Finance
U.S., Europe brands take on the Chinese consumer
Pictured here is Louis Vuitton’s new cruise ship-shaped store in Shanghai, China, on June 28, 2025.
Bloomberg | Bloomberg | Getty Images
BEIJING — China’s economic slowdown isn’t discouraging U.S. and European brands from revamping their strategies to reach Chinese shoppers.
Instead, the allure of the world’s second-largest consumer market is forcing companies to adapt in the face of growing competition from local brands.
In the case of Kraft Heinz, getting more people in China to buy ketchup this year also meant hiring a local agency to help create catchy campaigns — decorating subway station columns to mimic ketchup bottles and promoting the condiment as a fresh twist on a popular dish: stir-fried eggs and tomatoes.
It’s a hard market to tackle, even for Shanghai-based marketing firm Good Idea Growth Network (GGN). The agency has witnessed at least five different waves of consumer trends in its 14-year history, founder Stephy Liu, said in Mandarin, translated by CNBC. “The gameplay keeps on changing.”
But GGN has succeeded even after rejecting an acquisition offer from British advertising giant WPP, Liu said, noting that about half of her clients are foreign brands.
While Kraft Heinz isn’t done with its China ketchup campaign yet, the company reported second-quarter net sales in emerging markets climbed by 4.2% from a year ago, helping offset declines in North America.
WPP explored a potential acquisition of GGN but did not end up going far in the process, according to a person familiar with the discussions.
Kraft Heinz did not immediately respond to requests for comment.
Localized social media
From Starbucks’ struggles to Lululemon’s successes in China, it’s become clear that the right mix of localization is essential.
“Among international brands in China, the winners are often dedicating more than 40% of revenue to marketing, especially content and platform-first marketing, while also iterating products locally based on market data,” said Jacob Cooke, co-founder and CEO of WPIC Marketing + Technologies, which helps foreign brands sell in China.
This year, Cooke said that Under Armour has created products under 100 yuan ($14) in order to attract a mass of buyers online, while using livestreams with dedicated users to then build fitness communities and sell more premium products offline.
ByteDance-owned Douyin has become an e-commerce force in the last few years since celebrities and companies started using the app for livestreaming sales during the pandemic. And by the numbers, there’s little question that jumping into the Xiaohongshu and Douyin world is worthwhile for businesses.
Adapting to that new social commerce ecosystem has become the biggest challenge for brands in the last two years, GGN’s Liu said. “Foreign brands will think, ‘Isn’t this just TikTok?'”
She warned that success requires a complex strategy that can involve changing everything from how a team is structured to the kinds of products sold. But the payoff is significant.
“In half a year, it can help you sell more than you sold on [Alibaba‘s] Tmall in two years,” Liu said.
Data is power
In addition to social media, a critical factor in many companies’ strategies is access to hordes of data on what consumers in China are buying.
Chinese e-commerce platforms, including Alibaba’s Tmall, share far more data on what’s popular than Amazon.com does, WPIC’s Cooke said. In China, “people generally know what their competitors are selling and what they’re selling for.”
With that granular data, Chinese makeup brand Perfect Diary was able to succeed by identifying a market pain point and creating a lipstick targeted at that lower price segment, Cooke said. He noted that’s pressured foreign brands to create China-specific products as well, a big shift over the last five years.
E-commerce platforms in China also often show rough figures on how many orders were placed per product, while third-party companies such as Syntun offer significant amounts of product rankings and other online sales data for free.
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In the case of Apple‘s iPhone 17 launch on Sept. 19, it was Chinese e-commerce company JD.com that released sales data for mainland China. The electronics-focused platform announced that the first minute of iPhone 17 series preorders surpassed the first-day preorder volume of last year’s iPhone 16 series.
Apple’s story also underscores how it’s possible to reignite local interest despite losing market share to domestic competition. Some customers in Beijing told CNBC that they liked the iPhone’s new cosmic orange color, and that more locals intended to buy their first iPhone this year since they’d heard about new attractive features such as larger internal storage.
