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Dolce&Gabbana fiasco shows importance, risks of China market

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BEIJING — Don’t mess with China and its growing cadre of powerful luxury consumers.

Dolce&Gabbana learned that lesson the hard way when it faced a boycott after Chinese expressed outrage over what were seen as culturally insensitive videos promoting a major runway show in Shanghai and subsequent posts of insulting comments in a private Instagram chat.

The company blamed hackers for the anti-Chinese insults, but the explanation felt flat to many and the damage was done. The Milan designers cancelled the Shanghai runway show, meant as a tribute to China, as their guest list of Asian celebrities quickly joined the protests.

Then, as retailers pulled their merchandise from shelves and powerful e-commerce sites deleted their wares, co-founders Domenico Dolce and Stefano Gabbana went on camera — dwarfed against the larger backdrop of an ornate red wall-covering — to apologize to the Chinese people.

“We will never forget this experience, and it will definitely never happen again,” a solemn-looking Gabbana said in a video statement posted Friday on social media.

The apology video , and the sharp public backlash that demanded it, shows the importance of the Chinese market and the risks of operating in it. More broadly, it highlights the huge and still-growing influence of China, a country that cannot be ignored as it expands economically, militarily and diplomatically.

These trends are intertwined in frequent outbursts of nationalist sentiment among consumers who feel slighted by foreign brands or their governments. It’s not the first time a company has apologized, and it surely won’t be the last. Mercedes-Benz did so in February for featuring a quote by the Dalai Lama on its Instagram account.

For Dolce&Gabbana, it could be mark the end of its growth in China, a crucial market for global luxury brands that it has cultivated since opening its first store in 2005 and where it now has 44 boutiques.

“I think it is going to be impossible over the next couple of years for them to work in China,” said Cary Cooper, a professor of organizational psychology and health at Manchester University in England. “When you break this kind of cultural codes, then you are in trouble. The brand is now damaged in China, and I think it will be damaged in China until there is lost memory about it.”

London-based Brand Finance consultancy estimates that the scandal could wipe up to 20 per cent off the Dolce&Gabbana brand’s value of $937 million, which already places it out of the top 50 global apparel brands. They are 36th among all Italian brands, extending to sectors like automotive.

That could shake Dolce&Gabbana’s financial health. The privately held company does not release its individual sales figures. But Chinese consumers are responsible for a third of all luxury spending around the globe, according to a recent study by Bain consultancy. That will grow to 46 per cent of forecast sales of an estimated 365 billion euros ($412 billion) by 2025, fueled by millennials and the younger Generation Z set, who will make a growing percentage of their purchases online.

“Without China, the hinterland for growth, D&G will obviously be in a weak competitive position and in danger of being eliminated,” the Chinese business magazine New Fortune said in a social media post Sunday. “This is one of the major reasons why D&G finally lowered its head. They really cannot survive without the Chinese market.”

While Dolce&Gabbana has displayed a knack for social media engagement, inviting millennial influencers with millions of collective followers to sit in their front rows or walk in their shows, that engagement has been a double-edged sword. Pop idol Karry Wang, who has drawn hundreds of screaming Chinese fans to the designer’s Milan showroom for season runway shows, was one of the first to disavow the brand, saying he was ending his role as Asia-Pacific brand ambassador.

Dolce found himself on the defensive several years ago after Elton John lashed out for comments that suggested he did not support gay couples using surrogate mothers to have children. At the time, more than 67,000 tweets urged #boycottdolcegabbana, while Courtney Love vowed to burn her Dolce&Gabbana garb and Martina Navratilova pledged to trash her D&G shirts.

Gabbana, who has 1.6 million Instagram followers, faced a more contained backlash earlier this year when he responded to a collage of Selena Gomez photos on Instagram with the comment, “She’s really ugly.”

