As part of a feature on the role of trust for NZ Retail magazine, we looked at the phenomenon of daigou - personal shoppers who seek out products overseas for buyers in mainland China.
In September 2016, the Daily Mail pubished a story about daigou in Australia making AUS$1 million a week. Whether those figures are – ahem – accurate I couldn’t say, but the phenomenon of daigou is real.
Daigou literally means ‘buying on behalf of’. They are often students studying abroad, and they send parcels back to China as personal items to avoid tax. Convenience and the chance to make a buck on the side isn’t the main reason for the existence of daigou, though. The main reason is trust. The items purchased are usually luxury items commonly counterfeited in China, or overseas health and wellbeing brands viewed as more authentic and reliable.
China has suffered a long list of PR disasters around its largely unregulated food industry that have fuelled daigou growth. In 2008, contaminated formula milk affected 294,000 babies, leaving six dead. In 2010, a factory was shut down for dyeing soy beans with food additives to pass them off as green beans. In 2014, it was discovered a carcinogen, CH3NaO3S, was being used by many companies to bleach food. The trust of the Chinese consumer has been sorely abused by local industry in China.
Xiuzhong Xu of website theworldofchinese.com tracked down a Melbourne-based daigou selling baby formula at a 200 percent mark-up. Such is the keenness of the Chinese shopper to have an authentic, untainted and trustworthy product, this sort of price inflation is common, and pays for the daigou’s time and services. The daigou Xu spoke to said she made AUD$2000 in her first month, and her profits along with her customer base have grown since.
However, the trust of the daigou’s buyer is hard-won. Sometimes the woman Xu spoke to has to live stream video of her purchasing a product through WeChat to prove authenticity. Chinese shoppers are willing to pay through the nose but they have to be sure it’s for the real deal.
Companies in Australia have attempted to thwart daigou by imposing restrictions on purchase, but experts here believe retailers should consider how the daigou fit into their business. According to a 2016 report from Bain & Company, the daigou industry worldwide was worth around NZ$10 billion last year.
Speaking at an NZTE event in December about how to leverage the daigou channel was Livia Wang, director of Sydney-based Access CN. Wang’s company aims to help Australian and New Zealand brands break into the China market and she believes daigou are key.
“New Zealand brands are popular via the daigou route,” says Wang, noting how the Chinese market likes a story of provenance. “Think about your brand story, it’s very important, and involve the daigou – ask yourself what’s their position in your journey? Influence them to speak about your products.”
Wang suggests inviting 10 daigou to trial your products, to get feedback and encourage them to talk to their customer base about you. She encourages retailers to take the daigou into consideration and make their job easier so they will shop with you.
Other businesses are trying to circumvent daigou altogether. In September 2015, Australian company Chemist Warehouse made a deal with Chinese company Alibaba to sell its products directly to Chinese consumers through Tmall, Alibaba’s ecommerce site. But for the ever-suspicious Chinese consumer, it is going to take time to trust this new route. Even though the products are shipped direct with no Chinese middle-man, reviews left on Tmall show customer concerns over whether the product is genuine, with suggestions the packing ‘looked a bit different’ or the smell of the product ‘wasn’t quite right’.
The complicated trust relationship between retailers, brands and consumers is nowhere else better quantified than in the daigou example.
This story originally appeared in NZ Retail magazine issue 748 February / March 2017