By KEN MORITSUGU and COLLEEN BARRY
BEIJING (AP) — Don't mess with China and its growing cadre of powerful luxury consumers.
Dolce&Gabbana learned that lesson the hard way when it faced a boycott after Chinese expressed outrage over what were seen as culturally insensitive videos promoting a major runway show in Shanghai and subsequent posts of insulting comments in a private Instagram chat.
The company blamed hackers for the anti-Chinese insults, but the explanation felt flat to many and the damage was done. The Milan designers canceled the Shanghai runway show, meant as a tribute to China, as their guest list of Asian celebrities quickly joined the protests.
Then, as retailers pulled their merchandise from shelves and powerful e-commerce sites deleted their wares, co-founders Domenico Dolce and Stefano Gabbana went on camera — dwarfed against the larger backdrop of an ornate red wall-covering — to apologize to the Chinese people.
"We will never forget this experience, and it will definitely never happen again," a solemn-looking Gabbana said in a video statement posted Friday on social media.
The apology video , and the sharp public backlash that demanded it, shows the importance of the Chinese market and the risks of operating in it. More broadly, it highlights the huge and still-growing influence of China, a country that cannot be ignored as it expands economically, militarily and diplomatically.
These trends are intertwined in frequent outbursts of nationalist sentiment among consumers who feel slighted by foreign brands or their governments. It's not the first time a company has apologized, and it surely won't be the last. Mercedes-Benz did so in February for featuring a quote by the Dalai Lama on its Instagram account.
For Dolce&Gabbana, it could be mark the end of its growth in China, a crucial market for global luxury brands that it has cultivated since opening its first store in 2005 and where it now has 44 boutiques.
"I think it is going to be impossible over the next couple of years for them to work in China," said Cary Cooper, a professor of organizational psychology and health at Manchester University in England. "When you break this kind of cultural codes, then you are in trouble. The brand is now damaged in China, and I think it will be damaged in China until there is lost memory about it."
London-based Brand Finance consultancy estimates that the scandal could wipe up to 20 percent off the Dolce&Gabbana brand's value of $937 million, which already places it out of the top 50 global apparel brands. They are 36th among all Italian brands, extending to sectors like automotive.
That could shake Dolce&Gabbana's financial health. The privately held company does not release its individual sales figures. But Chinese consumers are responsible for a third of all luxury spending around the globe, according to a recent study by Bain consultancy. That will grow to 46 percent of forecast sales of an estimated 365 billion euros ($412 billion) by 2025, fueled by millennials and the younger Generation Z set, who will make a growing percentage of their purchases online.
"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. "This is one of the major reasons why D&G finally lowered its head. They really cannot survive without the Chinese market."