Why culture does matter – An analysis of Dolce&Gabbana’s unexpected experience in China

By Robert Yu and Sergio Bruno, China and Italy Partners at Global PMI Partners

Ignoring cultural differences or not giving them enough attention has been a cause of failures in many cross-border business activities.

Cultural understanding goes far beyond gender or racial respect.

The more complex the situation is, the higher attention must be given. Complex projects (like cross-border acquisition and post-merger integration) require close attention and sensitivity to cultural issues.

Dolce&Gabbana (D&G) learned that lesson the hard way when it faced public outrage and a boycott over what was perceived in China as culturally insensitive promotional videos for a runway show in Shanghai and subsequent posts of insulting comments in a D&G co-founder’s Instagram chat.

Background

Fashion is a large industry in Italy. It is estimated to gross about 65 Billion Euros, that is almost 4% of Italy’s GDP.

In Italy, there are some world-famous Italian fashion brands, like Gucci, Prada, Armani, Dolce&Gabbana, and many others.

Founded in 1985 by Domenico Dolce and Stefano Gabbana, it has always demonstrated with an image of innovation mixed with its Mediterranean origin. Its headquarter is located in Milan, Italy with a strong international presence in New York, Tokyo, Hong Kong, Shanghai, Beijing, and Sao Paulo.

The company revenue was about 1.1 Billion Euro (for the year ending on March 2017) and then decreased to 0.9 Billion Euro (for the year ending on March 2018).

The revenue comes mainly from Europe (about 70%). Although its Chinese market sales only contribute about 10% to its total revenue, China has been the highest growth market for D&G. This is not a secret since one-third of the world luxury consumption comes from China.

To capture the huge market demand for luxury goods, D&G entered the Chinese market in 2006 and has been engaged in many marketing efforts including hiring local Chinese celebrities as spoke-persons for its brand and sponsoring many fashion shows.

D&G had planned a runway show in Shanghai for November 22nd; to prepare for this event, D&G had produced a promotional video in which a Chinese model tries to eat three typical Italian dishes: a Pizza, a dish of Spaghetti and a Sicilian Cannolo with chopsticks.

In the video, the model showed some difficulties in eating these dishes with chopsticks and the voice-over statements that were intended to be funny or jokes in Italian culture but were perceived as very offensive in the Chinese culture.

It may have started as a joke, but received very serious chain reactions from Chinese audiences and the public in China, in fact, it was perceived as an insult to the Chinese culture and the tradition.

At least two celebrity spoke persons have canceled the contracts representing D&G, many invited Chinese celebrities, fashion models and media voiced their distaste for the D&G action and canceled their planned appearances for the D&G’s November 22nd event in Shanghai. As a result, D&G had to cancel the event.

As of November 23, all major Chinese online e-commerce platforms have pulled D&G products off the shelf and there are virtually no customers shopping at the D&G offline stores except some people returning D&G products they brought not long ago.

Since D&G was not fully aware of the magnitude of trouble they were in, they did not handle the crisis appropriately until it was too late. The company first blamed hackers for the anti-Chinese insults, but the explanation felt flat to many Chinese. Then on Friday, the 23^rd of November, Mr. Gabbana finally made an apology in a video statement posted on social media: “We will never forget this experience, and it will definitely never happen again.”

What went wrong

How could a promotional video receive such outrage in China? At a minimum level, lack of understanding of cultural difference and its impact is one of the culprits.

First of all, the use of the traditional chopsticks is an important tradition of Chinese culture, most of the Chinese probably felt extremely offended while watching the model in the video showing a totally inappropriate way of using the chopsticks while referring to the chopsticks as a “small stick-shaped eating tool”.

In China, Chopsticks represent a tradition with a few thousand years of history and carry deep Chinese cultural and ethnic connotations. For example:

• the square shape on one end and round tip on the end of the chopsticks represent heaven and earth;
• the way Chinese people hold the chopsticks can also be explained by their perspective of the relationship between nature and human being;
• the length of a standard chopstick measure 7 Chinese inches and 6 Chinese cents, representing human’s 7 emotions and 6 wants, and separating human beings from animals;
• a Chinese person would always refer to the chopsticks as one pair and use it in one set with one hand meaning two combines into one makes a perfect set.

If one pays closer attention to the D&G video, one would notice that the fashion model used two hands, one chopstick in each hand and tried to cut the pizza. This is not perceived well in the eyes of the Chinese audience.

Secondly, Chinese people are much more reserved than Italians and do not like to make fun of their traditions. When the promotional video uses the word “small stick-shaped eating tool” to describe the Chinese chopsticks but characterized the Italian Pizza as the “Great traditional Italian Pizza”, Chinese media read between the lines and said that the video paid no respect to the Chinese traditions and it was designed deliberately as if D&G was trying to “teach Chinese people how to use chopsticks”. Of course, we don’t believe this was the intention of D&G, but this is how Chinese people felt.

The consequences

The brand is definitely damaged in China. According to a London-based brand finance consultancy estimate, the scandal could wipe out up to 20 percent of the D&G brand’s value of $937 million Euro. That is about 200 million Euro damage and puts D&G out of the rank for the global 50 apparel brands.

“Without China, the hinterland for growth, D&G will obviously be in a weak competitive position and in danger of being eliminated,” the Chinese business magazine New Fortune said in a social media post-Sunday.

Lessons Learned

What can we learn from this? As a professional service firm assisting our clients expanding globally, we see the following lessons learned:

• Ignoring culture differences carries a high risk.
• Embracing the culture differences and paying full respect and detailed attention to the local culture and tradition is required while doing business in a foreign country.
• Well thought-out and timed communications is critical to handle important events and crisis.

Robert Yu and Sergio Bruno are Partners with Global PMI Partners – seasoned post-merger integration experts that help mid-market companies around the world bring their operational, technical and cultural differences into alignment.
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