Nick Kozak for the Toronto Star
Case Studies

Toronto’s Foxy Originals fights Chinese knockoffs of its made-in-Canada Jewellery

Vital Stats
Adress:
70 Production Dr., Toronto
Contact:
1 (866)GET-FOXY
Field:
Jewellery manufacturing
Staff:
6
Offering:
Earrings, necklaces, rings, bracelets, belts
Sales:
50,000 units per year
Core customers:
Professional women aged 20 to 50

They had a gem of a business idea.

Jennifer Ger and Suzie Chemel experienced early success with their Canadian-made jewelry line, Foxy Originals.

They started back in 1999 while attending Western University. Soon after graduating in 2002, the two turned the operation into a full-time affair, and the Foxy pieces — earrings, necklaces, rings and bracelets with colourful enamel designs and unique shapes — quickly attracted attention from fashion editors and stylists. They were spotted adorning celebrities such as Sienna Miller, Paris Hilton and Tori Spelling — who received pieces as gifts from the Foxy team when they visited Toronto for work.

Before long, Foxy Originals was sold in hundreds of boutiques across North America.

“We hit the ground running,” Ger says.

But one fateful day several years ago, Ger was working at a Toronto trade show when she spotted a competitor selling pieces that looked nearly identical to Foxy’s.

“We’re known for our reversible enamel pendant,” she explains. “On one side you might have a flower, and on the other maybe a landscape with birds. And we saw they were doing the exact same thing.”

Not only did the copycats’ reversible pieces look just like Foxy’s, the competitor — who Ger says manufactures its jewelry in China — was undercutting their already low prices (Foxy’s earrings go for $20 to $24, necklaces from $34 to $56, and rings from $20 to $26) by a full 25 per cent.

Foxy’s pieces have a trademark “Made in Canada”  tag. Adding insult to injury, the knockoffs had a similar declaration; theirs read “Designed in Canada.”

“We started getting calls from retailers asking, ‘Have you changed your name? We received a catalogue [featuring a line of reversible pendants] and it looks like yours, but it’s a different name and the prices are much cheaper,’” Ger recalls.

Eventually some of Foxy’s contract sales representatives in the U.S. — a market that accounts for half the company’s business — shifted allegiances.

“They said, ‘I can’t represent you anymore because there’s another line that does what you do but cheaper, and I’m going to take that instead’.”

Foxy — with a manufacturing plant in north Toronto and a full-time staff of six — sells about 50,000 units of jewelry annually. Ger estimates sales of reversible pieces, which once made up a fifth of sales and were their most popular item, have dropped by up to 40 per cent as a result of the rip-offs.

“I knew this would inevitably happen,” she says. “I just never thought it would be so comprehensive in terms of the extent to which they replicated our concepts. It was audacious.”

And it’s only gotten worse as of late, she says, because one of their competitors has gone beyond reversible pendants and has started to imitate other Foxy styles.

“Foxy Original’s situation is not unique,” says Merril Mascarenhas, a managing partner with Toronto’s Arcus Consulting Group, noting that this is a classic case of a business model maturing.

“You have a unique product and you’re highly successful initially, ‘til you get noticed,” he says. “Then a bunch of copycats come in and duplicate the ideas, and essentially you’ve got a shadow model following you wherever you go.”

It’s a clear indication that Foxy’s business plan must evolve, Mascarenhas says. He suggests they offer a “good, better and best” range of products, with higher-end, made-in-Canada jewelry at the core and sub-brands produced in cheaper jurisdictions sold at a price that matches the competition.

So far, Foxy is concentrating on less drastic steps to fight back. They’ve discontinued some of the styles that were being knocked off, posted a video that shows the process of hand-making the jewelry, and are including “Made in Canada” cards with each order.

“The Canadian-made piece is entirely woven into what we do,” Ger says, “and it’s important to a large subset of our customers.”

Still, she acknowledges that a segment of the market will always want to pay less.

“But they won’t know until they wear [the competitor's jewelry] that it’s going to fall apart. And it does — we’ve seen it.”

Foxy has also diversified its product line.

“We make hairbands, hair ties, skinny belts and graphic-patterned silk scarves,” Ger explains. “So we’re not putting all our eggs in one basket.”

Sure enough, though, whenever she checks the competition’s website, she finds they’re keeping pace. “Every time we do something, six months later they do something very similar.”

Vexing as it may be, Ger understands that it’s a reality of business and she insists that she and Chemel are content to keep innovating in order to outfox the competition.

“It’s inspiring,” she says, “and we love to do it.”

EXPERT VIEWS

As Interviewed by: Tom Henheffer

Foxy Originals has already employed several strategies to remain competitive. They’re introducing new products and diversifying well, and staying true to their values. But moving forward it will be important that they develop a long term plan, and continue building relationships by consulting with and listening to their customers, suppliers and distributors. Innovation will also be key. Foxy has a higher-quality product than the copycats, and a first-to-market advantage. So long as they continue to diversify their offering — maybe start producing complementary products to encourage secondary purchases — they’ll be able to leverage these strengths to encourage loyal, repeat customers. This will reduce the temptation to outsource, which could disrupt their quality and their crucial “made in Canada” image. Instead, I’d recommend they look to a new supply source to reduce costs, or to possibly find unique material for their jewelry that can become another selling point — and make their designs even harder to copy. Foxy Originals is on the right track, and so long as they look to the future and focus on their core business, they should remain successful.

by Kim Ulmer - RBC

Foxy is a nice little business, but the copycatters are costing them distribution, and that’s a serious issue — one that can easily sink a business. So, to deal with their problem, the owners should first sit down with a lawyer and see if there are any legal options. Most would be prohibitively expensive, but are still worth exploring. This will not completely stop copycats though. They’re a reality of capitalism, and the emergence of knockoffs should be a warning sign to Foxy that they need to look at their cost structure. They’re in the mid-market right now, which is a bad place to be when it comes to this kind of jewelry. They need to reduce costs to be successful, which means moving down market and outsourcing manufacturing. Foxy can keep a “made-in-Canada” line at the same time, but only if they move it upmarket, making it a premium offering. The company is selling a commodity, and consumers are buying based on price. If the owners don’t jump in the game and move to either end of the market they’ll just keep getting pushed out by cheaper alternatives.

by Knud Jensen - TRSM

Foxy is a mature company now, and they’re in a commodity business, so they have to think seriously about the business model, because copycats are always going to be a reality. The founders don’t want to manufacture in China, but young people have gone over to an H&M culture — they don’t care if jewelry is high quality or where it’s made, their primary motivation is price. Foxy can keep selling to them, but only if they price competitively and lower their costs by manufacturing someplace cheap. So their best option, as I see it, is to segment the product line, targeting different products to different parts of their market. Foxy should sell commodity items to young people, and offer a premium, made-in-Canada line constructed with more expensive materials and aimed at older consumers. And there’s also room for their current line in the mid-market — maybe made-in-Canada, but built from something less costly. This segmentation is really the only solution I see. Sales have been hit hard already — if the company continues down the same path they’ll run out of product, and the copycats aren’t going to stop.

by Mark Simpson - GBC

Advertisement