Weekly #22: How Japan seafood ban hurts China business 🐟, Prada's Lipstick Effect 💋, beating Costco & Sam’s Club 🛒 | Following the yuan

Contrary to the divisive sentiments of some netizens opposing Japan, we all share one Earth. Am I being ‘too young, too simple’ for saying that?

Not much is going on this week with me, other than the fact that I seem to rarely match the speed of my action with the mounting ideas on my mind, anyone else has this problem? Help? 🆘

1. The collateral damage of the seafood ban 🐟

Last Thursday, China banned all seafood imports from Japan. Following the ban, a series of events began to unravel, extending beyond the industry and seemingly beyond control. On the same day, local regulators inspected Japanese restaurants and retail stores carrying Japanese goods, touting their due diligence capabilities.

In the months leading up to the ban, Chinese state media and certain bloggers had been rallying netizens to protest against the release of treated water. They completely overlooked the fact that the IAEA had deemed the water safe, which decisively influenced public sentiment to be opposing.

As a result, Chinese seafood producers are facing boycotts on livestreams, receiving live comments urging them to shut down their businesses. Chinese retailers, including a trade company in Zhejiang Province that sells Japanese cough drops, are being fined for carrying products from affected regions in Japan. A day before the ban, Chinese tourists embarked on their first group tour via ANA Airlines to Japan. Afterward, travel agencies reportedly experienced a surge in canceled orders.

Shanghai regulators visited retailers on the day that the ban enacted. Image: Shanghai Observer

Dig Deeper: I attended an economics talk last weekend and asked a professor at CEIBS how we could gauge the impact of such an action on the economy.

While he didn't answer the question directly, he used an anecdote to suggest that the fault lies with the media. He noted that people are still lining up in front of sushi restaurants in Hong Kong and argued that if mainland media could elevate public understanding, consumers wouldn't resort to panic buying sea salt.

What he may not realize is how closely tied Chinese media is to propaganda, and that many vloggers and individuals in state media are stoking paranoia and conflicts to garner traffic and attention. It's disheartening to see how public opinion is being wielded as a weapon in international relations.

In retrospect, I wish the national conversation could be steered toward science and safety standards, as well as how neighboring countries could collaborate. Contrary to the divisive sentiments of some netizens, we all share one Earth. Am I being ‘too young, too naive’ for saying that?

2. Prada's Lipstick Effect 💋

In less than a month since its launch, select shades of Prada lipsticks have sold out on multiple Chinese e-commerce platforms, including Tmall, JD.com, and Douyin.

Priced at 395 yuan each (a few pounds more than £37 in the U.K.), Prada's lipstick has risen to second place on Tmall's new product sales rankings, following a duo-color gift set from YSL. The Prada Beauty Tmall flagship store alone has sold more than 10,000 lipsticks within the month, and the page has garnered 100,000 views.

Dig Deeper: Seeing beauty as a bright spot amid Covid and economic slowdowns, fashion companies are flocking to the sector. Prada's success in China is the result of a multi-year agreement with L’Oréal Luxe, signed in 2019. Following a leadership reshuffle in LVMH's beauty division in March, Coty has decided to relaunch its Marc Jacobs Beauty line after a two-year hiatus.

While it's commendable that Prada's lipsticks are refillable, aligning with the group's sustainability goals, the brand has faced criticism for excessive packaging.

Many users on Xiaohongshu have complained that one lipstick comes with a small gift box, a large paper box, and an excess of crinkle paper. Although this lavish presentation might meet consumers' desires during the recent Chinese Valentine's Day, the contradiction between sustainability and overpackaging is too glaring to ignore, especially for a brand like Prada.

One common feedback with Prada’s lipstick gift sets is that there is too much packaging. Image: screenshots from Xiaohongshu

3. IPO-hungry Freshippo wages war against Costco, Walmart’s Sam’s Club 🛒

Alibaba’s Freshippo, which is preparing a Hong Kong IPO next year, is going head-to-head with U.S. giants Costco and Sam’s Club in China. Freshippo CEO Hou Yi stated to domestic publication LinkShop that all three companies are vying for the same target audience: middle-class consumers, and the competition extends beyond just the stores to include entire business ecosystems.

Freshippo's latest strategy is tied to a discount system called "Moving Mountain Price", launched at the end of July. This initiative has already been rolled out in 15 cities across China, including Beijing and Shanghai, offering discounted popular items similar to those available at Costco and Sam’s Club, such as durian crepe cake.

The term 'Moving Mountain' refers to a Chinese folk story 愚公移山 where an old man's determination to move mountains eventually moved the gods to help him. Clearly, the two "mountains" Freshippo is facing are Costco and Sam’s Club, which have four and 36 locations in China, respectively. Meanwhile, Freshippo operates over 300 stores and has ambitions to diversify its offerings.

Freshippo is opening a high-end store in Changning District, Shanghai, next month. Image: LinkShop

Dig Deeper: I initially resisted Freshippo in 2015 due to environmental concerns, but I became a paid member in recent years when convenience and accessibility outweighed my ideological reservations. Freshippo’s goal of offering "high quality at low prices" aligns well with my needs to cut corners in a post-Covid era.

Discounting is a common tactic to fare against competitors — as seen in Luckin Coffee’s recent 9.9-yuan discounts to combat against Cotti Coffee and other chains — in this matter, I seem to get what Freshippo’s doing. Sam’s Club needs to open more stores because the accessibility is an issue, there are literally daigou business involving around its viral products, if Freshippo could make urban consumers realize they are just as good and cultivate stickiness from there, people won’t be bothered to drive across town to big-box stores anymore. 🔚

P.S. Oh, no worries with my previous question about the gap between intention and action, ChatGPT sorted it out for me.

One more thing: Two months ago, I launched a monthly LinkedIn newsletter named China Blunders that aims to help brands understand Chinese consumers, regulations, the media landscape, and local competition by examining case studies that have sparked public outrage each month. 

For example, in the July issue, I featured London-listed Dr. Martens plc, LVMH-owned Bulgari, and take a trip down memory lane to revisit an expensive experiment by Mattel, Inc. in China back in 2009. Make sure to subscribe if you think that could benefit your work/conversations about China before the August issue drops this week!