In China, global companies struggle as local brands take center stage

For many companies, business in China has changed for the long term as a fragile economy and sluggish consumer demand are forcing executives to rethink their brand strategy and compete with rising local rivals.

From Fast Retailing, which owns Uniqlo, to furniture giant IKEA, global companies have bristled at China's prospects, with some withdrawing their profit forecasts and others resigning themselves to a new “normalization.”

Its grim guidance illustrates how China's market, overshadowed by a trade war, fierce price competition, rising nationalism and cost-conscious consumers, is becoming a major drag on many companies already under pressure from higher U.S. tariffs.

“We need to find smarter ways of producing so that prices are even more competitive, and we need to learn to be even more relevant to the Chinese market,” said Jon Abrahamsson Ring, CEO of IKEA franchise Inter IKEA, adding that consumer confidence in China remains a challenge.

A shift in spending patterns is also hurting global retailers, with frugal consumers flocking to online platforms like Alibaba's Taobao in search of discounted prices.

At Fast Retailing, which owns Uniqlo, sales and profits fell in China, its largest market with 900 stores, even as its North American revenue rose 24%.

Nike reported a drop in sales during the fifth quarter in the Greater China market, amid stiff competition from domestic brands such as Anta and Li Ning. It recently sent American basketball stars LeBron James and Ja Morant to China to attract consumers.

Some companies appear to be holding on, particularly in China's luxury sector, which accounts for about a third of global sales. LVMH reported better-than-expected third-quarter sales backed by better Chinese demand, saying shoppers responded well to new store experiences such as the ship-shaped Louis Vuitton boutique in Shanghai.

“What we see is that every time we introduce an initiative, an innovation or a new disruptive initiative in retail, it immediately creates… interest and enthusiasm and consumers respond very quickly,” said LVMH CFO Cecile Cabanis.

China's persistent deflationary pressures bolster the case for more policy measures as weak demand and trade tensions drag down the $19 trillion economy. Data on China's GDP growth and retail sales due on Monday, plus a host of earnings from global companies, will give investors more insight into the health of the world's second-largest economy.

Adding to the growing challenges for global brands is the rapid rise of cheaper local alternatives for almost everything, from cars to coffee to fashion.

The market share of Chinese cosmetics brands is expected to surpass that of foreign brands for the first time in 2025, reaching 50.4%, according to Frost & Sullivan. Urban Revivo, known as Zara's rival in China, is among a growing cohort of domestic companies looking to expand abroad.

Another star is jewelry retailer Laopu Gold, often called the “Hermes of gold,” whose shares have soared 214% this year. It draws deeply on Chinese cultural heritage and has proven to be a hit with consumers. Frost & Sullivan says 77.3% of Laopu customers also shop at Louis Vuitton, Hermès, Cartier, Bulgari and Tiffany & Co.