Over the last 18 months, we’ve been taken aback by how quickly grey-market imports through suitcase shoppers (Daigou) have shrunk.
Daigou (“to buy on behalf of someone else” in Mandarin) have been taking advantage of price arbitrage and product scarcity for around a decade. In Australia alone, there were estimated to be 150,000 Daigou, buying and selling FMCG products to consumers back home to the tune of AUD 2.5 billion (USD 1.7 billion).
But two things have crippled the Daigou trade.
The first was new regulations, which came into effect last year. These require Daigou to be ‘legitimate’ corporate entities, which means would-be Daigou need to fork out for a business license, keep proper accounts and cough up tax.
The second is COVID-19. When the outbreak first hit China, there was a rush of transnational panic-buying which initially sent Daigou into overdrive. However, as COVID-19 spread around the world, international travel and postal systems crawled to a halt.
Now, if consumers in China purchase via Daigou, parcels will take anywhere between five and seven weeks to reach their destination. That’s far too long a wait for consumers who are used to same-day or next-day delivery as standard.
Accordingly, we think grey-market imports through Daigou have been dealt a heavy, heavy blow. While Daigou channels may have some resilience left in them, especially for high-value luxury goods, we don’t see Daigou returning to their former glory. Ever.
So, what does that mean for brands who are looking to launch into China?
- Build Up Awareness Via Instagram Influencers China’s Hippest Netizens Follow: One way to gain-on-the-ground awareness in China without being in China is via Instagram. Yes, Instagram is technically blocked in China. However, millions of Chinese netizens continue to access Instagram via VPN. There are also dedicated “content movers” (内容搬运工) who take Instagram content and place it on platforms Chinese consumers can see. Get in touch with us to see how you can improve your brand awareness in China by product seeding and paid promotion with Instagram influencers that are widely-followed in China.
- Consider Travel Retail Distribution: Prior to COVID-19, travel retail was a promising channel to reach Chinese travelers. Given time, we think that momentum will return. When it does, be in a commanding position to put your best foot forward with Chinese travellers.
- Test The Water Via Cross-Border E-Commerce (CBEC): Cross-border e-commerce in China holds a specific distinction. International companies are allowed to sell certain goods to Chinese consumers online, through platforms such as Alibaba’s Tmall Global and Kaola, at preferential duty rates and without a license to operate a business in China. As you can imagine, that’s a significant reduction in red tape. It also lowers the cost of doing business in China.
- Have A Track Record When You Approach Distributors: Growing traction on CBEC platforms is a minimum requirement for a meaningful conversation with in-country distributors. Local brands are becoming more sophisticated and distributors want to have certainty foreign brands have the chops to navigate China.
AgencyChina is a full-service marketing agency. We take brands from strategy to launch. We even can act as distributors for brands that we have specific expertise in. We’re keen to hear from brands who think they have what it takes to crack the China market. Drop us a line to get in touch.