It has been a tough few years for those in business. Lockdowns shut down whole industrial sectors worldwide, turning profitable businesses into loss-making ones, while a lot of smaller businesses went under entirely. Many companies will now be hoping for a return to some type of normality after the COVID crisis. However, there are strong signals that a resumption of how things were is not on the cards any time soon, as the world appears to have entered into an age of accelerating grand crises.

Even before COVID, the climate crisis was increasingly disrupting the world (and the companies operating it in) through extreme weather events. Then, just as some countries had declared their war against COVID to be won, the invasion of Ukraine has not only reshuffled global geopolitics, but also led to a dramatic increase in energy and food prices, having big knock-on effects on a whole host of other sectors. 

One day there may be a time after COVID, after the Ukraine war, and even after the climate crisis. But there’s unlikely to be a point of general stability any time soon. Humanity is pushing environmental limits to breaking point, risking further crises – whether in terms of disease, conflict, or natural disasters. Businesses, therefore, need to shift how they operate. This means responding to current crises, being better prepared for future crises, and addressing their own role in generating these crises in the first place. With that in mind, here are three types of business models companies should start adopting now.

1. Respond to Crises

What is needed are reactive business models that can respond to crises at hand. Such adaptability will naturally have a survival element, in which organizations do whatever is necessary to mitigate negative effects on themselves. This means aligning companies’ management practices with the “new normal” after the crisis, instead of holding on to the old normal from before. Where appropriate, such models should also have a crisis-mitigation element, addressing the wider negative effects of the crisis at hand where they can.

It appears fossil fuel behemoths such as Shell and BP might be starting to do just that. Having long been under attack for knowingly contributing to the climate crisis and counteracting shifts to more sustainable energy systems, they appear to now be adapting to crisis forces. These forces include, most notably, the global trend towards phasing out fossil-fuel vehicles. As such, these companies have begun to transform key aspects of their business. A first move, for example, seems to be repurposing their petrol station operations into an electric vehicle charging infrastructure. As they ride the waves of the climate crisis, we can expect to see them make many disruptive greening changes like this.

2. Be Ready for Future Difficulty

Businesses also need to move from stability-based business models to accepting that the business reality is now one characterized by volatility, uncertainty, complexity and ambiguity. Value propositions encompass the benefits a business offers, for example to its customers, employees, and the community. Building business models for this new world means establishing value propositions for companies that are fit for the long run, that can morph into all kinds of crisis scenarios. It also means being agile and quick to adjust. 

One form this could take, for instance, is for a business to offer products and services that address timeless and fundamental needs like health, food, or security, rather than short-lived superficial wants like those related to fast fashion or the latest technological fads. A good example of such a business model is that of Chinese electronic goods corporation Haier, which has  explicitly tuned in to an ever-changing world, aiming to deliver “products that respond to the constantly changing needs of the modern home.” For instance, Haier responded to Asia’s air pollution crisis by developing an integrated air conditioner and air purifier.

Alongside this, Haier employs its unique “RenDanHeYi” (or 人单合一), which freely translates to “one single person in unity,” way of working, making it a collective of smaller, semi-autonomous companies that gives both individual freedom and collective responsibility to self-organized micro-entrepreneurs. This makes Haier a fluid, agile and resilient organization. By operating as a network of micro-enterprises, each of which works closely with customers to respond to their changing needs and situations, the business can evolve more easily as each new crisis plays out. Because of these features in their business model, Haier has done exceptionally well during and after the COVID crisis.

3. Help Prevent Crises of Tomorrow

Finally, businesses can better set themselves up for the future by adopting models that specifically mitigate or even prevent future crises. While COVID, the Ukraine crisis, and climate change are still ongoing problems, many business models have been geared towards keeping other things from becoming the next grand crisis. Some companies, for example, are adopting business models that promote reconciliation and peace, with view to preventing disruptive future armed conflict. Examples range from former Colombian guerrilla group members building adventure travel businesses that show the previously hidden side of the conflict, to coffee cooperatives in Rwanda designed for Hutus and Tutsis to reconcile through collaboration.

