Focus: 'Daigou' goes corporate as retailers seek new ways to reach Chinese shoppers
21/12/2023 01:01
By Casey Hall and Stella Qiu
SHANGHAI/SYDNEY, Dec 21 (Reuters) - The pandemic-era
drop in overseas travel by Chinese tourists and students has
been a boon for Gen-Z focused online shopping platform Dewu.
The platform where users once mainly bought and sold trendy
sneakers to each other has morphed into a marketplace for
retailers of all sorts of branded and luxury goods.
Dewu, also known by the English name Poizon, now has 150
million active users, and hosts what retail consultants Re-Hub
estimate to be nearly three-quarters of China's luxury
cross-border "daigou" trade that was once largely plied by
individual shoppers.
"We're getting more formal in that we're allowing some of
these larger retailers and developing the tools for the larger
retailers to sell into our marketplaces," said Jeff Unze,
general manager for the San Francisco office of Poizon Global.
Daigou translates as 'buying on behalf of'. Before the
pandemic, millions of Chinese made a living by either travelling
abroad and buying items that were cheaper overseas and then
reselling them inside China, or shipping items into China.
Trade by daigou was a key sales driver for many global
brands including Estee Lauder EL.N , a2 Milk ATM.NZ and Kirin
Holdings-owned 2503.T supplements and vitamins brand
Blackmores, until pandemic-related travel restrictions ground
the industry to a halt.
But, unexpectedly, these restrictions actually worked to
boost the overall cross-border grey market trade, with
wholesalers and platforms like Dewu taking over from
individuals. The trade has grown by 40% from 2019 levels to an
estimated $81 billion this year, consultants Re-Hub say.
IT'S DAIGOU BUT NOT AS WE KNOW IT
Persistent price differences between markets like Europe and
China mean consumers can expect discounts of around 40% for some
products, said Thomas Piachaud, the Shanghai-based head of
strategy at Re-Hub. This is an obvious draw for Chinese shoppers
whose travel options are limited by cost, the slow resumption of
flights and lengthy wait times for visas.
"I think we have to level up our idea of daigou," Re-Hub's
Piachaud said. "Essentially there's this chain from global
retail to Chinese consumers not directly from the brands. That's
the professionalisation of daigou at work."
While this more formal form of daigou can help retailers and
wholesalers move inventory from markets like Europe, where
consumers are battling high inflation and a weak economy, it can
also mean missed opportunities for brands to sell directly to
consumers.
Vivi, a 22-year-old student from Nanjing who declined to use
her last name for privacy reasons, first bought a Prada bag on
Dewu in 2021 and has since also bought other items, including a
Louis Vuitton bag and Balenciaga sneakers.
"I chose Dewu to buy luxury because it has a cheaper price
than brick-and-mortar shops," she told Reuters.
END OF AN ERA
Estee Lauder estimates up to 40% of its total sales to
Chinese consumers was processed by daigou before the pandemic.
Daigou trade also accounted for one-third of annual retail sales
for the Australian vitamins and dietary supplement sector said
Blackmores CEO Alastair Symington.
But like the trade, the brands that once relied on daigou
are also changing their retail strategies to reach Chinese
consumers more directly.
Blackmores has already started selling directly to Chinese
consumers by partnering with online market places such as
Alibaba's 9988.HK Tmall Global and JD Global and PDD Holdings'
PDD.O Pinduoduo, Symington told Reuters.
"Over time, our intention is that we will move into brick
and mortar so we will move into retail stores maybe over the
next sort of two to three years," he added.
New Zealand's baby formula producer a2 Milk is also shifting
to boost sales through cross-border e-commerce to make up for
slumping daigou trade, it said in its recent earnings release.
Luxury outerwear brand Canada Goose GOOS.TO opened two new
stores in China last quarter, boosting the total permanent
outlet numbers in the mainland to 21, as recovery in Chinese
travel overseas remain weak.
But for some, the end of the old-style daigou means also
means an end to their livelihoods.
Felix Fu, who owns a gift shop in Sydney, used to pack
hundreds of boxes from 8am to 11pm daily to air ship health
supplements, milk power and UGG branded boots to China.
"After COVID, a lot of brands here have opened up shops in
China, either online or offline. They no longer need daigou, so
most of the daigou shops have closed down," he said, adding
turnover in his store shrank by two thirds from the pre-pandemic
levels of a little over A$1 million ($655,000) and the shop is
barely profitable.
($1 = 1.5267 Australian dollars)
(Reporting by Casey Hall; Editing by Miyoung Kim and Miral
Fahmy)
((Casey.Hall@thomsonreuters.com;))