auto, and Xpeng, GM has been suffering losses in China for two consecutive years, and its former advantages have almost disappeared entirely.
The problems of the American automotive industry are not just related to price. In areas such as new energy vehicles, intelligent cockpits, assisted driving, and product updates, Chinese automakers have developed unique competitive advantages. For an increasing number of Chinese consumers, local new energy vehicles are not only cheaper but also often offer a better technical experience.
Data shows that in July this year, new energy vehicles accounted for 65.1% of the total sales of new passenger cars in China. The mainstream consumption trend in the Chinese automotive market has undergone a fundamental change, and traditional American automakers have not kept up with this wave of industrial transformation.
It is worth noting that not all American brands have failed in China. CNBC believes that the problem lies not with the ‘Chinese market’, but with the American companies themselves.
Lafayette's latest quarterly sales in the Chinese market increased by 40%; KFC still maintains strong competitiveness. Chris believes that their common point is having done the "basic work" – providing products that meet local needs, having a reasonable value proposition, and selling and marketing through channels that are familiar to Chinese consumers.
He stated that whether American brands can turn around their business in China in the future depends on whether they are willing to establish strong local capabilities, rather than simply replicating successful global products and models to China.
