BorderX Lab connects brands and retailers directly with global Millennial Chinese consumers, helping to mitigate the trade war's impact on tourism.

While China’s wealthy upper middle class is expected to double its spending to 1.2 trillion renminbi by 2025, North American and European brands face challenges, particularly with Asia’s younger shoppers, 50 percent of whom have yet to purchase from luxury brands.

McKinsey & Co.’s April 2019 report, “How Young Chinese Consumers Are Reshaping Global Luxury,” which provided those statistics, suggests that China’s youth movement believes luxury products will lift them up the social ladder, and is primed to spend after the sharpest slowdown in  China’s economy since the Aughts.

Fascinated by Western lifestyles, young Chinese consumers want brands and retailers to speak to them in their own language and with sensitivity to local customs and cultural nuances.

“Shoppers are looking for authenticity when buying directly from a brand or store,” said Nancy Zhang, head of partnerships at cross-border platform BorderX Lab. “We’re trying to make cross-border shopping easier for global Chinese Millennials. There’s a very special mind-set of people who travel often and are extremely digitally savvy.”

BorderX Lab’s local content helps brands and retailers connect with consumers, and selling directly to Chinese shoppers eliminates the need for an agency, joint-venture partner or team in China.

“Chinese tourism is down,” Zhang said, noting that 2.9 million Chinese travelers visited the U.S. in 2018, down from 3.2 million in 2017. That’s bad news since Chinese consumers discover luxury brands and products digitally, then head to brick-and-mortar at purchase time, according to McKinsey, which found that North American brands don’t enjoy the same recognition as European labels with Chinese customers.

BorderX Lab’s 12 in-house editors create content, including articles with click-to-buy opportunities. “Users can comment on articles, post videos or photos,” said Zhang, whose experience includes Moda Operandi and Otte. “We cover lots of luxury and also very accessible products. Our discovery platform, Beyond, has an editorial look.”

For example, Beyond featured a story, “Mr. Big and Carrie’s Manolos Explained,” for Saks Fifth Avenue 10022-Shoe with photos of the “Sex and the City” characters played by Chris Noth, proposing on one knee to Sarah Jessica Parker. Interest in the fashion-obsessed and self-absorbed characters of the HBO series, which in 2004 ended after six seasons, hasn’t waned among young Chinese consumers.

Streetwear is BorderX Lab’s top category. “It’s number one because sneakers became so hot,” Zhang said. “Chinese women have small feet. They have to by kids’ shoes. We sell streetwear styles from Off-White, Vetements and Balenciaga, and we work with retailers and brands. Alexander Wang really understands the Asian market, as a Chinese American. Our content creates a halo for his products.”

BorderX Lab doesn’t charge “merchant partners” for the content it creates on their behalf. “We charge a commission of 10 percent to 20 percent [on sales],” Zhang said. “Our content is very AI-focused. Based on users’ buying history and what they click on, our algorithm makes a recommendation.”

BorderX Lab has 100 merchant partners, including multibrand retailers. “We did an article about Neiman Marcus that includes a history of Neiman’s,” Zhang said. “We use very high-quality images, streaming video and images from ad campaigns.

“Some of our competition in the cross-boarder space is focused on discounting,” she added. “We’re focused on full-price, current season. We pretty much saturated ourselves with multibrand retailers. We now want access to much deeper inventory and special and limited editions. We want to get the long tail and we’d love to have Chanel and Dior.”

“We do well with Michael Kors, Coach and Stuart Weitzman through multibrand stores,” Zhang said. “We’d love to have a direct relationships with the brands. We dig deep into the heritage of a brand. We’re very strong in helping beauty companies promote launches. We have the content and we have the community.”

In the beauty space, BorderX Labs leans on VIP influencers, who spend $2,000 a year on beauty. “Power users are extremely engaged, they’re always commenting and posting,” Zhang said. “VIPs have an agreement that if they get a gift, they have to post about it. We’d like to figure out how to do the same thing for fashion. We’re able to help fashion brands tell their story.

Zhang said there initially was wariness of BorderX Lab. “A lot of brands’ first concern was that we were going to cannibalize their sales, but only 1 percent of Chinese consumers have credit cards,” she said. “We really bring in those people to whom they don’t have access.

“They’re really buying into the Western lifestyle and looking for authenticity directly from brands or stores,” said Zhang, adding that BorderX Lab’s weekly Streetwear are an example of bringing coveted products to China in a timely manner using a shopping technique that’s wildly popular.

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