Managing businesses in an age of accelerating crises is challenging. However, transforming business models and managerial practices can go a long way in both making current and future crises manageable, and possibly even mitigating future crises.

Oliver Laasch is a Senior Lecturer in Entrepreneurship and Innovation at the University of Manchester. (This article was initially published by The Conversation.)

Reports are putting a valuation of $100 billion on Shein, following a recent funding round for the popular Chinese retailer. The latest round, which closed last week, saw Shein raise between $1 billion and $2 billion, according to the Wall Journal, with private-equity firm General Atlantic participating in the round, along with existing investors Tiger Global Management and Sequoia Capital China. The headline-making round does not only enable Shein to nab the title of one of the world’s most valuable privately-held companies (it is worth more than the combined market capitalization of traditional fast fashion players Inditex and H&M), it is a nod to the enduring appeal of cheap, trendy fashion. 

Shein’s funding – which follows from outsized growth by the retailer in the U.S. over the past two years, in particular – is striking, in part, because it amounts to a glowing endorsement for the ultra-fast fashion retailer and the model more generally, one that sees Shein drop thousands of new garments and accessories styles each week, with price tags that start at $2 for a crop top and that max out at $150 for a down puffer. The steady stream and high turnover of such of-the-moment (and sometimes lawsuit-spurring) wares – from footwear that mirrors Jacquemus’ to tops that are a dead-ringers for ones from Fendi – has enabled 14-year-old Shein to build an apparel business of an eye-watering scale and valuation thanks to robust demand largely from Western Gen-Z and millennial shoppers. 

The rising success of Shein, which generated a reported $15.7 billion in revenue in 2021, is noteworthy, as it appears to chip away at the overarching narrative that fast fashion is losing steam, and that consumers, particularly in younger demographics, are actually placing significant weight on companies’ sustainability credentials when it comes to their shopping habits. The past several years have been awash with consumer survey figures that suggest that consumers are “prioritizing sustainability” – or at least incorporating considerations about sustainability into their purchasing practices – in increasing numbers. “While the industry is reorganizing for the next normal” in the wake of the pandemic, McKinsey reported in 2020 that “consumers want fashion players to uphold their social and environmental responsibilities.” 

The consultancy pointed to 67 percent of surveyed consumers, who said that they consider the use of sustainable materials to be an important purchasing factor. 63 percent of those same surveyed individuals states that they “consider a brand’s promotion of sustainability in the same way.”

In May 2021, a report from clean manufacturing firm Genomatica stated that its surveys revealed that consumers in the U.S. want to make more environmentally-friendly choices when shopping for clothes, with 72 percent of survey participants stating that they are aware of “environmental sustainability issues” in the fashion industry, including “excess consumption, carbon emissions and water pollution from dye processes.” Around the same time, after surveying 10,000 people across 17 countries, global strategy consultancy Simon-Kucher & Partners determined that “sustainability is becoming increasingly important in consumers’ purchasing decisions,” and that younger consumers are “actively taking steps towards becoming more sustainable.” 

However, if revenues for players like Shein, as well as Zara-owner Inditex, for instance, which saw sales for FY 2021 climb to $8.25 billion, and other similarly-situated companies, are any indication, the reality of such rising sustainability sentiments from consumers may be a bit less matter-of-fact than meets the eye. In fact, among the biggest potential threats to the continued growth of Shein is likely not waning consumer interest in fast fashion, as while sustainability may be important to consumers (at least in theory), the reality is that price, convenience, and/or a wide – and regular – variety of wardrobe options is still driving purchasing behavior for the bulk of consumers.  