Celebrities took to social media Wednesday to blast Dolce&Gabbana and said they would boycott the show, which was cancelled. By Thursday, the company’s goods had disappeared from major e-commerce websites. The prevailing sentiment was captured by an airport duty-free shop that posted a photo of its shelves emptied of D&G products: “We have to show our stance. We are proud to be Chinese.”

The rapid escalation into a public relations disaster was fueled by social media. Individuals posted videos of themselves cutting up or burning their Dolce&Gabbana clothes, or picking them up with chopsticks and putting them in the trash. A parody of the offending Dolce&Gabbana videos, which featured a Chinese woman using chopsticks to eat pizza and an oversized cannoli, shows a white man trying to eat Chinese food with a fork and knife. At least three rap bands took up the cause with new songs.

“Companies that don’t respect us don’t deserve our respect,” Wang Zixin, team leader of CD Rev, a nationalist rap band, said by phone from Chengdu, the capital of Sichuan province. Its new song had been viewed more than 850,000 times on Weibo.

“We hope people will remember companies that have ever insulted China, and not forget about them when the fallout passes,” Wang said.

That sense of pride reflects a nationalism that has been encouraged by the government, often in disputes China has with other countries over other foreign products.

Sales by Japanese automakers plunged in 2012 amid tensions between islands both countries claim in the East China Sea. The clash also illustrated the complexity of Chinese sentiment: Industry analysts said buyers didn’t want to be seen in Japanese auto showrooms but went ahead with planned purchases once tensions had passed.

More recently, several foreign companies ran afoul of Beijing’s insistence that they explicitly refer to Taiwan, a self-governing territory, as part of China. Many complied, showing how important the Chinese market has become.

Delta, American and other airlines agreed to refer to Taiwan as part of China, and Zara now says “Taiwan, China” on its website after regulators criticized the fashion brand for calling Taiwan a country. Marriott announced it “respects and supports” China’s sovereignty after it was ordered to shut its China website for a week.

Actor Richard Gere, a supporter of the Dalai Lama, has told The Hollywood Reporter that movie studios balk at hiring him for fear of an official or public backlash that might affect ticket sales in China.

It remains unclear whether the D&G mea culpa video will stop the backlash — or if it will have implications for Made-in-Italy at large. The scandal erupted as Italy’s high-end furniture and design companies were making an annual presentation in Shanghai and as Miu Miu, the Prada Group’s little sister line, showed its cruise line in Shanghai.

Italian designers have so far refrained from comment. Dolce & Gabbana has remained conspicuously outside of the Italian Fashion Chamber, which organizes fashion weeks and acts as a lobby for the fashion industry.

Brand Finance’s luxury expert, Alex Haigh, said the scale of the Chinese reaction risked contagion in other markets, but that the brand could get ahead of the scandal if it makes sincere change. “They have made a big storm for themselves,” he said. “They need to wait a few months, and potentially do something like Volkswagen, when it had the emission scandal and repositioned itself as a more environmentally friendly electric-vehicle-first brand. Sometimes these issues can be a focal point for change.”

Italian commentators mused whether the Dolce&Gabbana protests were truly spontaneous or if there was some level of government control behind them. The government has publicly said the spat had no diplomatic element and would not comment.

“Anywhere in the world, an entrepreneur can make a mistake, use inappropriate language. Usually it is the consumers and the market to decide the seriousness of the offence,” the Milan daily Corriere della Sera wrote in a commentary. “Only in China is one forced to produce a humiliating video with public self-criticism, like in the time of Mao’s revolution. Now China feels powerful and is applying re-education on a global scale.”

___

Barry reported from Milan. AP journalists Joe McDonald and Dake Kang and researchers Henry Hou and Jiawei Chen contributed to this report.

