For a price, professional shoppers will travel the world to hunt down hard-to-find goods. But their methods often skirt the law.
For years, Chinese consumers who wanted luxury goods at affordable prices could count on daigou 代购, professional shoppers who buy sought-after products overseas and resell them in China.
A La Mer face cream, for example, might cost 2,680 yuan ($390) in retail stores in China, but only 1,600 yuan if one enlists the services of a daigou, according to a report from equity broker Bernstein.
“Over the past decade, this gray channel has provided Chinese consumers with valuable access to global brands at affordable prices,” says the Bernstein report. “At the same time, daigou operators can make lucrative margins by [taking advantage of variation in] prices between domestic and overseas markets.”
In airports around the world, it’s common to see Chinese shoppers with suitcases full of cosmetics, apparel, and luxury goods. Some also transport products that are hard to find in China, such as foreign-branded baby formula or health supplements.
Daigou means “buying on one’s behalf” in Chinese. At its peak in 2013, the daigou economy was worth over $10 billion. By 2015, though, it had shrunk to $5.9 billion because of clampdowns by the Chinese government.
In 2019, a new law was passed requiring professional shoppers to register companies and pay taxes. This narrowed profit margins and made it tougher for the shoppers to operate.
Estimates say there are more than 100,000 Chinese daigou in Australia alone, and over a million globally.
But daigou still remains a popular way of obtaining pricey goods. Estimates say there are more than 100,000 Chinese daigou in Australia alone, and over a million globally.
In recent months, they’ve been hit hard by the Covid-19 pandemic. Travel disruptions have been a blow to professional shoppers, especially the small-time operators who rely on making frequent buying trips abroad.
How does daigou work?
These buyers operate via messaging apps like WeChat, through which they build a network of customers and where they sell through their newsfeeds.
Some establish e-commerce stores on Chinese shopping platform Taobao or on websites such as ymatou.com and smzdm.com, which resell products from overseas.
(Taobao is run by Alibaba, the owner of the South China Morning Post, of which Goldthread is a part.)
The daigou business is conducted by both individual traders and companies.
Individual traders are small-time buyers who live overseas or go abroad frequently on buying trips. Some work with travel agencies that give them discounts at certain duty-free stores.
(Read more: What is ‘revenge spending,’ the post-coronavirus shopping spree phenomenon?)
Companies also work with travel agencies that have negotiated rebates from retailers.
The companies hire staff to shop in duty-free stores designated by the agencies and maintain an inventory of items. Their purchasing power means they can get big rebates from duty-free operators. Sometimes, they negotiate directly with brands to secure better prices.
Most of the professional shoppers offer competitive prices by dodging China’s import taxes.
Most of the professional shoppers offer competitive prices by dodging China’s import taxes. They have various ways to deliver their orders to customers in China.
Hong Kong is one route. To avoid paying taxes, some operators deliver products to the city and then ship them to China using a customs broker.
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Customs brokers are smugglers who illegally import goods to Shenzhen, just across the border from Hong Kong, to avoid customs duties. A daigou could simply mail the goods—the shipping costs would be lower—but taxes would be levied on the items.
Another popular option is to personally transport the goods through customs and risk parcels being inspected and subject to taxes.
Before the pandemic, professional shoppers would buy from Korean duty-free stores, according to Bernstein. In recent months, Chinese duty-free stores have lured them by rolling out aggressive discounts.
“Daigou will be marginalized,” says Cherry Leung, an analyst from Bernstein, “but I don’t think they will disappear in a year or even a few years as they still offer some value to consumers.”
Adapted from an article first published in the South China Morning Post.