If there is a real risk on the sustainability front from titan like Shein, it will more likely to come in the form of increasing proposals for legislation, including the recently-released proposals from the European Commission that specifically focus on volume and durability of companies’ annual output. As part of a package of legislative proposals, the European Commission stated on March 30 that is looking to amend the existing Consumer Rights Directive to “oblige traders to provide consumers with information on products’ durability,” which could require that “consumers be informed about the guaranteed durability of products.” This provision could prove significant for apparel and footwear retailers, particularly since the Commission explicitly stated that it is looking to implement “a new strategy to make textiles more durable, repairable, reusable and recyclable,” and to “tackle fast fashion.”  

As of now, the Commission states that textiles and footwear “are currently subject to certain product requirements, for instance concerning chemicals and labelling, [but] there are no specific requirements governing circularity (e.g. durability, reparability, recyclability and recycled content).” This is something that it is presumably aiming to change for products sold across the 27-member bloc. 

It is unclear as of now the extent to which the EU’s proposals – and others like it – would impact China-based Shein, but the rising number of legislative proposals that are being advanced across the globe certainly seem noteworthy, and potentially, one of the most significant hurdles to the enduring growth (and valuation) goals of the industry’s most sizable fast fashion giants. 

Amazon platforms were not among the names on the latest version of the U.S. Trade Representative (“USTR”)’s annual Review of Notorious Markets for Counterfeiting and Piracy. Released on Thursday, and based on nominations that it receives, as well as other input, such as from U.S. embassies, the Notorious Markets list highlights online and physical markets that “reportedly engage in or facilitate substantial trademark counterfeiting or copyright piracy,” and this year, identifies 42 online markets and 35 physical markets that are reported to engage in counterfeiting or piracy, including Alibaba-owned AliExpress and Tencent’s WeChat e-commerce ecosystem, two significant China-based online markets that “facilitate substantial trademark counterfeiting.”

Among the other China-based entities on the 2021 “Notorious Markets” list, an official U.S. government intellectual property “black list,” are search-engine provider Baidu Wangpan, marketplace DHgate, social shopping site Pinduoduo, and Alibaba-owned Taobao, which appear on the list for another year in a row, along with nine physical markets located within China that the USTR asserts “are known for the manufacture, distribution, and sale of counterfeit goods.” 

AliExpress, DHGate, PinDuoDuo & WeChat

Addressing the inclusion of AliExpress for the first time, the USTR stated in its report that despite falling under the Alibaba umbrella, which is “known for having some of the best anti- counterfeiting processes and systems in the e-commerce industry,” and boasting “much-improved communication with right holders, on their IP protection and enforcement issues,” rights holders have cited “a significant increase in counterfeit goods being offered for sale on AliExpress, including goods that are blatantly advertised as counterfeit and goods that are falsely advertised as genuine.” In addition to reports of “a vast increase in the number of sellers offering counterfeit goods” via AliExpress, the USTR asserts that “another key concern is that known sellers of counterfeit goods on AliExpress remain prevalent, purportedly due in part to the lenient seller penalty system and a removal process that does not deter sellers from continuing to offer counterfeit goods.” 

Turning its attention to DHgate, the USTR states that the business-to-business cross-border e-commerce platform is reported to be “the most popular online market for purchasing bulk counterfeit goods that are then resold on other markets, including the online and physical markets listed in this year’s Notorious Markets list.” While DHgate pointed to “continued improvements to its seller vetting system,” the USTR, nonetheless, noted that “right holders again identified [its] inadequate seller vetting, ineffective proactive anti-counterfeit processes, and lack of transparency,” which the USTR puts forth as “likely reasons why the volume of counterfeit goods on the platform remains unacceptably high.” 

As for PinDuoDuo, the USTR revealed that “despite significant improvements to its anti-counterfeiting tools, processes, and procedures in the past few years, the large volumes of counterfeit goods that stubbornly remain on the platform evinces the need to improve the effectiveness of the tools or close the gaps in their implementation.” Based on feedback from rights holders, the USTR states that Pinduoduo “appears to be moving in the wrong direction, with delays in takedowns, lack of transparency with takedown procedures, more burdensome and expensive processes, less effective seller vetting, and reduced cooperation with brands participating in the Brand Care program.”  

