In the words of Wikipedia, daigou (代购) “is a channel of commerce in which an overseas person purchases commodities… for a customer in mainland China, since prices for luxury goods can be 30 to 40 percent higher in China than abroad.” Daigou literally translates to “buying on behalf of,” and the industry is so big that sales are estimated to be around 15 billion USD per year. So what’s up with all this daigou-ing? This article tells you everything to know about the fascinating world of the daigou phenomenon in China.
The Most Daigou’d Goods
Technically, you can daigou just about anything. And while it may not exactly be the most legal thing out there (we’ll get to legality in a bit), there is one law this marvel certainly follows: supply and demand. If people want something, they’re going to get it. And if the price is too expensive around the corner, human beings always find creative ways to make it happen.
We’re all familiar with the infamous milk powder scandals that rocked China. That’s why so many Chinese prefer foreign milk powder rather than the locally produced stuff, turning places like Hong Kong into a daigou smuggling zone. However, according to this Financial Times article, the Hong Kong government actually “outlined draconian measures to combat shortages of infant milk powder in the city caused by mainland Chinese carrying the product across the border in bulk.” Nowadays, baby milk powder from around the world has become a much sought after daigou’d good.
Read this story about Yuxi in this article A Day in the Life of Daigou by TheWorldofChinese.com. A Chinese student in Australia has made quite a nice business out of daigou-ing baby milk powder to help finance her studies abroad.
Gucci, Chanel, Prada… If it has a fancy name, it can most certainly be daigou’d. According to MailmanGroup.com, “76% of Chinese luxury consumption took place overseas,” with a market value worth nearly 100 billion USD. The reason? Import tariffs can mark prices up to 50% in China. According to the same source, “a Louis Vuitton handbag is priced 30% higher in Beijing than in Paris.” For this reason, luxury/name brand items are considered some of the most daigou’d products out there.
This Financial Times article speaks about daigou professionals who make a nice living off their businesses. Individuals like Ms Pei are savvy Chinese business women who see an opportunity in the market and capitalize on it.
You knew this one was coming… With so many Chinese obsessed with Apple products beginning with “i”, and the fact that iPhones are much more expensive in the mainland than many other countries, it was only a matter of time before iPhones became a preferred daigou’d product. In fact, every time before I go back to the US, I have at least one Chinese colleague, friend, friend-of-a-friend, friend-of-a-friend-of-a-friend (you get the point) ask if I can get them an iPhone and bring it back for them.
Check out this 2015 article from the Telegraph, it illustrates the different prices of iPhones worldwide. No wonder so many iPhones are hot daigou consumer goods! As you can see, one can definitely make quite a nice business off daigou-ing, and that brings us to…
The Art of Daigou
Like Ms Pei, Yuxi, and the many others out there, daigou-ing is an art. It takes skill and a lot of hard work to make it in this semi-illegal, cut throat industry. So how do they do it?
One, they know their market. A daigou-er spots a good that’s high in demand, then locates a place where that good is cheaper. Like the Apple consumer goods mentioned above, iPhones are more than 20% cheaper in the US than China. That’s music to a daigou-er’s ears… ching ching! It’s also understood that most professional daigou-ers charge between a 5 – 15% commission on their sales, so it’s easy to see how they make money.
Two, they build connections inside and outside of China. On one hand, if you’re like Ms Pei or Yuxi, they personally go abroad then either send the goods back to China or bring them back personally. On the other hand, others do the opposite and establish connections with buyers abroad and serve as the distributor in China. Either way, a strong, trusted network is essential.
Third, marketing is a key function in any retail business. How can people buy their products if no one knows about them? Savvy daigou-ers use various marketing outlets. In the realms of digital marketing, establishing channels on Taobao, WeChat and Weibo can be effective, as they can reach a large audience. However, with authorities cracking down on the daigou phenomenon, it’s becoming harder and harder to advertise online.
A more traditional route is through the powers of word-of-mouth. Daigou-ers, like the ladies mentioned in the Financial Times article, build large networks of shoppers mainly through word-of-mouth. They supply one client with a well-priced good that’s in demand, then that satisfied customer tells a friend, and so on. In today’s age, this is probably the safest/most efficient bet.
Wait a minute… is this legal???
Well… not really. It’s definitely a gray area. It’s not legal per say, but the government is cracking down on it. It’s been reported that Chinese customs are already aware of daigou-ing and are seeking out packages shipped into the country. If it’s suspected of daigou, the authorities will most likely slap a tax on it.
What is acceptable, however, is bringing back just a few goods from abroad, and giving them as gifts for free (or, cough cough, with a slight commission on top) to people you know personally. Again, if the customs agent is having a bad day and wants to make life difficult, they may make you pay tax on items you bring into the country. But if it’s something small, or just one packet of baby milk powder, or just one iPhone (even bringing back two iPhones can raise a red flag), you’re probably in the clear. These amateur daigou-ers, especially ones that travel extensively abroad, can make a nice side business off shopping.
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Keywords: Milk Powder China iphone china Daigou in China
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