US media laments: American brands are no longer "sexy" in China, struggling to survive

Why Do Chinese Consumers Prefer Domestic Brands More?

【Text / Observer Network Wang Yi】

“American brands used to be very ‘sexy’ (Sexy, meaning alluring and popular) in China, but that’s no longer the case.” On April 2, the U.S. newspaper The Wall Street Journal succinctly pinpointed the current predicament facing American companies in China.

Earlier this week, U.S. sportswear giant Nike said its revenue in the Chinese market fell by double digits, and it expects the situation to deteriorate further. The American denim brand GUESS has also shut down all of its stores in China. U.S. coffee chain giant Starbucks is facing serious challenges in competing with local Chinese coffee brands; last year, it agreed to sell the majority stake in its China business to Chinese private equity firm Boyu Capital.

Zheng Yi, chair of the American Chamber of Commerce in Shanghai, lamented that competition in the Chinese market is getting increasingly fierce, and that it is now very difficult for American companies to achieve business success—“not comparable to 20 years ago.”

Competition from Chinese brands is getting increasingly intense

The Wall Street Journal says that if you roll the clock back ten years, American companies once viewed China as one of the most important engines of growth. With a massive market of 1.4 billion people, a rapidly growing economy, and young consumers who are fascinated by American brands and fashion, many American brands saw sales in China boom.

In 2018, even Howard Schultz, Starbucks’ former CEO, predicted that China would become the company’s largest market.

But now, American brands are “cooling off” in China. The newspaper’s analysis says that U.S. companies trying to maintain their market share in China are facing fierce competition from local brands—from ice cream, underwear, to bicycles, among multiple sectors—Chinese companies keep innovating. Nowadays, Chinese consumers lean more toward “good quality at a good price,” rather than paying a premium for a “brand halo.”

In November last year, the parent company of the Burger King brand, RBI (Restaurant Brands International), announced that a China-based partner would acquire more than 80% of the equity in Burger King China’s business in order to revitalize growth. Patrick Doyle, the company’s executive chairman, said in February this year: “It’s clear that things need to change.”

Data from the consulting firm GlobalData shows that, because local electric vehicle manufacturers such as BYD and Xiaomi have managed to catch up thanks to their innovation capabilities, the market share of U.S. automakers in China has fallen by more than half over the past decade, and by 2025 it is expected to be only about 5%.

2015 to 2025, U.S. automaker market share in China (GlobalData)

Nike this week expects that its revenue in the Chinese market will decline by 20% in the current quarter. Affected by this news, its stock price fell more than 15% on April 1. U.S. media quipped that this American athletic shoe maker once helped spur the rise of sports culture in China, but now its local competitors Anta and Li Ning are rapidly taking over the market it built first.

According to FactSet data, the proportion of revenue coming from China among S&P 500 index constituent companies has fallen from 7.5% in 2024 to 7.1% last year.

“Competition is getting increasingly fierce. It’s now very difficult to achieve commercial success—this isn’t the same as 20 years ago,” Zheng Yi, chair of the American Chamber of Commerce in Shanghai, said.

Reports say that in recent months, the situation for U.S. companies in China has continued to worsen. This shift is also influenced by geopolitics: the Trump administration has imposed high tariffs on Chinese goods, and both sides have restricted exports in advanced technology fields, among other factors, causing relations between the two countries to grow more distant.

Analysts say that while Trump plans to visit China in mid-May, an ever smaller number of U.S. companies believe their interests are closely tied to good China-U.S. relations—and to some extent, this has also pushed the two countries toward a kind of “tricky divorce.”

“American-style sexiness” is no longer in favor

“I think the ‘American-style sexiness’ represented by GUESS used to be a very unique style, but it’s now outdated,” said Olivia Plotnick, who runs a marketing agency in China.

GUESS once expanded rapidly in China, opening more than 150 stores nationwide, and its signature products such as tight jeans and T-shirts were quite popular. The company also actively moved into e-commerce platforms, hoping to attract a broader group of Chinese consumers.

But since then, the “failure to thrive” of U.S. companies in the Chinese market has gradually become apparent. Jose Blanco, who was responsible for GUESS China from 2015 to 2021, said the company realized early on that it could not simply copy Western market models in China. Because competition in the local leather goods market was too fierce, they abandoned the handbag business in China.

Around 2019, GUESS tried to shift toward a higher-end product line to improve profit margins, but Blanco said that in the Chinese market, they did not receive the right marketing support.

Add to that, over the past decade, changes in Chinese consumers’ tastes have gradually moved away from exaggerated branding and more revealing “American-style” clothing. At the end of February this year, GUESS had to announce that it would close its stores and online platforms in China. In its message to Chinese consumers, the company said it would continue to deepen its China market with a “new model.”

The Wall Street Journal points out that a small number of American consumer brands are still succeeding in China, such as Sam’s Club and the “Crocs” shoe manufacturer, which adapt their products to meet the needs of Chinese consumers through localization. Crocs, in particular, has won market share by relying on a “personalized” marketing strategy built by its local China team.

Plotnick analyzed that U.S. companies need to increase their investment in branding in order to better connect with Chinese consumers: “Before the pandemic, you might only have needed to use Chinese models or celebrities to take a few photos, or launch a special Spring Festival edition—that was enough.”

But now, U.S. companies have found that Chinese consumers’ pursuit of American cultural trends is weakening; instead, they are more inclined to embrace local brands—and are even proud to do so.

Ms. Zhang, a tech worker in her 30s, once lined up in a mall for 30 minutes just to buy a pair of GUESS jeans at an 85% discount for about $20. Now, she is not surprised that the brand is exiting. “There are too many local Chinese brands. If a brand doesn’t have a unique style and its pricing is unreasonable, it’s hard to survive.”

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