A post by Benoit Trouwaert, a Digital and Marketing Expert at Bienvenue Factory, Singapore
Daigou was initially a spontaneous phenomenon. It brought to light how the digital revolution hit the standard and institutional frameworks of western brands’ retail in mainland China.
Within a few years, Daigou shoppers’ activity grew that fast that Chinese authorities strengthened China’s e-commerce and import policies. And today, brands are still asking themselves what the strategy is to be adopted to face the Daigou.
Here is an article to have an overview of the Daigou phenomenon in 3 bullets.
Who are Daigou?
At first, Daigou (also called overseas personal shoppers or professional shoppers) were Chinese people who were just living overseas and who were locally buying goods they sent by postal services to Chinese people in mainland China. Most of the time, they used to do it to make a favour to a friend or a connection of theirs.
It was the start of a particularly efficient way of marketing (Direct rapport and personal trust, blogging and live-streaming through WeChat to show the products, personalizing sales), and Daigou turned into a new industrial e-commerce channel that addressed all across mainland China.
By organizing and industrializing their systems (Logistics, e-commerce platforms), they built a new layer between standard retail services and end customers in China Mainland.
Indeed, when people legally buy goods (by paying the local GST) and the post services for individuals are flexible and discrete in their operations, the phenomenon can keep invisible and significantly and untransparently grow.
But why did that C2C market grow that much to the point of embarrassing the authorities whereas it could have just dissolved in the huge Chinese domestic market?
Why did Daigou flourish?
First, the Chinese end consumers wanted the proof that the products were not counterfeit and came from what they considered more reliable brands and origins.
Second, it was also a mean for them to obtain products and goods that were not at all available in China, particularly products from the western-culture countries.
Third, they could get new goods already available in China at a lower price than the local price. Indeed, the C2C market made by Daigou was escaping import duties that are very high in China.
Thereby, Daigou designed solutions to bypass significant barriers to entering the Chinese market the western brands face.
Since January 2019, China regulated the Daigou’s grey channel with stronger CBEC (Cross-Border e-Commerce like eBay or Amazon) policies. In response to it, Daigou rebranded in CBEC companies by integrating all the actors of the unofficial channel (from the personal shopper to the logistic firm) into single entities. They also adapted their methods not to be spotted by authorities. They centred back to social networks (their initial niche channels). They now show the products through sketches instead of pictures or don’t mention the brands’ names.
Growth is less but still there. So, even if we still attend a game of cat and mouse, brands which want to benefit from the Daigou’s system to operate in the Chinese market can still do it by selling their goods in volumes where they find Daigou.
So what posture should a brand adopt?
Struggle or surf the Daigou phenomenon?
For instance, brands of which products are already available from duty-free operators in Korea can choose to define no-limit buying by customers (or Daigou), and let them massively distribute their goods in China. It can be a huge source of income but also a big chance to lose control of their brand identity in China. Counterfeit products could also scatter among non-counterfeit goods.
Practically, even if Daigou shoppers are under pressure more and more day after day, the option is seductive. Some high-end brands decided to let it be and take the money, some feel concerned by the phenomenon and decided to limit their growth and set up systems by ensuring themselves that their client is the end customer.
It’s not that easy to build a presence in the Chinese market which is fond of high-end and well-manufactured goods, that’s why we give you our Asian Stories to make you understand it.
Indeed, the key to the Chinese market is to understand the Chinese culture and to find ways to make your products marry it. Sometimes you will need to adapt, sometimes your products will be preferred as they already are.
Bienvenue Factory is here to help you find the good formula between your goods and the markets in Asia. Feel free to contact us just for a chat on it.