Have you heard of Daigou?
By now, it’s no secret that the e commerce sector is booming. In 2018, consumers worldwide purchased goods worth 2.86 trillion USD on the web. Meaning plus 18% compared to 2017.
Chinese online shopping is the largest sector in the world. In 2018, the country’s online retail sales totaled about 1.33 trillion USD. Following closely in the second place: the USA.
So, let’s gIn this week’s Tenba Group article, we explain the hype behind this specialized cross-border e commerce industry in China. And most importantly, we describe how your business benefits from the skyrocketing online industry in China and around the world.
Table of contents
What is Daigou?
代购 in Chinese or Daigou in English means “to buy on behalf of”. It is a type of commerce known as “cross-border e commerce”. It works like this: a Chinese person overseas purchases items for a customer in mainland China and then sends it to them.
China’s high import tariffs on luxury goods and the population’s concerns over unsafe products, especially food, create a large demand for the Daigou marketplace.
The products are mainly luxury goods like handbags and cosmetics, but also everyday items like groceries and baby formula. In total, China’s cross-border e commerce generated 1.1 trillion USD in sales in 2018. Some analysts criticize that this system enables the sales of counterfeit products.
DaigouSales.com as a Platform
DaigouSales.com is the biggest of these cross-border e commerce sites and had its beginning in 2017. It quickly established itself as a solution for emerging labels to build a sales channel in China. Brands can bypass a lengthy and cost-intense company and product registration, and other legal processes.
DaigouSales.com offers paid flagship stores on its website. Besides, there are marketplaces and a WeChat eMarketplace as well as comprehensive merchandising programs to reach a wider audience. The platform also offers its services in English. As a result, it facilitates the selling and marketing of brands to Chinese consumers via Daigou agents.
DaigouSales.com has an estimated annual sales volume of over 6.3 billion USD. DaigouSales.com makes payment easy – the platform accepts the major Chinese mobile payment systems Alipay and WeChat Pay. The platform makes payment easy by accepting the major Chinese mobile payment systems Alipay and WeChat Pay.
Foreign Luxury Items
As prices for luxury items can be 30 to 40% higher in China than abroad, this is a lucrative business model. The estimated Chinese luxury spending in 2018 is more than 87 billion USD. With sales of 43 billion USD in 2018, purchases on DaigouSales.com account for half of that.
Daigou has around 1 million individual sellers, mainly Chinese entrepreneurs. In total, Daigou has about 1 million users in mainland China.
China’s luxury goods market is booming. In 2018, it had a 20% growth for the second year in a row, with a revenue of more than 24 billion USD. By 2025, 7.5 million wealthy Chinese households are expected to spend more than 145 billion USD in luxury goods.
But it also works the other way around: 86 Daigou and Panli Daigou target Chinese living outside of China. Those platforms sell products from mainland China to other parts of the world. Which are the main types of products sold there? However, these platforms and businesses are not related to DaigouSales.com.
Daigou Marketing on Popular Social Media Apps
Daigou sellers are influencers who are trusted by their network. Many of them start by selling to family and friends, then expand their business through word-of-mouth.
Daigou can also be described as an agent, sourcing products on his or her client’s needs. A Daigou seller typically specializes in a particular category of goods. The most popular niches are baby products, healthcare, luxury bags, and Korean or Japanese cosmetics.
Daigou sellers usually get their products from luxury brand boutiques in prominent fashion cities like Paris, London, New York City, Tokyo, and Seoul. Baby powder and infant formula from Germany are also highly popular.
Many sellers use China’s most popular social media platforms and messenger apps Sina Weibo and We Chat to communicate with their clients and sell their products.
Foreign Companies Selling on Daigou Platforms
For Western businesses, selling to China is a challenge. However, as Daigou sees this potential, the platform is working on concepts to make marketing, promotion, and sales of foreign brands in China easier.