And in a lengthy entry dedicated to WeChat, the USTR characterizes the Tencent-operated platform, which has 1.2 billion active users around the world in 2021, as “one of the largest platforms for counterfeit goods in China.” Of primary concern for the USTR when it comes to WeChat is the company’s e-commerce ecosystem, which “seamlessly functions within the overall WeChat platform and facilitates the distribution and sale of counterfeit products.” For example, the USTR states that sellers of counterfeit goods are allegedly “directing potential buyers to their counterfeit product offerings by advertising on WeChat [and] other communication portals.” 

Amazon is Off

Maybe even more striking than the names that appear on this year’s list are ones that were not included. On the heels of a handful of the Amazon sites being included on the 2019 and 2020 versions of the Notorious Markets list, the Jeff Bezos-founded company has been wiped from this year’s list.  (It is worth noting both that the USTR list is not an exhaustive measure of all markets that reportedly “deal in or facilitate commercial-scale copyright piracy or trademark counterfeiting,” just as it “does not reflect findings of legal violations or the U.S. government’s analysis of the general intellectual property protection and enforcement climate in the country concerned.”)

After reportedly skirting placement on the USTR’s Review of Notorious Markets in 2018, Amazon made headlines when a handful of its international e-commerce arms were officially cited in the 2019 list. In connection with its inclusion of Amazon’s Canadian, United Kingdom, German, French, and Indian platforms, the USTR asserted that “submissions by right holders expressed concerns regarding the challenges related to [Amazon] combating counterfeits with respect to e-commerce platforms around the world.”

No small matter, the inclusion of Amazon sites on the U.S. government’s list in 2019 and again in 2020 was characterized as a “watershed event,” due to the company’s American heritage, and it marking the first time that an American company was targeted on the annual list since it was first published by the USTR in 2006. In adding Amazon’s sites to the list in 2020, the USTR cited rights holders’ challenges with “high levels of counterfeit goods,” and concern that “Amazon does not sufficiently vet sellers on its platforms” and that its “counterfeit removal processes can be lengthy and burdensome, even for right holders that enroll in Amazon’s brand protection programs.” 

Speaking out about the list at the time, Amazon called its inclusion a “purely political act” by the Trump Administration and “another example of the administration using the U.S. government to advance a personal vendetta against Amazon.” 

Companies that are identified on the annual USTR list are not subject to financial penalties or regulatory oversight. Instead, the USTR’s list is used to encourage foreign entities and nations to crack down on piracy and counterfeiting. Nonetheless, being name-checked is generally considered to take a reputational toll in the individual company, particularly entities that are looking to position – or reposition – themselves to shed perceptions that their websites are riddled with fakes – a key to gaining bigger customer bases and traction among potential brand partners, while also taking market share from global competitors. 

No mention has been made in this year’s list or by the USTR about how Amazon managed to avoid being named.  

Ongoing tensions between the United States and China have affected many companies around the world. At the same time, the COVID-19 pandemic has also made it very clear that when it comes to a company’s supply chain, reliance on China can have disastrous consequences in the event that these supply chains are interrupted. During this challenging and uncertain time, many companies across various industries are trying to reorganize their supply chains and reduce dependencies that are vulnerable to political tensions and rising costs

While the pandemic has already compelled many companies to become more agile – for example by increasing their number of suppliers – business leaders must now start thinking about the long-term implications of increased uncertainty in the markets since volatility is likely here to stay. Our ongoing research suggests two factors are most important when making decisions on how to respond to the U.S.-China trade war: location and supply chain dependence, and technology. 

Ending dependence on two fronts

The first factor deals with how much dependence companies have on Chinese suppliers and customers. China offers a uniquely complete combination of supply chains and a growing middle class that fuels high demand for almost any good; luxury goods (and the robustness of Chinese demand for them) are among the most headline-making. According to a United Nations report, China is home to almost every industry and its companies offer almost the full range of products and services in each of these industries. 