Ken Moritsugu And Colleen Barry, The Associated Press


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What is ‘productivity’ and how can we improve it

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From the Fraser Institute

By Jock Finlayson

Earlier this year, a senior Bank of Canada official caused a stir by describing Canada’s pattern of declining productivity as an “emergency,” confirming that the issue of productivity is now in the spotlight. That’s encouraging. Boosting productivity is the only way to improve living standards, particularly in the long term. Today, Canada ranks 18th globally on the most common measure of productivity, with our position dropping steadily over the last several years.

Productivity is the amount of gross domestic product (GDP) or “output” the economy produces using a given quantity and mix of “inputs.” Labour is a key input in the production process, and most discussions of productivity focus on labour productivity. Productivity can be estimated for the entire economy or for individual industries.

In 2023, labour productivity in Canada was $63.60 per hour (in 2017 dollars). Industries with above average productivity include mining, oil and gas, pipelines, utilities, most parts of manufacturing, and telecommunications. Those with comparatively low productivity levels include accommodation and food services, construction, retail trade, personal and household services, and much of the government sector. Due to the lack of market-determined prices, it’s difficult to gauge productivity in the government and non-profit sectors. Instead, analysts often estimate productivity in these parts of the economy by valuing the inputs they use, of which labour is the most important one.

Within the private sector, there’s a positive linkage between productivity and employee wages and benefits. The most productive industries (on average) pay their workers more. As noted in a February 2024 RBC Economics report, productivity growth is “essentially the only way that business profits and worker wages can sustainably rise at the same time.”

Since the early 2000s, Canada has been losing ground vis-à-vis the United States and other advanced economies on productivity. By 2022, our labour productivity stood at just 70 per cent of the U.S. benchmark. What does this mean for Canadians?

Chronically lagging productivity acts as a drag on the growth of inflation-adjusted wages and incomes. According to a recent study, after adjusting for differences in the purchasing power of a dollar of income in the two countries, GDP per person (an indicator of incomes and living standards) in Canada was only 72 per cent of the U.S. level in 2022, down from 80 per cent a decade earlier. Our performance has continued to deteriorate since 2022. Mainly because of the widening cross-border productivity gap, GDP per person in the U.S. is now $22,000 higher than in Canada.

Addressing Canada’s “productivity crisis” should be a top priority for policymakers and business leaders. While there’s no short-term fix, the following steps can help to put the country on a better productivity growth path.

  • Increase business investment in productive assets and activities. Canada scores poorly compared to peer economies in investment in machinery, equipment, advanced technology products and intellectual property. We also must invest more in trade-enabling infrastructure such as ports, highways and other transportation assets that link Canada with global markets and facilitate the movement of goods and services within the country.
  • Overhaul federal and provincial tax policies to strengthen incentives for capital formation, innovation, entrepreneurship and business growth.
  • Streamline and reduce the cost and complexity of government regulation affecting all sectors of the economy.
  • Foster greater competition in local markets and scale back government monopolies and government-sanctioned oligopolies.
  • Eliminate interprovincial barriers to trade, investment and labour mobility to bolster Canada’s common market.
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COP29 was a waste of time

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From Canadians For Affordable Energy

Dan McTeague

Written By Dan McTeague

The twenty-ninth edition of the U.N. Climate Change Committee’s annual “Conference of the Parties,” also known as COP29, wrapped up recently, and I must say, it seemed a much gloomier affair than the previous twenty-eight. It’s hard to imagine a more downcast gathering of elitists and activists. You almost felt sorry for them.

Oh, there was all the usual nutty Net-Zero-by-2050 proposals, which would make life harder and more expensive in developed countries, and be absolutely disastrous for developing countries, if they were even partially implemented. But a lot of the roughly 65,000 attendees seemed to realize they were just spewing hot air.

Why were they so down? It couldn’t be that they were feeling guilty about their own hypocrisy, since they had flown in, many aboard private jets, to the Middle Eastern petrostate of Azerbaijan, where fossil fuels count for two-thirds of national GDP and 90% of export revenues, to lecture the world on the evils of flying in planes and prospering from the extraction of oil and natural gas. Afterall, they did the same last year in Dubai and there was no noticeable pang of guilt there.

