“China was once the market that American companies coveted the most. Now, however, it has become a headache for many U.S. brands.”

In an article published on August 21 local time, CNBC said that American brands such as Nike, Starbucks, and General Motors—which once enjoyed great success in the Chinese market—have in recent years increasingly faced growth stagnation, declining market share, and even business restructuring. Confronted with the rapid rise of domestic Chinese brands, many U.S. companies have found that the business logic that once helped them succeed is working less and less in China.

In an interview with CNBC, Aaron Cheris, global head of Bain’s retail practice, said plainly: “The real question isn’t what’s wrong with China, but why other parts of the world haven’t experienced changes like those in China.”

In the retail industry, CNBC calls Nike the most typical case.

At one time, China was one of Nike’s fastest-growing markets globally. However, this U.S. sportswear giant is now facing the toughest challenges since it entered the Chinese market. CNBC cited data showing that since 2021, Nike’s business scale in China has shrunk by about 30%, and its revenue has fallen to its lowest level in nearly eight years.

What makes Nike even more awkward is that China’s sports consumption market has not declined.

On the contrary, as a nationwide fitness craze has taken off and more sports events have emerged, China’s sportswear market has grown by more than double over the past decade. The “market pie” is still expanding, but more and more consumers are turning their attention to local brands such as Anta and Li-Ning.

Analysts believe Chinese brands not only have advantages in product design and supply-chain response speed, but also understand local consumers’ needs even better. By contrast, Nike has long relied on a globally standardized product and marketing system, which looks increasingly sluggish in China’s rapidly changing market.

Some in the industry have even bluntly said that in China, Nike has “become irrelevant.”

The changes in the coffee market are also representative. After entering mainland China in 1999, Starbucks long held a dominant position in premium coffee consumption. China also became its world’s second-largest market in 2015.

But in recent years, China’s coffee market has undergone drastic changes.

Local brands represented by Luckin Coffee have rapidly expanded by leveraging digital operations, food delivery, and low-price strategies. Currently, the number of Luckin’s stores in China has exceeded Starbucks by more than three times.

For increasingly rational Chinese consumers, a cup of coffee priced at a dozen yuan or even less is often more appealing than Starbucks at several tens of yuan.

Facing competitive pressure, Starbucks has had to adjust its strategy. Last year, the company formed a joint venture with Boyu Capital, hoping to reactivate the China market with the help of local capital and local operating experience.

This means that Starbucks, which once used the “American lifestyle” as a selling point, also has to acknowledge that it can no longer win today’s Chinese consumers relying on brand halo alone.

A similar trend has also appeared in the consumer goods sector. CNBC notes that China is Procter & Gamble’s second-largest market globally, but in recent years the company’s sales growth in China has come under clear pressure. Its premium skincare brand SK-II once saw sales decline, driven by both the impact of consumption downgrades and intensifying market competition.

Estee Lauder’s situation is also not optimistic.

A company executive admitted that it will be difficult for China’s market to recover to the kind of high double-digit rapid growth seen in the past in the near term. With the rapid rise of domestic beauty brands such as Proya, Hanshu, and Kufumei, international big-name brands are facing mounting competitive pressure.

It is worth noting that these Chinese brands are not winning purely by offering low prices. Instead, they demonstrate 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.” Now, more and more people are starting to pursue “value for money” and what fits them best—the importance of a brand’s country of origin is declining.

The worst may be the U.S. automakers.

CNBC believes China’s auto market has changed from a “growth engine” in the eyes of global automakers into a brutal elimination race.

General Motors is the most typical example. As one of the earliest U.S. automakers to enter China, GM long relied on SAIC-GM-Wuling in China and reaped substantial profits. Around 2018, its China business still made about $2 billion in annual profit. But now, the situation has completely changed. With the rapid rise of Chinese brands such as BYD, Geely, Li Auto, and XPeng, GM has posted losses in China for two consecutive years, and its former advantages are virtually gone.

The problem with the U.S. auto industry is not just about price. In areas such as new-energy vehicles, smart cockpits, assisted driving, and the speed of product updates, Chinese automakers have formed unique competitive advantages. For more and more Chinese consumers, local new-energy vehicles are not only cheaper, but also often offer better technological experiences.

Data show that this year, in July, Chinese new-energy vehicles accounted for 65.1% of new passenger car sales. The mainstream consumption direction of China’s auto market has undergone fundamental changes, while traditional U.S. automakers have failed to keep up with this industrial shift.

It is worth noting that not all U.S. brands have failed in China. CNBC believes the problem is not “the China market,” but rather the U.S. companies themselves.

Ralph Lauren’s latest quarter shows a 40% growth in sales revenue in the China market; KFC has still maintained strong competitiveness. Chenglis (Cherries?) believes their common ground is that they have nailed the “basics”—offering products that fit local needs, with reasonable value positioning, and selling and marketing through channels shaped by Chinese consumers’ habits.

He said that whether U.S. brands can turn around their business in China in the future hinges on whether they are willing to build sufficiently strong local capabilities, rather than simply copying successful products and models from the global market to China.

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