How Crocs Became the Perfect Choice for China's Generation Z

Crocs Inc., the perforated clogs marketed by a trio of middle-aged American boating enthusiasts, have become the surprising shoe of choice for Chinese hipsters. Its return can provide valuable insights for Western companies struggling to connect with young consumers in a $7 trillion market where trust has taken a hit.

China's uneven economy – exports have remained strong but spending is weak after a property market collapse – has created the conditions for some companies to benefit from “emotional consumption”. The phenomenon is similar to the so-called lipstick index coined by cosmetics magnate Leonard Lauder to describe people who buy small treats to feel better in times of insecurity.

The concept has taken shape as a thriving industry embodied by companies such as Pop Mart International Group Ltd., Laopu Gold Co. and Luckin Coffee Inc. Crocs is one of the few American companies in that mix as an emotional consumer play. This is unusual in a country that fights almost daily with Washington over tariffs and where consumers are increasingly seeking cultural authenticity in the things they buy. In the most recent quarter, Crocs sales in China increased more than 30%, while revenue in North America decreased 6.5%.

People may not be spending on big-ticket items amid rising youth unemployment and a four-year economic recession, however, they crave an instant hit of dopamine from opening blind boxes containing cute toys or trying creative drink flavors. Crocs has positioned itself as a beneficiary of this trend.

The ability to customize clogs with a wide variety of bright embellishments, from fried chicken to cartoon characters, ups the individuality factor, especially when images are shared online. And from ads to spokesmodels, the brand has become so localized that people aren't sure of its origins. “Why are Crocs so expensive?” and “Where are you from?” are two of the most associated search terms.

Chinese consumers love anything silly, cheesy or fun, Allison Malmsten, principal at Daxue Consulting, a market research firm, told me. Once advertised as an “ugly” shoe, that perception is now key to its popularity. Adopting unconventional footwear allows wearers to mock the establishment and declare their independence.

For decades, Western companies had benefited from the seemingly unstoppable growth of Chinese consumers. But with the economy slowing and domestic rivals emerging, some of those companies have been left behind.

Crocs has been able to buck that trend after overcoming years of challenges. It entered the country through a distributor in 2006. After some initial success, there was a long period of inactivity compounded by problems in the United States. But a change began to take shape about five years ago, coinciding with the decision to hire actress Yang Mi as an ambassador. Their path may offer lessons for other foreign retailers.

Starbucks Corp. is an example of this. It preceded Crocs in China by seven years, bringing coffee culture to the masses for the first time. And for most of its quarter century, it flourished. But over the years, smaller, nimbler rivals took that caffeine culture and ran with it. They charged less and innovated more. Two years ago, one of those upstarts, Luckin, dethroned Starbucks as the top coffee seller. A former China boss has been blamed for sticking too closely to what worked in the West and refusing to adapt offerings to the local market.

Another company making a big push to attract Gen Z shoppers is LVMH Moët Hennessy Louis Vuitton SE, the world's largest high-end retailer. Although sales in the region that includes China grew rapidly in 2023 after the country fully lifted its pandemic controls, revenue stagnated a year later as unsure buyers began to avoid luxury.

This summer, LVMH unveiled The Louis, a three-story pop-up exhibition in the heart of Shanghai. The cruise-themed fashion store caught the attention of live streamers and created a buzz around the brand. Visitors have praised what they call the monument's East-West fusion elements. Like their global cohorts, young Chinese value experiences over spending, which is in short supply anyway. But maybe they'll come back when their bank accounts are fuller.

China remains the world's second largest retail market. The key is to localize operations as much as possible. Crocs has been able to take a step forward, proving that not all Western retailers in the country have lost their touch.