How luxury brand Forzieri skirts China’s firewall to reach online shoppers
Facebook and Instagram may be blocked by Chinese government censors, but Italian online accessories retailer Forzieri finds that posts by influencers paid to promote the brand find their way to shoppers in China looking for affordable luxury. Working with China e-commerce specialist BorderX Lab, Forzieri’s China sales have risen dramatically in two years.
The Chinese government’s “Great Firewall” blocks easy access within China to some major Western websites, including Google’s search engine and social media sites Facebook and Instagram. Yet Italian accessories e-retailer Forzieri has found that promotional campaigns on those U.S. social networks have boosted sales in China.
There are two ways the Florence-based retailer reaches Chinese shoppers through Facebook and Instagram, says founder and CEO Andrea Forzieri. Many internet users in China use a technology called virtual private networks, or VPNs, to evade the government restrictions and reach blocked sites. In addition, Chinese friends and relatives living abroad often see posts on U.S. social sites and relay word of Forzieri’s products through such popular Chinese social networks as WeChat and Weibo.
“We end up being on Weibo and WeChat, because they pass this information around very quickly,” Forzieri says.
He says the company’s sales in China have picked up significantly in the past two years since he began working with BorderX Lab, the operator of a mobile app that promotes Western products to Chinese shoppers. He chose to work with BorderX, he says, because his mid-sized company did not have the resources to tackle a market as large as China. Forzieri’s annual sales approach 20 million euros, around $23 million, he says.
BorderX says it works with more than 60 merchants and brands, including the Saks unit of Hudson’s Bay Co., Barneys New York Inc. and skin-care brand Peter Thomas Roth to offer a catalog of more than 500 million products to Chinese mobile shoppers. The company says its shopping app has been downloaded more than 4 million times and sales through its app last year exceeded $60 million. Hudson’s Bay is No. 36 and Barneys is No. 180 in the 2018 Internet Retailer Top 1000 ranking of North America’s leading online retailers.
They trust more what’s happening outside of China than what’s happening inside China.
BorderX has a team of 12 full-time editors who promote the brands it represents in China and also recruits from a network of 1,000 well-known bloggers and celebrities to raise awareness of its clients’ products on social media, says Nancy Zhang, the company’s recently hired and New York–based head of partnerships.
Forzieri says his own social media team and BorderX have organized campaigns aimed at Chinese consumers that include not only influencers based in China, but also Western and Asian social media stars in such countries as the United States, United Kingdom, Australia and Singapore. “Chinese shoppers are smart and savvy shoppers,” he says. “They trust more what’s happening outside of China than what’s happening inside China. Savvy shoppers use VPNs to navigate to Instagram, even though it’s blocked in China, to see what’s cool and not cool in Western countries.”
Spreading the word
And even those Chinese consumers who don’t use VPNs, he says, often hear about posts on Western social media through friends and relatives among the large number of Chinese people living outside of their native country. There are an estimated 50 million Chinese living outside China.
Forzieri says he can tell the marketing campaigns work because on some promotional days, sales through BorderX double. Overall, he says sales to China and Hong Kong now represent about 15% of his company’s revenue, compared with 2-3% before he began working with BorderX.
He says he’s seen a change in the kind of Chinese consumer looking for Western luxury goods in recent years. While five years ago, the typical Chinese visitor to Forzieri’s 17 global e-commerce sites might have been shopping for a Gucci or Prada handbag that could cost $2,000 or more, today there are more middle-class Chinese looking for a product that’s special but still affordable.
“This middle class doesn’t have $2,000 for a bag, but they may want to buy a bag once a year,” he says. “They’re looking for diversity, for novelty, something that’s affordable but still exclusive.”
Forzieri’s moderately priced Leparmentier line of purses has been a hit with Chinese mobile shoppers.
He says Forzieri has had success with private-label handbags it designs, such as its Leparmentier Paris line of purses that typically cost under $300. He sees unmet demand in China for premium handbags priced under $400. “That’s something missing on the market,” he says.
BorderX specializes in reaching that broader layer of middle-class Chinese consumers who may not be wealthy enough to travel to Paris or London, but who want premium Western goods.
Local payment methods
One way BorderX enables this larger pool of consumers to buy goods from companies like Forzieri and U.S. retailer The Finish Line Inc. (No. 101 in the Internet Retailer Top 1000) is by offering local payment methods. Zhang says only 1% of Chinese consumer have credit cards from such global networks as Visa and MasterCard, but hundreds of millions have WeChat Pay and Alipay accounts, two local online payment methods that BorderX accepts.
A 2017 Penguin Intelligence survey found 94% of consumers surveyed in China’s biggest cities prefer to make daily purchases with mobile payment systems like Alipay and WeChat Pay. U.S. payment card publication the Nilson Report estimates 15 million Chinese consumers have international credit cards, a small fraction of the roughly 1.1 billion Chinese adults.
Zhang agrees with Forzieri that China’s online shoppers are perceptive and persistent, saying they may often check a half-dozen sites to get the best price on a particular product. Offering discounts in China, she says, “is a double-edged sword. You may get a spike in volume, but you’re training the customer not to buy from you until a discount comes around.”
BorderX helps clients boost sales without discounting by managing limited-edition product releases, bundling items together and by offering gifts with purchases. She says skin-care brand Peter Thomas Roth has introduced new products by including them as free gifts with purchases of another item. “Our customers feel they’ve been rewarded for shopping with Peter Thomas Roth, and it’s an opportunity for Peter Thomas Roth to get new products into the hands of 4 million consumers in a new market,” Zhang says.
When Forzieri makes a sale through BorderX, the retailer ships the product to a BorderX warehouses in the U.S., and the company forwards parcels in bulk to China. (BorderX also operates warehouses in Europe.) Forzieri says it generally takes about 10 business days for packages to arrive. (Zhang notes deliveries to rural areas in China can take a few days more.) Shipping charges typically are in the range of $12-15. Forzieri offers free shipping on orders of about $300.
Getting goods through customs
BorderX offers clients two ways to handle China’s customs and duty taxes, which can reach 30-40% depending on the product, but may not be charged if a customs official doesn’t check the incoming package. Zhang says about one in 10 packages arriving at Chinese customs gets checked. The consumer can choose to pay a small fee in advance, generally 2-3% of the purchase price, and then BorderX pays the customs fee if it’s charged. Or, someone in a rush could pay the duty fee in advance to ensure fast passage through customs. BorderX is encouraging consumers to choose the latter model as it minimizes the risk of goods being held up at the border.
Forzieri operates its own Forzieri.cn site in China, but it mainly serves consumers already familiar with the brand and is not a major source of sales. The Italian brand did try selling on Tmall, Alibaba Group Holding Ltd.’s big brand-friendly online marketplace, but Forzieri says the costs of creating a storefront on Tmall and then advertising on a shopping portal with thousands of competitors ate up all the profits. “You end up fighting every day, and in the end three’s no margin left,” he says.
While he would not go into detail on the sales commission he pays, he says with BorderX, “We are making money.”