Is Now The Time To Invest in China?
COVID-19 continues to spread on a global scale, and it’s now clear the virus’ symptoms reach beyond its unpredictable illness. The pandemic is both accelerating and exacerbating economic problems that already existed before the outbreak. For example, the US and China’s ongoing tit-for-tat trade war had already weakened American fashion retailers thanks to tariff costs, and now, because of a severe disruption to the world’s international shipping and supply chain, manufacturing in China has become an even more removed solution. For foreign brands — especially smaller players — the sky-high cost of digital spending and shifting market and tech platform regulations have become barriers that are devastating their ability to operate in China.
The Shanghai-based consultant Hervé Roland Rogazy, who helps foreign brands expand in an increasingly challenging Chinese market, has witnessed the drastic change in dynamics that the virus has brought forth. “China was supposed to be the answer for everything: supply chains, customers… Everybody wanted to jump into this huge and lucrative market,” he said. “But it was mostly smoke and mirrors.”
And now, COVID-19 has undoubtedly brought China’s position in the luxury market into question. “These last few weeks, I received a lot of messages from some factories I know in China, asking for business,” said Rogazy. “But a lot of brands are now thinking about moving production to Eastern Europe. 15 years ago, everybody was looking for contacts at Chinese factories. [But] today, it’s totally the opposite.”
It’s clear that COVID-19 has been a reality check for companies with any kind of business in China — from manufacturing to supply — and they need to consider their ROI when reaching out to Chinese consumers. So how have they reacted thus far, and what should these brands do in the future to survive on the mainland?