A.H. Beard began looking at China around 2010. The family-owned company was facing low-cost foreign-made mattresses in its home market. China has a growing middle class with a taste for premium brands and is a good place to expand.
It paid off.
The first A.H. Beard store was there. Sales grew by more than 30 percent a year before the coronaviruses hit. Fifty A.H. Beard stores are planned to open in China. A.H. Beard has begun to think about its strategy a bit more carefully.
Beijing's strict Covid-19 policy has hurt business. The company's exports to China are not going up.
Chinese officials said this month that the economy grew at a slower pace than in the past. Consumers are not spending, the housing market is in crisis, and unemployment is high.
The Chinese economy is looking shaky, and the companies that came to the country to participate in boom times are facing a sobering reality: flat growth in what was once seen as a reliable economic opportunity.
Tony Pearson, chief executive of A.H. Beard, doesn't think China will return to its previous growth rates.
Most companies are sticking to their guns, but there is a hint of caution that was not present a few years ago.
Some industries have been hit with punishing tariffs due to the U.S.-China trade war. The flow of goods has been snarled due to Covid-19. Customers have stayed at home and out of stores as a result of the Pandemic response.
The flagship store of A.H. Beard was opened in Shanghai a decade ago. Products with prices that defy belief were rolled out. The top-of-the-line $75,000 mattress sold well in China.
The cost of shipping a container has more than doubled since then. latex and natural fibers have increased in price. There are other worrying signs. New mattresses are often a new home's meaning.
Mr. Pearson wants the Chinese Communist Party congress later this year to clarify the trajectory for China and make consumers more confident. He said that the economy has growth potential. There is always a level of risk.
International businesses rushed in after the 2008 financial crisis when China emerged as an outlier.
European luxury brands erected gleaming stores in China's biggest cities. South Korean and Japanese chipmakers courted Chinese electronics makers. Demand for iron Ore from Australia and Brazil increased as a result of a booming construction market.
Consumers in China opened their wallet to reward those investments. The Pandemic has made many shoppers nervous.
Since leaving a job in 2020, she has reduced her spending. She used to spend most of her salary on designer brands.
She works in advertising in Beijing and allocates a quarter of her salary to living costs. The rest is put in the bank by her mom.
She said that she transfers everything to her mother every month because of her fear of being laid off. It's very depressing to go from enjoying life to living paycheck to paycheck.
Many foreign businesses worry about a more frugal Chinese consumer because they offer products that are not the low cost option but a premium alternative. An Jun-Min, chief executive of Ginseng by Pharm, a South Korean producer of ginseng products, said he has noticed Chinesewallets have become thinner.
Mr. An said that sales of the company's main product, a 2 ounce bottle of ginseng drink, peaked before the Pandemic. There were 600,000 bottles shipped into China and Hong Kong.
It was difficult to get products into the country during Covid lockdowns. Business is down 10 to 20% from the peak, but has mostly rebounded.
Mr. An believes that the market for health products in China will continue to benefit from his familiarity with the root. He's trying to get regulatory approval to sell in Europe.
That is not as optimistic as it was in the past.
The CEO of Adidas declared that China was the star of the company when it was the most profitable market. Adidas made a lot of investments to expand its foothold. Only 500 of its 12,000 stores are operated by Adidas. The music stopped as well.
Adidas lowered their expectations in May as Covids continued to spread. China revenue is expected to decline significantly and a sudden rebound is not likely, according to the company.
Adidas is undeterred at the moment. Mr. Rorsted said on the call that the company isn't going to cut costs or pull back from the country. It will double down and speed up the growth.
The rise of a Chinese middle class was seen as a reliable source of growth by many foreign companies. Federica Levato, a senior partner at Bain & Company, said that they expect China to be the world's largest luxury market by the year 2025.
Some foreign companies used to rely on the Chinese market more than before.
The opportunity to expand in China was first seized by the Michigan-based manufacturer of kiln-treated lumber. Rob Kukowski, the company's general manager, said a Chinese buyer offered to buy enough stock to fill 99 shipping containers. For four months, the $2 million order of lumber was the company's main source of business.
Chinese buyers would visit the company's booth and refuse to leave until Mr. Kukowski accepted a million dollar deal on the spot. 80% of the company's sales were made in China by the end of the year.
It was difficult to make a profit from large Chinese orders because many buyers were only interested in the cheapest price. The company focused on finding customers in the US and overseas who were willing to pay more for a better product.
It was a good time. As a result of the trade war, China raised tariffs on lumber from the U.S. China accounts for only 10% of the company's sales, but it still has a big impact on the company. When China stops buying lumber, there will be a downward price war.
A lot of our product goes into that market because of their purchasing power. If the economy slows, our industry is going to have a hard time.
Jin Yu Young made a report. She contributed research.
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