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Into the Great Beyond with BorderX Lab: Part 2

Jun 10, 2019
Written by CJ Affiliate

This is Part 2 of our interview with Jeff Unze, President of Strategic Partnerships at BorderX Lab. (If you haven't already, check out Part 1.) Jeff provides great insight into how brands can successfully tap into the growing Chinese market and capitalize on cross-border shopping. 


CJ: You mentioned resellers as a distribution model. Are there other distribution models that consumers are turning to for cross-border shopping?

Jeff: Almost everyone in China leans on friends or family who are going to school in the US or Europe—it’s almost like a cottage industry. When you're a college student in the US, you become a reseller. You go to local stores to buy and send items back to China as personal packages and every time you travel, you load your suitcase up with X amount of luxury handbags. I think there are a lot of resellers that sell on the Chinese malls as well. They can make a 5-10% margin by buying here and selling on these platforms. Once again, it can be tough to combat unless you are really diligent.

We had a merchant with 15% site traffic from China. When I pointed it out to them, they said, ''Oh yeah, we know about that, but we're not getting any sales from them.'' And I said, ''Are you sure? How many sales are going to Oregon or Monterey Park near Los Angeles?'' They responded, “We're getting a lot of sales from there.'' I explained, ''Those are freight forwarders. These look like domestic sales, but they're really going to China and then they're reselling. Are you seeing bulk buys where they're buying 5 or 10 products at a time?'' Their answer: “Yes—sometimes 20 or 30 at a time.”

That’s all China. We convinced this brand to work with us, and now we write content and talk about the products so they can interact with the end consumers, not just the resellers. Today, this merchant is a good partner, but at the time, they maintained that China wasn't a core market—just icing on the cake. But China is also a big, big cake. You can set it right next to the US cake and enjoy them both.

 

CJ: Many Chinese consumers have VPNs that maybe make them appear like they're not necessarily in that market, so brands aren't even aware of how to quantify the opportunity. What are the best practices that you would recommend to an Advertiser to understand what percentage of their traffic or shoppers are cross-border?

Jeff: I usually look at the ratio of product that is being pushed on the large Chinese B2C retail sites; the official channel vs the unofficial channel. I examine the ratios to see how much a brand is selling within those marketplaces. If they do a search for their product in these marketplaces, they can see all the different companies selling it.In terms of volume, every time we work with a merchant, we’ll show them how much they sold on the big Chinese platforms the month prior. We also show them the traffic. We work with a lot of multi‐brand retailers and so we highlight a lot of brands within those multi-brand retailers in order to see what people are buying. We also look for brand searches within our own platform that are unresolved.

For example, for a few months now a top searched brand has been this cruelty-free beauty company. People in China love them, but because they're cruelty-free, they can’t sell direct so they have no distribution strategy in China. Resellers buy them by the tons. They're the number one searched brand within our company that doesn’t return a result.

The easiest way besides that is to look at how many of your sales come from Chinese sites. There's a pretty good Chinese cohort of sites within the CJ network. Some of these sites ostensibly sell to the Chinese-American audience, but they have a lot of users within their audience that are also selling to China. Even if they are completely Chinese-American, it's a pretty good proxy of the brands that people in China want. A brand that is successful with those sites is going to be successful with us as well if they have the right price point, the right promotion, and the right product line.

 

CJ: What about brands that are completely new to the China market?

Jeff: In terms of taking a brand from zero to one, you can't do it via coupon or cashback—you need to do it through content. You can't discount a product that no one knows—it doesn't matter because you haven't established the value of what it's worth.

For example, we’ve recently been working with a lot of direct-to-consumer brands that haven't been established in China. We're writing content, seeding product, and running influencer co-marketing with them in China to get product in people's hands and get a buzz started. It's very difficult to start that fire through channels outside of content—and even content needs a little bit of help. You need to get a few different sources writing about something. Eventually, we'll get to the point where our voice alone is going to be enough to take a brand from zero to one.

