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A Canada Goose store, in Beijing, on Dec. 2.TINGSHU WANG/Reuters

Luxury parka maker Canada Goose is facing renewed scrutiny in China from state media and regulators, months after it was fined for allegedly misleading advertising.

This week, Chinese media reported that a customer in Shanghai was told by a Canada Goose store that she could not return a faulty jacket despite the brand advertising a 30-day return policy on its website. Allegations Canada Goose was applying a double standard to customers in China soon went viral, with some online even calling for a boycott.

The problem appears to have arisen from a confusing clause in Canada Goose’s refunds policy, displayed in all its stores: “Unless otherwise provided by applicable laws, all products sold at Canada Goose’s retail stores in the Chinese mainland are strictly non-refundable.” According to Canada Goose, this means that refunds are permitted, as is required legally; but staff have interpreted it otherwise, refusing to accept returns based on the policy.

In a statement, the Canadian retailer said it “abides by Chinese laws and regulations,” and its policies are “in line with industry standards.”

Canada Goose goes viral in China – for all the wrong reasons

Insistence that there is no discriminatory refund policy has largely fallen on deaf ears, however – and not just among Canada Goose’s critics. The Global Times, a state-run tabloid, sent reporters to several stores in Beijing and Shanghai after the company issued a statement clarifying it allows refunds, only to be told by employees that they were not permitted to do so.

On Wednesday, regulators in Shanghai, who in September fined Canada Goose 450,000 yuan ($90,000) over misleading advertising about the quality of down stuffing inside the company’s parkas, summoned representatives to provide a “formal explanation” for the refund scandal.

This is the second time Canada Goose has made headlines in China in under a week, both times for the wrong reasons. On Friday, the brand was the number-one trending topic on social media platform Weibo, as users pointed to the September ruling as a guide on how to find quality parkas and puffer jackets to buy, with Canada Goose used as the negative example.

“They haven’t really done anything wrong – it’s just their turn,” said Avery Booker, the co-founder of Jing Daily, a trade publication focused on the business of luxury in China. “If you look at them objectively, I think they’ve done everything right in China as a foreign brand.”

The Toronto-based brand operates 14 stores across the Chinese mainland, with three more in Hong Kong and Macao. Its store on TMall, the Alibaba-owned e-commerce platform, recorded sales of 167 million yuan ($33.2-million) in 2020, according to Chinese state media. In a recent statement, Canada Goose said its wider Asia-Pacific business was worth around a quarter of a billion dollars.

But the current climate in China is intensely difficult for foreign brands, with companies such as Nike, Burberry, Adidas, H&M and even leading luxury brands like Dior suffering backlashes and criticism.

Mr. Booker saw the recent scrutiny of Canada Goose as partly designed to boost local Chinese competitors, pointing to the upcoming Winter Olympics in Beijing early next year.

“Canada Goose has kind of been a victim of their own success – they’re still the hottest winter brand in China,” he said. “And winter clothing, the winter sports arena, is a big area that Beijing is focused on ahead of the Winter Olympics – one that doesn’t have many established local brands.”

With domestic competitors nipping at their heels, Mr. Booker said, brands like Canada Goose and Moncler are going to come in for extra scrutiny.

“It seems like the only brands that are going to be immune from this in the winter sphere are going to be Chinese-owned,” he added.

Luxury brands have also been hit by the drop in Chinese tourism as a result of the coronavirus pandemic. Shoppers who once would have thronged the streets of Paris or Milan are now staying home, and this has created new opportunities for domestic brands to win their businesses – and led foreign competitors to face extra scrutiny and often nationalist criticism online.

Mr. Booker said that for some products, such as luxury watches and jewelry, as much as 70 per cent of sales to Chinese consumers are made abroad, and even for larger products this can still run over 50 per cent.

The problem could be particularly acute for brands like Canada Goose whose products are more seasonal. Chinese consumers might have bought jackets during summer sales while on holiday, but they may be less likely to do so at home, particularly if there is a high-quality – but cheaper – local competitor on offer.

While observers expect Canada Goose to weather the current storm, the outlook for foreign brands in China is not good, especially as the country goes into the politically sensitive year of 2022, in which it will mark not only the Beijing Olympics, but the 25th anniversary of the Hong Kong handover, an all important Communist Party congress at which President Xi Jinping is expected to seek an unprecedented third term.

“It’s going to be a really tough time for brands, think they’re going to have to hunker down,” Mr. Booker said.

With a report from Alexandra Li.

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