What lessons can be learned from the brand’s China fiasco?

BEIJING — “It’s a landslide of colossal dimensions, and the speed of it all is frightening,” said Alessandro Maria Ferreri, chief executive officer and owner of The Style Gate consulting firm, referring to the media and business storm that has hit Dolce & Gabbana.
Ferreri echoed what many are thinking, as the brand’s intended tribute to China last week backfired, setting off an intense backlash from celebrities, consumers and retailers alike. How and when will this stop, and will the Italian house be able to put its troubles behind?
Aside from the losses of the canceled event itself — not your ordinary runway show, but an event in Shanghai involving some 500 looks — harm to Dolce & Gabbana’s sales is definitely on the cards. As it stands, the brand’s products had been scrubbed from the sites of major Chinese e-commerce players, including Tmall, JD.com and Secoo. Certain global retailers also distanced themselves: Luisa Via Roma pulled the brand’s products, as did the Chinese platforms of Yoox Net-a- porter Group.

Lane Crawford dropped Dolce & Gabbana products from its 10 stores and e-commerce platform, and in the immediate aftermath, police and guards were stationed at brick-and-mortar Dolce & Gabbana stores across China. However, not all retailers backed away. Rinascente kicked off a Dolce & Gabbana takeover of the Milan and Rome stores “as programmed,” without providing additional comment.
According to media reports, Dolce & Gabbana sales are expected to total 1.3 billon euros this year. Assuming that China accounts for 30 percent of the brand’s sales, in line with the estimate given by McKinsey for the broader luxury industry, it means that some 400 million euros are at risk.
Rebecca Robins, global chief learning and culture officer for Interbrand — the consultancy that puts together the annual list Best Global Brands, a ranking based on brands’ actual and perceived value — said the snowballing impact reflected just how deeply modern consumers care about company values.
“I think what’s interesting is that we’ve got a more demanding consumer than ever. We’re holding brands to account more than ever before. A responsible business is not a ‘nice to have’ and how brands behave and act is crucial,” Robins cautioned.
Good crisis management necessitates a quick and bold response, she said.
“Look at what Starbucks did when they had the issue about racism in one of their stores,” Robbins said. “They decided to close all of their stores for an entire day and invest in training. When things go wrong the answer is always how do the brands respond and react? Are they taking a bold decision, are they taking bold action? How quickly does that show up? Is it deep and meaningful?”
Dolce & Gabbana’s response did not appear completely synced. It took two more days to get the original offending videos taken down from the brand’s Instagram, Facebook and Twitter accounts, as opposed to only Chinese social media platforms. The company’s initial response was to claim a hacking, which was met with skepticism, then came an apology statement. When those two moves failed to contain the backlash, the group then tried a more personal, direct-to-camera video address from the two brand cofounders Dolce and Gabbana, in which they expressed how much they loved China.
“Thirty years of brand building evaporated in 48 hours and employees are the ones who will pay the price,” said Ferreri, who has worked for the likes of Bloomingdale’s and Macy’s in the Middle East, the Al Tayer Group, Harvey Nichols and Furla. He, among others, wondered if perhaps a sale of the brand could be in the cards.
“People are angry with the designers, the boycott is aimed at the owners of the brand, and the brand is a vehicle for the protest,” said Ferreri, adding that the loss of retail partners would depreciate the value of the company in such a way that it could make it more affordable and appetizing for a big group.
If that were the case, “it’s unlikely Domenico Dolce and Stefano Gabbana would stay on and if a big name designer such as Tom Ford arrived, just as an example, the brand would be able to restart,” he said.