China’s factories were quick to jump on the trend, releasing iPhone cases with a similar orange hue even before the 17 model was out.
“Winning brands are those that have established local R&D centers and on-the-ground product teams,” said Ashley Dudarenok, founder of ChoZan, a China marketing consultancy. “This allows them to spot trends early, develop products tailored to local needs, and launch them in months, not years. This is a significant departure from the past, where global products were often simply rolled out in the Chinese market.”
Cultural connection
Even with the right data and social media platforms, cultural integration is becoming increasingly important, especially as Chinese brands find success in tapping the country’s own history of artisanal craftsmanship.
“Brands are moving beyond superficial nods to Chinese culture,” Dudarenok said. She pointed out that Loewe partnered with jade carving masters, while Burberry teamed up with bamboo-weaving artists.
And despite declining sales in China’s luxury market, LVMH this summer opened an eye-catching ship-shaped store in Shanghai — immediately generating much local buzz.
In contrast to LVMH’s luggage-shaped store in Manhattan, the Shanghai location taps into the Chinese city’s history as a port of entry for international travelers to Asia roughly a century ago.
The new store also captures the European brand’s roots in hand-crafted travel trunks — which contrasts with Chinese brands’ inability to offer the same emotional appeal, Joe Ngai, chairman of greater China at McKinsey, pointed out in a LinkedIn post.
“As Chinese customers grow in their confidence and desire for local elements,” he said, “creating more crossovers between West and East is one of the unique opportunities for multinationals in China.”
— CNBC’s Eunice Yoon contributed to this report.
Cybersecurity and enterprise software stocks have been market dogs in 2026, with fears that AI will wipe out a wide range of companies in the enterprise space dominating the narrative. But they snapped a brutal losing streak this past week, joining in the broader market rally that saw all losses from the U.S.-Iran war regained by the Dow Jones Industrial Average and S&P 500.
Cybersecurity has been “a victim of some of the AI-related headlines,” Christian Magoon, Amplify ETFs CEO, said on this week’s “ETF Edge.”
It wasn’t just niche cybersecurity names. Take Microsoft, for example, which was recently down close to 20% for the year. Its shares surged last week by 13%.
A big driver of the pummeling in software stocks was a rotation within tech by investors to AI infrastructure and semiconductors and some other names in large-cap tech, Magoon said, and since cybersecurity stocks and ETFs are heavily weighted towards software companies, they were left behind even as those businesses continue to grow on a fundamental basis.
But Wall Street now has become more bullish with the stocks at lower levels. Brent Thill, Jefferies tech analyst, said last week that the worst may be over for software stocks. “I think that this concept that software is dead, and then Anthropic and OpenAI are going to kill the entire industry, is just over-exaggerated,” he said on CNBC’s “Money Movers” on Wednesday.
“Big Short” investor Michael Burry wrote in a Substack post on Wednesday that he is becoming bullish about software stocks after the recent selloff. “Software stocks remain interesting because of accelerated extreme declines last week arising from a reflexive positive feedback loop between falling software stocks and changes in the market for their bank debt,” he wrote.
The Global X Cybersecurity ETF (BUG), is down about 12% since the beginning of the year, with top holdings including Palo Alto Networks, Fortinet, Akamai Technologies and CrowdStrike. But BUG was up 12% last week. The First Trust NASDAQ Cybersecurity ETF (CIBR) is down 6% for the year, but up 9% in the past week.
Piper Sandler analyst Rob Owens reiterated an “overweight” rating on Palo Alto Networks which helped the stock pop 7% — it is now down roughly 6% on the year. Its peers saw similar moves, including CrowdStrike.
Performance of Global X cybersecurity ETF versus S&P 500 over past one-year period.
Magoon said expectations may have become too high in cybersecurity, and with a crowding effect among investors, solid results were not enough to to push stocks higher. But the down-and-then-back-up 2026 for the sector is also a reminder that when stocks fall sharply in a short period of time, opportunity may knock.
