When one major retailer decided, a few weeks after Russia’s invasion of Ukraine, to keep its Russian stores open, consumers in Europe and beyond swiftly vowed to boycott the chain. It’s unclear how many actually did, but the reputational harm the boycott caused the retail chain was so severe that the company swiftly reversed course. Its fate seems to have convinced many other Western companies to also leave Russia. Western consumers concerned about geopolitics are likely to turn their sights to companies operating in other countries too – and they’re not the only group willing to stage boycotts over geopolitics.
When Russia invaded Ukraine, the many companies who decided to stay – until a consumer backlash conducted mostly on Twitter convinced them otherwise -- were demonstrating the corporate mindset that has over the decades seen Western companies make and sell their wares in many countries with questionable political or human rights track records. Many did business in apartheid South Africa until a boycott by Western governments forced them to leave. They do business in Myanmar and Saudi Arabia, even though both countries’ regimes have a poor human rights record and engage in military violence, in the case of Myanmar against the Rohingya minority and in the case of Saudi Arabia against Yemenis. But Western consumers haven’t responded by staging boycotts against Western companies active in these countries. To be sure, smaller activist groups had criticized a few brands over Myanmar, but until Russia’s invasion of Ukraine there hadn’t been any major geopolitically motivated boycotts of Western companies.
By Western consumers, that is. But they’re not the only ones staging boycotts. According to a July 2022, report by researchers at the Swedish National China Centre, a think tank funded by the Swedish government, between 2008 and 2021, Chinese consumers conducted 90 boycotts of foreign companies, with most of the boycotts taking place from 2016 onwards. Most of the boycotts, the researchers found, targeted companies from North America, Europe, Japan or South Korea in the apparel, automotive, and food and beverages sectors: that is, consumer brands.. The haute couture houses of Givenchy, Dior, Coach and Versace have also been subjected to Chinese consumer boycotts on social media, in their case after having seemed to imply that Taiwan is independent by, for example, not including it on a map of China, while companies including Burberry were targeted over their involvement in the Better Cotton Initiative, which promotes ethical cotton sourcing. “Boycotts were most commonly triggered by company statements or actions perceived as challenging China’s governance in Hong Kong or sovereignty over Taiwan, or as unfairly criticising China’s human rights record in Xinjiang,” the Swedish National China Centre’s researchers found. Cotton cultivation in the Xinjiang region, a leading source of cotton, includes use of Uyghur forced labor; the June 2022 Uyghur Forced Labor Prevention Act bans US-based companies from using cotton whose supply chain involves forced labour.
The boycotts have a tangible effect on companies’ bottom line. All companies that have suspended operations in Russia or left the country altogether to avoid a consumer boycott – and thus reputational damage – have incurred financial losses. Some have, of course, left the country primarily because they consider it a moral imperative, in which case financial losses are of secondary importance. Others, though, face the new dilemma of leaving a country to avoid a consumer boycott and thus forfeiting revenues – or staying in the country and suffer reputational damage.
Indeed, companies contemplating leaving a country to avoid a consumer boycott face another dilemma: what is the tipping point for consumers to stage a boycott? The information available to date provides little guidance. Why did Russia’s 24 February invasion trigger consumer boycotts while Russia’s 2014 annexation of Crimea did not? Indeed, why did Western consumers hardly react at all after the annexation of Crimea? Why did they not stage boycotts of Western brands active in Saudi Arabia after journalist Jamal Khashoggi was murdered? It’s impossible to know. Indeed, the boycott of a Japanese retailer seems not have been the product of spontaneous outrage among Western consumers, rather than the work of hashtag activism.
That means that the next time an event or an act enrages enough Western consumers, a company involved in the situation faces the risk of a boycott that could do considerable reputational harm on global operations even if it causes only minimal financial losses in the affected region. Chinese consumers, meanwhile, will continue to boycott companies they see as offending China, and consumers in other countries could start targeting companies over specific issues relating to their countries.
Such intangible losses snowballing into substantial tangible financial losses, resulting from consumer boycotts don’t fit neatly into risks traditionally modelled by insurers. Indeed, because frequent consumer boycotts from different corners are a new phenomenon, there is little data that underwriters could use for modelling. Consumer sentiment is changing, too: while older consumers focus mostly on quality and price in their choices of consumer products, a 2021 study by the market-research firm Forrester found that more than half of American Generation Z consumers research brands to ensure they align with “their position on corporate social responsibility.” But that modelling should start soon – especially because as geopolitical tension continues to grow, consumer boycotts are certain to increase too.
