Daigou? An interesting answer to the growing demand in China.
May 23, 2017 8:57 PM
Could the secret sauce for increasing exports to China be the small army of Chinese students studying abroad? That seems to be the case in Australia, where New York Times reporters found an informal network of entrepreneurs buying local products and selling them to consumers in mainland China.
What are they selling? You name it but some favorites are Uggs boots, vitamins, brand-name jewelry just to name a few. One female student (most of the sellers are women selling to other women) reportedly made $300,00o in markups in just one year.
The students, who call themselves daigou, or purchasing agents, understand Chinese consumer tastes and mindsets, one of which is a seemingly mindless fascination with foreign products. Some analysts estimate that daigou sent as much as $600 million in Australian products to China last year, buying them mostly from retail shops that are delighted to have their shelves stripped on a regular basis.
For Australia, it has been a double bonanza from both export of goods and tuitions and living expenses collected from about 150,000 Chinese college students.
Never mind all that, say the daigous’ supporters, who note that personal networks and communications technology enable Australian products to break into the notoriously difficult China market.
Chinese purchasing agents first appeared in Europe a number of years ago, buying and shipping luxury goods like handbags for China’s growing middle class. But the trade shifted to Australia in recent years as the Chinese student population in Australia has expanded and consumers in China have grown more anxious about food and product safety.
Worries over infant formula, for example, surged in 2008 when six babies died and more than 300,000 children got sick from drinking Chinese milk products that had been tainted with a toxic chemical. Many in China turned to imported milk powder in response, but reports of distributors or retailers adulterating it with Chinese formula prompted consumers to directly seek supplies from overseas.
It’s the real thing
The main challenge for the students is persuading buyers that the Australian goods are not fake. Video is used to show the student in Australia buying and talking about the product. It seems to work.
The success of the student agents has been so great that producers now hold events to meet Chinese students and demonstrate their products. Some Chinese retailers have tried to circumvent the daigou by going direct to the Australian producers, but they are careful not to cut out the students as their personal networks are a vital part of the ersatz distribution chain. Some producers sell on TMall, the Chinese e-commerce marketplace, but claim Chinese customers would rather buy via the students, who use the Chinese WeChat app to process orders and exchange text messages with customers.
The larger daigou businesses often buy in bulk directly from manufacturers at a discount and then sell supplies to smaller student operators at a markup.
Express delivery companies that specialize in shipping to China are now located throughout major Australian cities to keep up with demand. One of them sends about 400 tons of products to mainland China each month. Recently, fresh fruit, including cherries, has been in demand despite the expense of buying and shipping.
The business is not without critics who compare it to smuggling, especially if it involves evading Chinese duties. Last year, the Australian Agriculture Department said it was investigating individuals suspected of shipping infant formula to China without meeting export requirements. Small exports of baby formula are legal, but shipments over 10 kilos must come from registered export companies with health certificates and meet Chinese import regulations.
But the students express confidence that the market will continue to expand even as regulators catch up and Australian companies establish new channels to sell directly to Chinese customers. At the very least the daigou should get credit for opening the door and tutoring foreigners on Chinese consumer sensibilities.
So whether you’re in the U.S., Ireland, or anywhere else, when you meet a Chinese student, try your limited Chinese out on them.
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