Since its founding in 2005, Labbrand has accompanied hundreds of foreign brands entering and growing in China. For nearly two decades, many multinational brands benefited from a relatively straightforward formula: fast growth, rising consumption, strong appetite for international brands, and a clear “foreign premium” across many categories.
That formula no longer holds.
Since Covid, we have witnessed a profound shift across industries. Foreign brands across industries face common challenges: cautious spending, eroded differentiation, declining “foreign premium,” and increasingly sophisticated local competitors.
But the story should not be reduced to a simplistic and fatalistic “foreign brands are losing in China.”
The real question is: how can foreign brands operate their China Shift?
Across industries, foreign brands are steadily losing historical advantages.
Starbucks defined café culture in China for more than a decade. But once coffee became mainstream, local players such as Luckin Coffee moved faster — delivery-first operations, digital ordering, aggressive pricing, localized products, and relentless expansion. Luckin now operates more than 26,000 stores globally, overtaking Starbucks in scale in China.
In automotive, Volkswagen once represented the gold standard of engineering. But China’s EV transition fundamentally changed the competitive landscape. Local players such as BYD and Xiaomi are no longer winning only on price, but increasingly on technology integration, user experience, software ecosystems, and innovation speed. German automakers’ share of the market fell from 24.2% in 2019 to 14.6% in 2024.
The same pattern is visible in beauty. The Estée Lauder Companies announced thousands of global job cuts amid prolonged weakness linked partly to China market pressures and shifting consumer behavior. Meanwhile, Chinese “C-beauty” brands continue to gain share through rapid product innovation, social commerce mastery, and culturally resonant storytelling.
In many industries, this shift is accelerated by the rise of “rational consumption”. Chinese consumers increasingly prioritize value over brand heritage alone. A 2024 survey of 1,200 consumers across 15 Chinese cities found that 57.2% preferred cheaper products with comparable quality and functionality to well-known global brands.
But reducing this shift to “consumption downgrade” misses the deeper reality. Chinese brands are not simply cheaper. They are increasingly better adapted to the market.
Brands such as Genki Forest redefined FMCG innovation cycles through faster product development, digital-native branding, and highly responsive consumer feedback loops. Chinese EV brands transformed the car from a product into an integrated digital lifestyle experience. Local coffee, sportswear, cosmetics, and electronics brands increasingly outperform foreign competitors on relevance, speed, and experience.
Yet there is no inevitability to foreign brand decline.
Some foreign brands are adapting successfully and thriving in the new China.
L’Oréal has operated its Shanghai R&D center for more than 20 years, using China as a global innovation hub. Its China-developed innovations increasingly feed back into global product development. Even amid broader market softness, divisions such as Dermatological Beauty continued to outperform.
In hospitality, Marriott International continued aggressive expansion in China despite RevPAR pressure, signing record numbers of deals in recent years. The company understood an important truth: long-term confidence in China requires adaptation, not retreat.
In retail, Sam’s Club and Costco show that “rational consumption” does not simply mean buying cheaper. Their warehouse membership model has gained traction because it offers Chinese consumers a powerful combination of quality, trust, curated choice, private-label value, and a sense of shopping smarter.
In luxury, Miu Miu shows that even in a slower luxury market, cultural relevance and creative momentum can still create growth. While many luxury brands struggled with weaker demand in China, Miu Miu continued to outperform, with retail sales jumping 35% in 2025 after almost doubling in 2024.
These brands are not succeeding because they are foreign. They are succeeding because they have found a way to be meaningfully local without losing what makes them globally distinctive.
The answer is not simply more tactical marketing spend, more KOL campaigns, more short-term promotions, or more one-off collaborations.
The China Shift is structural. Therefore, the response must be structural too.
At Labbrand, we use the Brand Power framework to understand how brands create business growth through three dimensions: Leadership Power, Experience Power, and Eco-System Power.
1. Leadership Power: Re-Earn Authority Locally
For many foreign brands, leadership power was the key to winning the Chinese market; built on automatic associations with superior quality, innovation and prestige.
But that authority is no longer automatic.
Today, many Chinese consumers no longer assume foreign means better. In numerous categories, local brands are perceived as equally innovative — and often more culturally relevant.
This does not mean foreign brands have lost all leadership potential. But it does mean they must re-earn it.
Leadership can no longer rely only on origin or heritage. It must be rebuilt around a sharper answer to one question: what can this brand lead in China today?
That leadership may come from science, design, craftsmanship, sustainability, service philosophy, cultural imagination, or category expertise. But it must be made visible, locally meaningful, and commercially relevant.
The new rule is simple: China no longer rewards passive global prestige.
It rewards active local relevance.
2. Experience Power: Stop Translating, Start Designing
For many foreign brands, the China experience, from stores to campaigns and membership programs, still feels like a translated version of global assets.
But Chinese consumers do not experience brands in translation. They experience brands in context.
Today, experience is often where preference is won or lost. Consumers expect digital fluency, personalization, social integration, fast service, local cultural cues, and emotionally intelligent touchpoints.
This is why experience investment often matters more than broad communication investment.
A stronger experience makes the brand useful, memorable, and repeatable. A weaker experience turns even strong brand awareness into disappointment.
The question is no longer only: what does the brand say in China?
It is: how does the brand behave in China?
3. Eco-System Power: From Market Entry To Market Embeddedness
Eco-system power has often been the weakest dimension for foreign brands.
Many multinationals still manage China through transactional relationships: distributors, suppliers, landlords, agencies, platforms, franchisees, employees, and partners are managed as execution channels rather than as a living brand ecosystem.
But in China, ecosystem strength is often a major source of speed and resilience.
Local brands are frequently better at mobilizing platforms, communities, creators, suppliers, technology partners, and offline networks around a shared growth agenda. They do not simply enter the market. They become embedded in it.
For foreign brands, this requires a mindset shift.
China cannot be managed only as a market to sell into. It must be cultivated as a system to participate in.
The strongest brands are not just brands with consumers. They are brands with allies.
The China story for foreign brands is not over. But the old story is over.
The brands that will continue to grow are those that accept the China Shift and act on it early: re-earning leadership, redesigning experience, and building their ecosystem.
The brands that struggle will be those that keep waiting for the market to return to the version of China they once understood.
China remains one of the world’s most dynamic, demanding, and innovative consumer markets. But it now rewards a different kind of foreign brand: less distant, less self-assured, more adaptive, more embedded, and more willing to learn.
The opportunity is still here. But the right to win must be earned again.
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