It’s likely that Donald Trump’s recent reelection had a lot to do with it. Living as they do in a media bubble, our governing class was completely blindsided by the American people’s decision to return their 45th president to the White House. And the fact that he won the popular vote this time made it harder to deny his legitimacy. (Note that they’ve never questioned the legitimacy of Justin Trudeau, even though his party has lost the popular vote in the past two federal elections. What’s the saying about the modern Left? “If they didn’t have double standards, they’d have no standards at all.”)

Come January, Trump is committed to (once again) pulling the U.S. out of the Paris Climate Accords, to rolling back the Biden Administration’s anti-fracking and pro-EV regulations, and to giving oil companies the green light to extract as much “liquid gold” (his phrase) as possible, with an eye towards making energy more affordable for American consumers and businesses alike. The chance that they’ll be able to leech billions in taxpayer dollars from the U.S. Treasury while he’s running the show is basically zero.

But it wasn’t just the return of Trump which has gotten the climate brigade down. After a few years on top, environmentalists have been having one setback after another. Green parties saw a huge drop off in support in the E.U. parliament’s elections this past June, losing one-third of their seats in Brussels.

And wherever they’ve actually been in government, in Germany and Ireland for instance, the Greens have dragged down the popularity of the coalitions they were part of. That’s largely because their policies have been like an arrow to the heart of those nations’ economies – see the former industrial titan Germany, where major companies like Volkswagen, Siemens, and the chemical giant BASF are frantically shifting production to China and the U.S. to escape high energy costs.

But while voters around the world are kicking climate ideologues to the curb, there are still a few places where they’re managing to cling to power for dear life.

Here in Canada, for instance, Justin Trudeau and Steven Guilbeault steadfastly refuse to consider revisiting their ruinous Net Zero policies, from their ever-increasing Carbon Tax, to their huge investments in Electric Vehicles and the mandates which will force all of us to buy pricey, unreliable EVs in just over a decade, and to the emissions caps which seek to strangle the natural resource sector on which our economy depends.

Minister Guilbeault was all-in on COP29, heading the Canadian delegation, which “hosted 65 events showcasing Canada’s leadership on climate action, nature-based solutions, sustainable finance, and Canadian clean technologies—while discussing gender equality, youth perspectives, and the critical role of Indigenous knowledge and climate leadership” and stood up for Canadian values such as “2SLGBTQI+” and “gender inclusivity.” Once again, in Azerbaijan, which has been denounced for its human rights abuses.

And no word yet on the cost of all of this – for last year’s COP28 the government – or should I say the taxpayers – spent $1.4M on travel and accommodations alone for the 633 member delegation. That number, not counting the above mentioned events, are sure to be higher, as Azerbaijan is much less of a travel destination than Dubai, and so has fewer flights in and available hotel rooms.

At the same time all of this was going on, Trudeau was 12,000 kms away in Rio de Janeiro, Brazil,  telling an audience that carbon taxation is a “moral obligation” which is more important than the cost of living: “It’s really, really easy when you’re in a short-term survive, [to say] I gotta be able to pay the rent this month, I’ve gotta be able to buy groceries for my kids, to say, OK, let’s put climate change as a slightly lower priority.”

This is madness, and it underscores how tone-deaf the prime minister is, and also why current polling looks so good for the Conservatives that Pierre Poilievre might as well start measuring the drapes at the PMO.

He has the Trudeau Liberals’ obsessive pursuit of Net Zero policies in large part to thank for that.

The world is waking up to the true cost of the Net Zero ideology, and leaving it behind. That doesn’t mean the fight is over – the activists and their allies in government are going to squeeze as many tax dollars out of this as they possibly can. But the writing is on the wall, and their window is rapidly closing.

Dan McTeague is President of Canadians for Affordable Energy.

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