Unlike B2B or B2C, Daigou is a form of C2C (consumer to consumer) marketing. More specifically, Daigou has adapted the term Direct-to-Consumer (D2C) to Daigou-to-Consumer to fit their strategy and enable them to unlock the potential of the powerful channel Daigou.
The Special Role of Australia and New Zealand
Currently, there are two countries, which mainly serve as supplying countries to Daigou platforms: Australia (AUS) and New Zealand (NZ). Two well-known Australian businesses promoting their products as Daigou are Ymatou and Kaola. Australia is embracing the Daigou industry. And the government is taking steps to change the image of the cross-border e commerce platform from the grey market and bring it out into the open.
DaigouSales.com, for example, is a member of the Australia China Daigou Association (ACDA). The online platform subscribes to ACDA’s code in developing a professional Daigou community and resource pool for Australian brands. Around 70,000 Daigou “personal shoppers” are estimated to reside in Australia and do business there.
Personal Shoppers in China
Shoppers in China can request products by browsing through the Daigou online platform and purchasing the item directly from their Daigou contact. These purchases are then sent by airfreight to the buyer. Daigou sellers in Australia and around the world can simply manage their online Daigou StoreFront and grow their network of customers.
Despite the open attitude towards the Daigou Australia connection, other parts of the world are not as welcoming of the industry. The EU started Daigou crackdown initiatives to stop illegal sales of luxury items. This is the case for example when Daigou sellers take advantage of the luxury tax refund benefit, which is only offered to Chinese tourists, not migrants living in the EU.
Stricter Controls to End this Boom?
At the same time, China aims to strengthen e commerce regulation and better control the rapidly expanding sector. For example, stricter border controls are a measure to stop tremendous tax revenue losses. And since January 2019, Daigou merchants are obligated to register and pay taxes. Together with the new policy, the list of duty-free cross-border e commerce products covers 1,321 items in total.
However, China’s crackdown on Daigou is unlikely to have an impact on the total cross-border e commerce consumption. Consumers in China benefit from the credibility and authenticity of retailers and their products on cross-border online platforms due to stricter management.
Likewise, shopping on the internet is not likely to get old any time soon! By 2020, market research projects that 25% of the Chinese population will be shopping online for overseas products via cross-border e commerce platforms.
How You can Unlock the Power of China’s E Commerce
If your company is new to the Chinese e commerce environment, proactively working with Daigou can help you reach local customers and become an online player.
Daigou can be a large asset for brands and has the potential to be more than just a middleman. Why go through the costly process of setting up a store and marketing your product only to find out there is no demand? Instead, try working with a Daigou seller to test the market first. Once you see that your product has an audience, take further steps like setting an official China e commerce sales channel.
Just keep in mind that this is not an overnight solution. It takes time, work, and effort to establish relationships with the Daigou community. Although for most Daigou sellers, the concept of working with a brand directly is new, many of them are open to the idea and think it will work if the brand and product are right. And for now, DaigouSales.com sourcing must go through Australia or New Zealand.
If your brand and products have a solid reputation, Chinese consumers will be likely to buy them. Chinese buyers generally visit online forums to discuss with other consumers and consult with friends and family before purchasing a product from an unfamiliar brand.
At the same time, there are easier and quicker ways to accelerate your business in China and unlock the potential of the booming e commerce sector.
- Be accessible in China with an online presence within mainland China through fast Cloud Hosting
- Speak your customer’s language and provide your products and services on a Chinese website in the Chinese language
- Reach your audience by setting up a WeChat Business account and connect through WeChat China advertising and marketing tools like WeChat stickers
- Shine with influencer marketing on Chinese social media sites
- Lead search engine ranks with search engine optimized SEO content
Entering the Chinese market through e commerce and doing business in China right is a time-intense process with lots of research and specific knowledge on how to target Chinese customers.
Tenba Group is the digital marketing agency of your choice to help you save time, money, and energy. Collaborating with Daigou sellers is a great way to boost your brand.
Do you want to test our services? Get your FREE consultation TODAY!