Power to the People: China and the Internet

While social commentary in China, either via public demonstrations or offline media, is still heavily controlled by the Communist Party, there is one place where it is alive and well:  on the Chinese bulletin boards. And it is a force best given its due by those who are the target of its ire, as the power of the Chinese Internet community to shape offline public opinion is, well, quite significant. This is a phenomenon that was most recently chronicled by The Economist in a story concerning Starbucks and its presence inside the Forbidden City:

IF THE strength of Chinese nationalism were to be gauged by its
expression on the internet, it would seem a powerful force indeed. A
blog posting a couple of weeks back complaining about a Starbucks
branch in the Forbidden City, an ancient imperial palace in the centre
of Beijing, has triggered a torrent of online criticism against the
American firm and those who allowed it to open there.

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Why should Starbucks, or the Forbidden City’s management, pay
attention to online chatter? The answer is that, in a country where the
media are fettered by Communist Party censorship, and public protest of
any kind is discouraged by the authorities, the internet plays an
unusually prominent role as a barometer of public opinion.

Even senior officials say they pay attention to it. Online protests
sometimes appear to influence party policy. Four years ago the
government revised its vagrancy laws, after heated online debate about
the fatal beating of a university graduate held in jail for lacking
correct identification papers.

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Starbucks may yet weather this storm, as it did a smaller one soon
after opening the Forbidden City outlet. At that time it removed some
signage, to answer complaints that it was not blending in. Its small
shop is now hard to spot. Better that than the fate of KFC, the seller
of Kentucky Fried Chicken, which was obliged to close an outlet in a
park north of the Forbidden City four years ago when the government
feared for the garden’s “imperial style.”

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This is just a small example of the power of the BBS denizens who have shown their displeasure with both local and foreign companies. A stark example of this was in the case of Avon, which in mid-2005 was given the ability to engage in direct selling following a 1998 government ban. Avon responded to this news by immediately creating a massive 3,000-strong direct sales force, and sharply limiting support to the Chinese distributors that had helped it grow during its successful expansion in the late 1990s/early 2000s. Further, the financial markets expected Avon’s metoric growth in the emerging markets to move forward unabated, a significant component of which was its continued success in China. Following its ham-handed transition from distributor-based to direct selling, the Chinese BBS was afire with complaints over Avon’s handling of its distributors, 74% of which demanded inventory refunds. This fury was then picked up in local print media, and there was even a picture of an enraged distributor pointing his finger in the nose of the head of Avon China. Needless to say, this was not good news for Avon.

But believe it or not, this story was not picked up in Western media until after Avon released its earnings over two months later. And guess what - they whiffed. Terribly. And why did they whiff? Because sales in China had fallen 16% in the wake of channel conflict. All you needed to do was connect-the-dots. The “smoking gun” was out there to be seen. So I guess there are two key take-aways: (1) don’t think that China is some repressed society without an outlet for expression. It has an outlet, and it’s called the BBS; and (2) what happens in the East can effect the West, and for some reason it often takes a long time for relevant information to find its way over here. Unless you have the right tools. Remember the adage “Think Global/Act Local” - whoever said it was right.