When it comes to China e-commerce sales, the topic of daigou is controversial. Some brands, especially those in the luxury industry, consider daigou to be a detriment.
In other industries, companies have a more positive view. In fact, many companies that are new to China e-commerce sales have begun proactively working with daigou to help them reach local consumers.
Is this a good idea? Can it work?
An Excellent Option for Emerging Brands
Daigou can be a huge asset for brands and are more than just middlemen. They are influencers whom people trust. Many start out by selling to family and friends, then expand through word-of-mouth.
They know their success lies in their reputation with customers. Selling any fake or low-quality products could rapidly lead to their demise. Therefore, having a trusted daigou sell your product is like a badge of approval — it signifies your product is trustworthy and desirable.
Daigou typically specialize in a particular category of goods. For example, baby products, healthcare, luxury bags, and Korean or Japanese cosmetics are all popular niches. This can be very useful for brands who are new to China and want to access to that specific target audience. Instead of going through the costly process of setting up a store and heavily marketing the product only to find out there is no demand, brands could work with daigou to test the market first. Then, once brand adoption has occurred, they can set up an official China e-commerce sales channel.
However, brands need to remember that daigou are not silver bullets. It takes brands a lot of time and effort to establish relationships with the daigou community.
Your Prospects Depends on Your Industry and Country
Australia is Daigou Heaven
If your business is located in Australia and sells baby or healthcare products, then you are in luck! Australia is embracing the daigou industry, which was estimated to have been worth $1B in 2017, and the government is taking steps to move the daigou industry from the grey market and bring it out into the open.
New companies such as AuMake and Daigou Sales are focused entirely on helping local businesses work with daigou. Dr. Mathew McDougall, the founder of Daigou Sales, hopes to make the purchasing process easier for the daigou.
Dr. Mathew McDougall, the founder of Daigou Sales
“Shoppers in China can request products by going into our Daigou StoreFront and purchasing directly from their Daigou contact — these purchases are then sent by airfreight to the buyer,” Dr. McDougall explained. “No longer is the Daigou in Australia having to do a lot of physical running around buying or shipping products. Now, they can simply manage their online Daigou StoreFront and grow their network of customers.”
Dr. McDougall added that even brands who already have China e-commerce sales channels can benefit from working with daigou.
“Wattle Health is an Australian company who produces high quality powdered baby formula. They already distribute their products across mainland China via physical stores. However, they have also set up an eStore on DaigouSales.com and are utilizing Australian based daigou to grow their sales in Australia and also increase trust and awareness in their brand in China. Since starting to work with daigou they have seen a significant growth in sales in China.”
Europe… Not so Much
On the opposite end of the spectrum, luxury retailers and the European government have a much different attitude towards daigou. At a corporate level, luxury brands despise daigou, while at the individual store-level they still see them as a way to boost sales.
A source told us that a number of luxury stores in Italy were secretly holding daigou shopping events for this very reason.
However, it all stopped a few months ago when the EU and the Italian government started launching initiatives to “catch” daigou. In EU, many daigou are taking advantage of the luxury tax refund benefit — which is only offered to Chinese tourists, not migrants living in EU. The daigou industry has become a very sensitive topic in Europe and risks are increasing for those operating there.
Can Be Difficult to Collaborate with Daigou
Despite the open attitude towards daigou in Australia, most parts of the world are not so open and welcoming towards the industry. That mean daigou generally stay low-key and hidden. For this article, interviewing daigou proved extremely difficult. None wanted their real names or storefronts to be revealed for fear of being shut down or penalized in some way.
Finding daigou is not always easy. If they have Taobao stores, they typically do not use the word “daigou” in the store’s name. Instead, they use other phrases to signify they are purchasing goods from abroad. Many forego conventional China e-commerce sales channels altogether, instead, selling products through WeChat Moments or in private WeChat groups.
They Typically Sell What Their Audience Demands
The majority of daigou decide what to sell based on 1) requests from their customers and 2) products from which they can get the most value or commission.
AuMake’s Daigou Show
One daigou, who chose to remain anonymous, explained.
“When we first started, my friend and I had a big WeChat group and whenever we were going on a shopping trip to Japan, people would send us their requests and payment. Then we would buy whatever it is they wanted.”
“As our business grew, this got too complicated so we opened up a Weidian [a small WeChat store] and listed some of the most popular items and people could pre-order them that way.”
We asked if they ever promoted new brands to their customers.
“We wouldn’t really consider doing that unless it was a product we loved and used ourselves,” she said. “But even then, we would need to make sure there was a market for it.”
Another daigou we interviewed agreed that she would only promote products she uses herself.
“Mostly I just sell what products I use for my son. Other than that, I also sell some products that my customers have requested.”
Strong Packaging and Solid Reputation: The Foundation of Daigou Success
Among the daigou we spoke to, the concept of working with a brand directly was new. But, many of them were open to the idea and thought it could work if the brand and product were right.
AuMake’s facility for Chinese daigou
Dr. McDougall agreed.
“Daigou can persuade their buyers in China to try new and emerging Australian brands as long as the brand has good marketing materials and quality packaging. Mainland Chinese buyers also prefer authentic quality Australian goods, so this is important for brands to articulate in their packaging also.”
The China E-commerce Sales Takeaway
Even with support from daigou, your brand and products need to have a solid reputation abroad before Chinese consumers will buy them. Before purchasing a product from an unfamiliar brand, Chinese consumers often visit online forums, discuss with other consumers, and consult friends and family. Don’t assume that Chinese shoppers will buy any product just because it was “Not Made in China”.