Sales of sportswear giants Adidas AG and Nike Inc. plunged on China’s largest business-to-consumer e-commerce platform in April after consumers called for a boycott of international brands avoiding raw materials from Xinjiang, reflecting the blow to businesses that cross Beijing’s political lines.
Sales in the Adidas store on Alibaba Group Holding Ltd.’s Tmall tanked by 78 percent in April from a year ago, while Nike’s dropped by 59 percent, according to analysis done by Morningstar Inc. in a note released Wednesday. Tmall sales of Fast Retailing Co.’s clothing brand Uniqlo, which was also targeted by the boycott, dropped by over one-fifth.
Mainland consumers instead turned to Chinese sportswear competitors, including Anta Sports Products Ltd. and Li Ning Co. Ltd., that have supported using materials from the contentious far west region. China has been accused of human rights abuses against Muslim Uighurs there.
China Lining — Li Ning’s premium fashion arm — was by far the biggest beneficiary of the nationalist turn, with its sales on Tmall jumping more than 800 percent in April, Morningstar said.
The boycott’s powerful impact underscores the dilemma facing foreign brands for whom China is an increasingly important market, yet are held to account on human rights issues by consumers in their western home countries.
Chinese consumers have become a growth driver for global brands as the country roars ahead economically after stamping out Covid-19. But patriotism among mainland shoppers — benefiting domestic brands — is also at an all-time high given China’s thorny relationship with western nations over everything from trade to the pandemic.
Revenue from Greater China amounted to nearly one-fifth of Beaverton, Oregon-headquartered Nike’s sales in its 2020 fiscal year ended May 31, and nearly a quarter of net sales for Adidas. Herzogenaurach, Germany-based Adidas is scheduled to report its first-quarter earnings on Friday. While there’s no information on what share of total sales is transacted through Tmall, the platform is a major presence in China retail.
Still, there are signs that local brands are not yet considered substitutes for the global giants. Overall Tmall sales of sports apparel and footwear declined 11 percent in April compared to a year ago — a steep drop from more than 30 percent growth in the last quarter of 2020 — according to Morningstar. This suggests that some consumers are waiting out the boycott rather than bypassing the brands entirely.
Chinese consumers’ current shopping behaviour was “most likely temporary,” said Morningstar equity analyst Ivan Su.
“As there aren’t renewed attacks from state media, consumer boycotts against Nike and Adidas should most likely fade over the next months,” he wrote.
The dilemma over Xinjiang deepened in March for international companies operating in China, when the Communist Youth League and People’s Liberation Army slammed H&M over an undated company statement about accusations of forced labor in the far west region. Calls to boycott the retailer in the mainland spread to include other foreign brands that have expressed concerns over labor there, including Nike, which has said it won’t source products from Xinjiang.
Brand ambassadors in China cut ties with companies including Nike, Adidas and Uniqlo, and H&M had some of its stores forcibly closed by landlords.
By Jinshan Hong