The second factor is technology dependence. In some industries, blazing a trail on the technology frontier is key to success. North America is still the leading region for many of these technologies (including biotechnologycultured meat, and artificial intelligence) and it is increasingly concerned about its intellectual property falling into Chinese hands. Recent restrictions on Chinese researchers in Canadian universities are one example of protectionist actions spurred by these concerns.

In the future, companies that deal with North American technologies in cutting-edge areas will probably have to avoid delivering to China or using this technology in collaborations with any Chinese companies.

Low vs. high Chinese dependence

Companies with different degrees of dependence on Chinese supply chains and North American technologies are likely to behave very differently. There are four scenarios. First there are companies with low reliance on both North American technology and Chinese supply chains that tend to relocate their manufacturing facilities to a third, low-wage country, such as Vietnam and India, because it is easy to find alternative production sites and to access technology. 

In addition to big names in the mass-market fashion and retail space, Samsung’s display business, which offers digital signage and hospitality displays, is an example. The tech company’s reliance on supply chains in China is low because it owns a relatively complete supply chain ranging from upstream activities (inputs to products, such as chip design) to downstream activities (outputs such as products, like smartphones). In short, Samsung designs, manufactures, and markets its own products. Its reliance on North American technology is also low because the technology required to produce display devices is not limited to North America. As a result, Samsung has shifted its manufacturing of IT and mobile displays from China to India, avoiding tariffs and higher wages in China.

But companies with high dependence on Chinese supply chains could have a hard time leaving China. Take Google’s Pixel phone as an example. In 2019, Google decided to relocate the manufacturing of the Pixel phone from China to Bac Ninh in northern Vietnam to avoid tariffs into the U.S., an important market for its phones. Two years later, Google reversed the decision and started producing the new smartphone in China due to supply chain problems amid increasing uncertainty from pandemic-related restrictions

Relocations to North America

Companies with a high reliance on North American technology and a relatively low reliance on Chinese supply chains, on the other hand, are likely to relocate manufacturing to North America. For instance, TSMC, one of the world’s leading semiconductor foundries, uses substantial American technologies and equipment, including advanced equipment for ultraviolet lithography. Therefore, the Taiwanese company decided to build a new advanced chip factory in Arizona, a decision closely connected to its dependence on both U.S. technology and customers. 

Companies with high reliance on both North American technology and the Chinese supply chain face the biggest challenges. They have no choice but to keep operating in both countries while navigating political risks and market turbulence. 

Tesla is a prime example of this. While dependent on its research and development in the U.S. to enhance its leading technology position, China’s supply chain benefits Tesla with manufacturing speed, cost, and proximity to the Chinese market. That leaves companies like Tesla with no choice but to navigate political tensions and stay present in both markets. As a result, Tesla has built and expanded a factory in Shanghai. Additionally, it has promised to conduct more research and development activities in China and to recruit local talent for local design.

The COVID-19 pandemic has been another wake-up call for business leaders – including in their retail space – that should have prompted them to consider the importance of technological progress and supply chain security. While we do not know how long the pandemic and its restrictions will endure, successful companies think ahead and build resilience and flexibility into their operations.

Felix Arndt is the John F. Wood Chair in Entrepreneurship at the University of Guelph. Abby Jingzi Zhou is an Associate Professor in International Business at the University of Nottingham. Christiaan Röell is a Lecturer in International Business at the University of Sheffield. Steven Shijin Zhou is an Associate Professor in International Business at the University of Nottingham. Xiaomeng Liu is a PhD Student in International Business at the University of Nottingham. (This article was initially published by The Conversation.)