“Once you’re down over 10% in some of these subsectors, you start to see the contrarians start to say, ‘well, maybe I’ll take a look at this,'” Magoon said.
He said AI does add both opportunity and uncertainty to the cybersecurity equation, increasing demand but also introducing new competition. But he added, “I think the dip is good to buy in an AI-driven world,” specifically because the risks to companies may lead to more M&A in cyber names that benefits the stocks.
For now, investors may look for opportunity on the margins rather than rush back into beaten-up tech names. “I think investors are still going to remain underweight software,” Thill said.
But Magoon advises investors to at least take the reminder to keep an eye on niches in the market during pronounced downturns. “The best-performing are often the least bought and do the best over the next 12 months versus late-in-the-game piling on,” he said.
While that may have been a mindset that worked against the last investors into cybersecurity and enterprise software in mid-2025 when the negative sentiment started building, at least for now, it’s started working for the stocks in the sector again.
Meanwhile, this year’s biggest winner is also a good example of what can be an extended trade in either a bullish or bearish direction. Last year, institutional ownership of energy was at multi-year lows, Magoon said, referencing Bank of America data. “Reverse sentiment can be a great indicator,” he said.
But he cautioned that any selective buying of stocks that have dipped does have to contend with the risk that there is a potentially bigger drawdown in the market yet to come in 2026. That is because midterm election years historically have been marked by large drawdowns. “If you think it is bad right now, it could get a lot worse,” Magoon said. But he added that there’s a silver-lining in that data, too, for the patient investor. The market has posted very strong 12-month returns after midterm election drawdowns end. So, for investors with a longer-term time horizon and no need for short-term liquidity, Magoon said, “stick in there.”
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New innovation in the exchange-traded fund industry could come at a cost to investors during extreme conditions.
According to MFS Investment Management’s Jamie Harrison, ETFs involved in increasingly complex derivatives and less transparent markets may be in uncharted territory when it comes to violent downturns.
“Those would be something that you’d want to keep an eye on as volatility ramps up,” the firm’s head of ETF capital markets told CNBC’s “ETF Edge” this week. “As innovation continues to increase at a rapid pace within the ETF wrapper, [it’s] definitely something that we advise our clients to be really front-footed about… Lack of transparency could absolutely be an issue if we’re going to start seeing some deep sell-offs.”
His firm has been around since 1924 and is known for inventing the open-end mutual fund. Last year, ETF.com named MFS Investment Management as the best new ETF issuer.
“It’s important to do due diligence on the portfolio,” he said. “Having a firm that has deep partnerships, deep bench of subject matter experts that plays with the A-team in terms of the Street and liquidity providers available [are] super important.”
Liquidity as the real issue?
Harrison suggested the real issue is liquidity, particularly during a steep sell-off.
“We’ve all seen the news and the headlines around potential private credit ETFs. That picture becomes much more murky,” he added. “It’s up to advisors, to investors [and] to clients to really dig in and look under the hood and engage with their issuers.”
He noted investors will have to ask some tough questions.
“What does this look like in a 20% drawdown? How does this liquidity facility work? Am I going to be able to get in? Am I going to be able to get out? And if I’m able to get out, am I able to get out at a price that’s tight to NAV [net asset value], and what’s the infrastructure at your shop in terms of managing that consideration for me,” said Harrison.
Amplify ETFs’ Christian Magoon is also concerned about these newer ETF strategies could weather a monster drawdown. He listed private credit as a red flag.
“If your ETF owns private credit, I think it’s worth taking a look at, kind of what the standards are around liquidity and how that ETF is trading, because that should be a bit of a mismatch between the trading pace of ETFs and the underlying asset,” the firm’s CEO said in the same interview.
Magoon also highlighted potential issues surrounding equity-linked notes. The notes provide fixed income security while offering potentially higher returns linked to stocks or equity indexes.
“Those could potentially be in stress due to redemptions and the underlying credit risk. That’s another kind of unique derivative,” Magoon said. “I would very closely look at any ETF that has equity-linked notes should we get into a major drawdown or there be a contagion in private credit or something related to the banking system.”
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