Content is super effective at taking a product or a trend and translating it to a brand, like natural products, or cruelty-free products, or streetwear in our earlier example. If those get big, we can talk about how certain brands fit in. In China, people might only know four products out of a product line of 200. We're really good at saying, "Hey, if you liked the cucumber mask, you should really group it with these products because your results will be that much better." We always do a combination of proven winners, and we try to introduce new brands and layer those in.

 

CJ: What types of offers should brands be aware of when they're working with this audience?

Jeff: GWP—gift with purchase—is huge with Chinese consumers because the concept doesn’t exist there. If a Chinese shopper’s only experience with a brand is through Chinese platforms, they won’t get a GWP. Resellers will buy a product that comes with a GWP, but then they'll split it apart and sell the samples. A lot of our big promotions offer a gift with purchase.

International free shipping also does really well. China’s mentality is similar to how we use Amazon Prime—we’ll filter by Prime in our search results and pay more just to get free 2-day shipping. It's ridiculous, but we do it because we're used to the convenience. Free international shipping only costs $7- $12, but we’ve found that to our consumers it’s the same value as a 40% discount. There's a lot of brands that might never discount, so we tell them to offer international free shipping. Many times we can do it with a 5% boost in commission for a week or two, and that will pay for it. It's not a profit maker for us so much as it is a lift in gross merchandise volume. Even though we use the bump in commission to pay for the international free shipping, it has this huge impact and we all make more in the end. We did it for a brand that never discounts, and we got a 17X increase in sales for that one week over a normal week. We don't want people to expect it, but it's fun for special events.

Discounts are important as well. I always tell companies to consider the entire China cohort of sites when they run promotions because the Chinese shoppers are very savvy shoppers. If you start discounting too much, it can really hurt your brand. One thing to consider is that fewer than 5% of Chinese people have an international credit card so they can’t transact on some of the well-known Chinese focused deal sites. They can only transact with us. If another Chinese Publisher is offering 20% off, and we’re offering 15% off, even though our users can't buy there it'll stop them from buying from us because they think they can get it for a better deal, and therefore they delay; they want to get that best price. They'll leave it in their shopping cart for a month waiting for that deal to come to us. They'll check all the different sites, they'll check the brand site directly. We don't need to be discounted, but if you're going to discount elsewhere, it can hurt your sales with us. We spend a lot of time on content to say: “this is why this is worth buying, this promotion is why it's worth buying now.”

 

CJ: Are there any unique ways that you’ve capitalized on these offers?

Jeff: We've been working on a new strategy focused on samples and GWP to give people a little bit extra—we launched our first cross-border beauty box. We spent six months studying all the boxes that we could find in the world. We ordered them all and took them all apart and figured out what we liked and what we didn't. We took those learnings and constructed a box for cross-border. It has an outer box that's meant for international shipping and an interior box that's really pretty—kind of souvenir quality—with a bag inside that holds all the products together. There are QR codes so you can scan and learn about product usage and why a product is worth buying. Our first run sold out in two hours. Our whole app is about discovery and telling people what's cool and what's new. If we can get product in people's hands, that’s even better.

 

CJ: It sounds like a great way to pair some of the things that might be tried and true with lesser known products so that you can get more of the brand exposure you talked about.

Jeff: Exactly. And it helps us strategically from a channel conflict side, because if you give samples—say there's an established beauty brand’s product in there—people can choose to buy from their brick and mortar store in China, or they can buy from us. It's really their choice at that point, but it is going to create demand. Content is a tide that lifts all boats, so I think it's a real positive.

 

CJ: Are there any other tidbits that you think people should know about your brand, the shoppers, or your market?

Jeff: We have a global expansion on the horizon. China's obviously a huge market, and we've done pretty well there. We're going to continue to grow. We want to do other markets, like the Middle East, soon. Ultimately, the goal of the company is not to focus only on Chinese cross-border, but to do global cross-border and really empower emerging middle-class shoppers.

 

This article was Part 2 in a two part interview with Jeff Unze. Make sure to check out Part 1 for more insight!

Read Part 1

 

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