Chanel has prevailed in a lawsuit in China over the sale of a lookalike fragrance that is being marketed under the name N°9, in a case that provides some meaningful takeaways for brands looking to enforce their rights in the Chinese market. The case got its start when Chanel filed suit against perfume-maker Yiwu Story of Love Cosmetics Co., Ltd. (“Yiwu”) in the Intermediate People’s Court of Shaanxi Province on the basis that the Shanghai-headquartered cosmetics company replicated the branding of its N°5 perfume in violation of the Anti-Unfair Competition Law of China. 

At the heart of the recently-decided Chanel case, which was initiated by Chanel in 2019 and first reported by IPKat, is Article 6(1) of the Anti-Unfair Competition Law of China (2019 Amendment), which prohibits parties from offering up products that are confusingly similar to those of others, including by way of “a label [that is] identical or similar to the name, packaging or decoration … with certain influence.” 

Siding with Chanel back in 2020, the trial court determined that the N°5 fragrance and its packaging – namely, Yiwu’s use (and placement) of N°9, “FLOWER OF STORY,” and “Eau de Parfum” in black text on a square white label – meet the “certain influence” standard. In other words, they have “reached the distinctive level to distinguish the source of the [product] among the relevant public in China.” Moreover, the court found that the defendants’ perfume label was notably similar to Chanel’s, thereby, giving rise to a likelihood that consumers would associate the N°9 product with Chanel even though no such association exists between the two companies. Against this background, the lower court sided with Chanel, ordering Yiwu to cease its sale of the N°9 fragrance at issue and pay CNY 600,000 ($94,238) in damages and expenses to Chanel. 

Fast forward to 2021, and Yiwu appealed to the Shaanxi Provincial Higher People’s Court, arguing that “neither Chanel’s N°5 perfume trade dress nor its [labeling] are distinctive enough to identify the source of the product.” In reality, Yiwu asserted that consumers identify the Chanel fragrance thanks to the brand’s use of the “N°5” and “CHANEL” marks that appear within the label on the bottle and not just by the plain bottle, itself.

Even if Chanel’s perfume bottle and labeling (sans any Chanel word marks or logos) were distinctive enough to act as trademarks, Yiwu argued that consumers are not likely to be confused because of the “significant differences [between] the consumer groups” for its products and Chanel’s, and the level of attention paid by such consumers in connection with their purchasing of fragrance products. The defendant also noted the different prices of the two parties’ products: Chanel’s N°5 retails for 61 times more than the N°9 fragrance.  

In a decision handed down in January, the Shaanxi Provincial Higher People’s Court agreed with Yiwu’s argument that based on evidence, including labeling for other brands’ fragrances, “the design of the black frame on a white background [on Chanel’s labeling] is a common decoration for perfume packaging.” The court also found that the positioning/arrangement of the text within the label “is also the usual way of general packaging.”

However, the court, nonetheless, sided with Chanel as a result of Yiwu’s use of “identical or visually basically undifferentiated commodity names, packaging and decorations” on its product, which Article 4(3) of the Interpretation of the Supreme People’s Court on Some Issues Concerning the Application of Law in the Trial of Civil Cases Involving Unfair Competition states “shall be deemed as ‘sufficient to cause confusion (with another’s well-known commodity).’” 

In dismissing Yiwu’s appeal, the court stated that when it comes to perfumes as luxury goods, “the bottle itself is a commercial sign to distinguish the source of the goods, [and] some copycat products are very similar in packaging to luxury packaging through deliberate imitation to attract consumers,” thereby, creating “hazards, such as disrupting the market order and damaging the image of large brands, and this behavior should be regulated.” 

THE TAKEAWAY: Reflecting on the outcome, Tian Lu, a Ph.D. candidate in International and European Law at Maastricht University, states that the case “demonstrates how unfair competition law catches and regulates an area not easily reachable by trademark law: the look-alike or complete copycat [product] that deliberately [lacks the use of] infringing marks.” As for the extra remarks added by the Shaanxi Provincial Higher People’s Court about the harms that follow from products like Yiwu’s, Lu notes that they “make for a straightforward standpoint: [there is] very little room, if any, that the law in China has left for such copycats.”