How One Kind Gesture Changed the Fortunes of a Near-Bust Brand in China
The sports and fitness industry in China has had a golden run of late. China's health kick has accelerated as a result of Covid, coupled with the increasing street cred that young consumers garner from having active interests. Throw in Beijing's support, policies and facility building driven by the recently announced ¥5 trillion ($773 billion) 2025 National Fitness Plan, its Healthy China 2030 Plan, hosting the Winter Olympics next year, and the quest for soft power and national pride through sporting success, and you have fertile ground for the industry.
Clever, China-resonant marketing strategies have helped brands such as Nike and Adidas capitalise on this growth. However, some of the biggest beneficiaries recently have been local brands, helped by the H&M Xinjiang cotton scandal which impacted Nike and Adidas. Since February 2018, the capitalisation of local competitor Li-Ning has jumped almost 14 times to $29.2 billion and Anta Sports is tracking to overtake Adidas in market value soon.
One local sportswear brand who hadn't been riding the wave was ERKE. The 21-year old brand was weathering tough times, suspended from trading for years on the Singapore Stock Exchange, before being delisted last year. After losing ¥220 million ($34 million) in 2020, the outlook for the company was grim.
But last week ERKE's fortunes changed, drastically. The late-July "once in a thousand year" rainstorm in Henan Province saw a year's worth of rain pummel the city of Zhengzhou in just 72 hours. The deluge led to over a million people displaced, 302 dead and 50 still missing.
From a precarious financial position, ERKE was quick to pledge ¥50 million ($7.7 million) worth of funds and goods to disaster relief efforts for Henan province. The donation was met with both admiration and surprise from Chinese consumers, with the comment "I thought you were going bankrupt, but you still donated so much," receiving over 800K likes on Weibo.
Consumers acknowledged ERKE's generosity by opening their wallets to say thank you and associate themselves with the brand. ERKE's Tmall livestream attracted 20 million viewers on July 24 – 2,000 times more than a week earlier forcing it to halt sales and postpone shipments until August 15. JD said sales increased 52-fold this month and Taobao sales ballooned by 50-times in a week. Brick and mortar stores were also heaving, seeing much of their inventory selling out. Tourism attractions across China were also offering free or discounted tickets to people wearing Erke gear and even the central government chimed in, noting that "one good deed deserves another."
Corporate Social Responsibility (CSR) is not new in China, with the first wholesale movement happening after the Sichuan earthquake in 2008. Within a week of the quake, Chinese companies had donated more than $645 million in cash and goods, with many rewarded for their generosity. Other not-so-forthcoming brands were punished. Many consumers berated and even blockaded successful foreign brands such as KFC, McDonalds, Coca Cola and Samsung. They were accused of being misers and not chipping in commensurate to their presence and profitability in the market.
Brands' responses from the 2008 quake have shaped consumer expectations for CSR in China, and we have since seen many brands quick to pledge during every challenging event. For foreign brands, it can help demonstrate to consumers that you are not just in the country to pillage profits, but also to give back too.
Nevertheless, like everything in China, even post-disaster pledges are a competitive business. Timing and execution is everything. It needs to appear authentic and genuinely heartfelt, but ideally it should garner some publicity without looking like a large scale commercial promotion. ERKE executed this brilliantly, announcing the pledge with a 'low-key Weibo post', which then went viral.
We are fortunate that there are hundreds of CSR case studies that we can learn from since 2008 in China. It's unlikely that most campaigns will have the impact of ERKE's, but they can still provide an authentic and powerful connection with target audiences and break through the clutter. Contact China Skinny to discuss how this can best be incorporated into your overall China strategy.
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