Personal shopping service opportunity

Exchange rates, taxes, and duties can force an imported item’s price up 80% in mainland China. The locational price preference drove the creation of the daigou markets. Why would Chinese consumers pay such high prices when significantly cheaper, yet identical, options are available right across the border? Daigou trade takes multiple forms. Some operations travel to foreign countries and stock up on products to resell back home. Hong Kong sees thousands of mainland Chinese travellers a day, purchasing everything from iPhones to infant formula to sell back in their own country. With a lack of taxes and increased access to foreign products in combination with geographic proximity, Hong Kong is an attractive market for daigou. Traders strained Hong Kong’s economy so much that the government actually established a two can limit for infant formula crossing over the border into China. Another form of daigou are shoppers living in foreign countries who make purchases for mainland Chinese. These are typically younger Chinese women living abroad as students or stay-at-home, educated on popular Western brands.

Who are DAIGOU traders?

A DAIGOU is a person who enables an export and e-commerce ecosystem through purchasing commodities such as luxury goods and grocery items for a customer in mainland China.

There have been many articles written in the Australian press about the Daigou business model. The Daigou believe 95% of the media they receive (often negative) is not accurate. They want to demystify the channel, and build engagement with more producers. In its simplest form, Daigou purchase products in supermarkets, pharmacies or specialist stores, package them up and send them to their customer in exchange for a commission on the purchase. Most of the transactions are facilitated via the Chinese social media platform WeChat and, it’s underpinned by the Daigous’ personal contacts and networks. The Daigou ecosystem and logistics networks are becoming increasingly sophisticated. For example, a Chinese consumer can now sit at home and directly bid and order live lobster in New Zealand via a webcam on a boat. The Daigou then, through new logistics channels offered by China Road, can export that product directly to the buyer’s front door. This ability to deliver fresh, quality and safe produce directly to a Chinese consumer is transformational. There are different layers to the Daigou ecosystem - from grassroots to full-blown professionals. While unknown to many, the Daigou industry is mature and incredibly well organised. The industry is built on trust, with consumers in China placing their trust in their network to source authentic, quality and safe products.

The professional Daigou are typically not touching the products – they are simply facilitating orders between their customers, the producer, and their logistics provider. Daigous simply sell, sometimes promote, and are the insurer of quality and authenticity for the product. Dedicated Daigou stores exist to facilitate this trade. Generally speaking, Daigous believe that Chinese consumers know the brands and products they want. They research online and they have an incredible network of in-person influencers.

The Daigous we spoke to, however, believe there is an increasing opportunity for them to play a role in the introduction and promotion of brands and products directly to their Chinese consumer network. Daigou trade despite its illegality. Constituting 80% of the world’s luxury purchases, these proxy purchasers see a large demand for high-end products. Operations are very small, usually with one woman based abroad purchasing the products in bulk and another based in China redistributing them to the end customers. While some daigou operations can have up to three to four employees, this is a rare case. Daigou trade relies on their small-sized operations to avoid the import taxes that gives their products a significant price advantage. Traditional companies exporting their goods to China are subject to import taxes and strict regulations, making reaching Chinese consumers a lengthy and complicated process. By sending their product in small packages for redistribution, daigou avoid the notice of the Chinese government. These proxy purchases know how to make the cheapest purchase and deliver in the most efficient manner. Often, they stock up on popular products during traditional Western sales day or weekly promotions in store and then take from their inventory to meet demand over the entire year. Foreign websites, such as the American version of Amazon, which are unavailable to mainland consumers are also utilized.

Some of the larger daigou entities have business deals with delivery companies in China, which waive fees and get discounts for their continual business. These women know their consumers, know the Chinese market, and know the best channels to get their product from abroad to the end customer. Daigou women are not only a business, they are a brand. Most of these buyers act as Key Opinion Leaders (KOLs) within their social media communities. Their consumers value their opinions and will purchase the products they promote.

Daigou is an e-commerce trade channel. Most of their customer communication occurs through WeChat — a Chinese messaging service that is similar to FaceBook, Weibo — similar to Twitter, and online stores. Personal stores are set up on e-commerce platforms like TaoBao, where customers can browse, shop, and review daigou.

An extremely personal shopping method, most daigou customers know their buyer personally or through word of mouth. In a country like China, brand trust is a huge problem. Consumers have a long and sordid history with a lack of product safety and quality, hence the demand for imported products. A mark of the rampant counterfeit products in the Chinese market, even an industry based on consumer trust is not invulnerable to the issue. The daigou industry is filled with fake products made in China but packaged to appear foreign. While e-commerce platforms have a rating function, these are often not trusted by consumers. Producers can easily manipulate their reviews and increase their own scores. In this distrustful purchasing environment, daigou have adapted to ease their customers' worries. Buyers often livestream their purchases and provide photographs of receipts and product barcodes as proof of purchase. Here we find a business opportunity to create a trustworthy personal shoppers service.