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daigou industry

Navigating China’s Daigou landscape: resilience, challenges, and novel avenues in post-pandemic luxury markets

The Daigou (代购) industry, referring to individuals or agents who purchase and import goods from overseas for resale in the Chinese market, faced substantial challenges amid the pandemic. Tightened regulations and pandemic-related disruptions led to a significant reduction in the industry. Despite some recovery, the industry is unlikely to return to its previous size.

This decline is further accentuated by a shift in consumer habits. More citizens are opting for in-store shopping or choosing legitimate e-commerce channels and duty-free malls. This changing landscape has contributed to the diminishing influence of the Daigou industry in the Chinese market.

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Daigous as gatekeepers of niche luxury in China

Approximately 15% of luxury goods consumption in China comes from Daigous, with cosmetics from top international brands accounting for more than half, followed by bags, watches, and jewelry.

The most popular luxury brands among Daigous in China include Dior, Louis Vuitton, Gucci, Chanel, and Prada, consistently at the top of the list for several quarters. Chanel, in particular, is highly favored by Chinese shoppers. Other popular brands among Daigous include Hermès, Burberry, and Swatch.

Daigous play a crucial role in introducing new and nicher brands to the Chinese market, such as Christopher Kane, benefiting from increased revenues through Daigou sales. Additionally, Daigous help meet the high demand for iconic Hermès bags in China, where local supply is limited. They also cater to the rising demand for luxury in lower-tier cities, offering international luxury products at home and boosting sales for brands globally, creating organic buzz on social media.

daigou industry: why people use daigou
Source: Xiaohongshu, designed and translated by Daxue Consulting, Chinese posting of reasons why people should find Daigous

What are the luxury brands reactions to Daigous?

Luxury brands exhibit a nuanced stance towards the Daigou phenomenon. Daigous play a pivotal role in elevating brand awareness, especially beneficial for newcomers in the Chinese market. Furthermore, also play a constructive role for European Sales Associates (SAs) by contributing to sales through parallel channels, aiding in achieving Key Performance Indicators (KPIs). However, they also pose challenges. The exclusive image of luxury brands, carefully crafted through pricing strategies and limited stocking, can be compromised by Daigous offering lower prices and access to limited-edition products.

Adding to the complexity, luxury brands find it challenging to maintain control over the shopping experience and lack access to customer data through Daigou channels, impacting their ability to shape overall brand perception. Some luxury brands, exemplified by LVMH’s Bernard Arnault, view the Daigou trade negatively, vowing to address its impact on brand capital and allure.

In response, certain luxury brands are implementing stricter regulations on cross-border e-commerce to oversee Daigou resellers. This move aims to ensure that products are sold through authorized retailers, potentially redirecting sales through official channels and mitigating the challenges posed by the Daigou market.

Simultaneously, the Chinese government has responded to the Daigou phenomenon by introducing regulations and systems to combat fraudulent activities. Measures include the verification of online buyers’ identities, reinforcing border regulations, and establishing blacklists, underscoring the commitment to addressing the complexities associated with Daigous in the luxury market.

Daigou renaissance: unveiling novel avenues in a shifting landscape

While the Chinese Daigou industry has faced significant challenges due to the COVID-19 pandemic and tighter regulations, it has shown resilience and adaptability. Focused on sourcing elusive items, especially limited-edition luxury goods, Daigou sellers adapt through livestreaming. While not fully restored to pre-pandemic levels, the Daigou industry remains a substantial contributor to China’s luxury retail, showcasing its enduring significance.

Livestreaming and online channels:

The Daigou industry is seizing new opportunities through innovative methods like livestreaming and online channels. Utilizing these platforms allows Daigou sellers to connect directly with customers, showcasing products in real-time. This interactive approach not only enhances the shopping experience but also opens up avenues for personalized engagement, fostering stronger relationships between sellers and consumers in the evolving landscape of e-commerce.

Tapping into lower-tier city markets:

Daigou sellers exhibit adaptability by expanding their reach into lower-tier city markets. Capitalizing on their extensive networks, Daigou entrepreneurs excel at reaching consumers in regions where luxury products might be less accessible. This strategic move enables the Daigou industry to tap into emerging markets, catering to diverse consumer bases and establishing a foothold in areas with untapped potential for luxury goods.

Focusing on hard-to-find items:

A key avenue for Daigou sellers to thrive is by concentrating on hard-to-find items, especially limited-edition luxury products. By curating a selection that is not readily available in local boutiques, Daigou sellers can meet the demand for unique and exclusive items. This niche focus allows them to maintain relevance and attract consumers seeking distinctive products not easily found through conventional retail channels.

Reverse Daigou (逆代購 or 反向代购):

A novel trend known as “reverse Daigou” is reshaping cross-border commerce. In this emerging practice, goods are shuttled from Shenzhen into Hong Kong, facilitated by social media platforms. Leveraging this trend, Daigou sellers can explore new avenues for cross-border trade, capitalizing on the efficient movement of goods between these key regions and adapting to the evolving dynamics of international commerce.

Examples of this trend include the sale of trendy snacks from mainland China, known as “wanghong meishi” (网红美食) or “viral cuisine”, that are hard to find in Hong Kong. Popular choices for reverse Daigou include bubble tea from Yidiandian, Master Bao’s pastries, and specialty products from Alibaba’s Hema supermarkets or Walmart’s Sam’s Club stores.

reverse daigou in hong kong
Source: Xiaohongshu, Designed and translated by Daxue Consulting, Hong Kong Daigou explaining challenges and appreciation for customers

On Xiaohongshu, people often use hashtags such as #reversedaigou (#反向代购) having a total of 7.1 million views (as of December 14). In a post, expressing gratitude and providing a summary of recent experiences in the context of reverse daigou, the author acknowledges the support received from understanding customers and details adjustments made in pricing and delivery methods. The author emphasizes the challenges faced, including negotiations on fees, transportation costs, and the complexities of delivery platform fees.

Collaborating with brands:

In response to demand shortages in Europe and the US during the early stages of the pandemic, some brands have turned to Daigou sellers to sell excess inventory that ended up in the Chinese market. This collaborative approach presents an opportunity for Daigou sellers to establish closer ties with brands. Such partnerships can foster mutually beneficial relationships, allowing Daigou sellers to play a pivotal role in brand distribution and sales strategies.

Revitalizing Daigou: Navigating the post-pandemic landscape through livestreaming, niche markets, and innovative commerce

  • The Chinese Daigou industry, involving individuals reselling overseas products in China, has been significantly impacted by the COVID-19 pandemic and tightened regulations, leading to a reduction in market size.
  • Despite attempts at recovery, industry leaders, like A2 Milk’s CEO, anticipate the Daigou channel only recovering to half of its pre-pandemic peak due to shifting consumer habits towards legitimate e-commerce channels and duty-free malls.
  • To overcome challenges, Daigou sellers have embraced online channels, particularly livestreaming on platforms like Douyin, to connect with customers. They focus on sourcing hard-to-find items, including limited-edition luxury products, and tap into lower-tier city markets where luxury goods may be less accessible.
  • The emergence of “reverse Daigou” is noted, where goods shuttle from Shenzhen to Hong Kong, facilitated by social media platforms, presenting a new form of cross-border commerce.
  • Collaborating with brands has become a strategy, with some brands turning to Daigou sellers to sell excess inventory in the Chinese market, opening up potential future opportunities for closer partnerships.