BorderX Lab, founded five years ago by three former Google engineers, had a simple purpose, which is to “make it safe and convenient for shoppers worldwide to buy authentic products at a fair price.”
Since then, the company, which is led by cofounder and chief executive officer Dr. Albert Shen, has grown its logistics and personalization solution to generate a “best in class” cross-border shopping experience. It’s merchant partners include Yoox, DKNY, Alexander Wang, Everlane and Saks Fifth Avenue, among others.
BorderX Lab has a simple pitch. “From payment integration, logistics solutions and marketing services to content creation in Mandarin and more, we handle it all so you don’t have to,” the company touts on its web site. “Launch in China in less [than] two weeks and start growing your sales in the world’s largest e-commerce market.”
For BorderX Lab president of strategic partnerships Jeff Unze, the cross-border e-commerce, or CBEC, market in China is ripe and demand is robust across many categories — even as the current trade war creates uncertainty.
“Cross-border e-commerce is a multibillion-dollar business that grew tremendously with Chinese parents seeking quality mom and baby products from the U.S. and Europe after a product tragedy more than 10 years ago,” Unze said, referring to the time when various Chinese products were found to contain melamine. “Shoppers have since expanded the product categories they purchase to beauty, fashion, health and nutrition, and shoes and streetwear among others.”
Unze told WWD that Chinese consumers shop overseas “for better pricing, unavailable long-tail products and to ensure authenticity and quality.” He explained that cross-border e-commerce is “a great way” to enter a market without the investment required of setting up a warehouse setup as well as putting into place a China team or working with an “external agency or partner.”
“For established brands, it’s a great way to test new product lines, provide their full array of long-tail products and a new channel for liquidation,” he added.
But there are other things to consider when selling into China. Unze said retail marketing “always benefits from consumer insights, China is no different.” He said cross-border shoppers have specific “wants and needs and they buy products in very specific ways. The way you present the price, product groupings or your promotion can mean the difference between sparse sales and selling out.”
There are also cultural and behavioral differences that must be considered. “It’s estimated that one-fifth of Chinese e-commerce transactions are done via cross-border and the driver is the difference in customer needs,” Unze said. “To put it bluntly, cross-border consumers are authenticity-based, not convenience-based.”
To help prospective merchant partners better navigate the market, Unze developed a chart that compares “local platform (convenience customers) versus cross-border (authenticity customers).” Convenience shoppers, for example, prefer quick delivery over price, he said while cross-border customers favor authenticity over convenience. Convenience shoppers want to buy the best-selling products while authenticity consumers “want a mix of top sellers and long-tail products,” Unze said.
In regard to the impact of the trade war, Unze said the impact has been mixed. “The negatives are that while demand still exists, the uncertainty around the trade war is having a chilling effect on companies marketing dollars and launch plans,” Unze said. “Some brands are unwilling to make changes until the situation resolves. Consumers are also affected due to customs policy. In the last 12 months, more packages were delayed in customs, assigned higher duties or refused altogether and sent back to their country of origin. The result is a very uneven buying experience that has made consumers wary.”
But there are positives in the cross-border e-commerce market. Unze noted that the trade war affects B2B exports “much more than B2C exports.” He said products brought in “by the palette for China distribution may have an immediate price increase due to a higher tariff designation. Cross-border products are considered B2C and are subject to a different tariff schedule making them more price competitive.”
To mitigate any impact, Unze said companies can make investments in new shipping channels such as the CBEC channel. “China has recently strengthened this flat 9.1 percent duty rate channel to make it easier for their growing middle class to buy foreign products,” Unze said. “CBEC is a fraction of the price of courier, is much quicker than postal and provides an incredible customer experience.”
Unze said if retailers and brands are facing a new steep tariff rate hike, “they should check with a cross-border expert to determine if it’s more efficient to ship individual orders using various cross border channels. Companies may be surprised by the results.”