Predicting The Future Of Daigou Shopping

    When COVID-19 brought the world to a standstill, it did the same to daigou sellers. So what is the future for this once-lucrative industry?
    When COVID-19 brought the world to a standstill, it did the same to daigou sellers. So what is the future for this once-lucrative industry? Photo: Shutterstock
    Adina-Laura AchimAuthor
      Published   in Finance

    Key Takeaways:#

    In the post-COVID-19 economy, professional shoppers and daigou agencies have had to innovate to keep their businesses afloat.

    The new e-commerce law that went into force on January 1, 2019, and the pursuit of global price harmonization by brands have killed middlemen and the intermediary business.

    Disruptive innovations have taken the Chinese retail world by storm. But until recently, the daigou business has failed to adopt any of these new tactics.

    Before the global pandemic, personal shoppers and daigou sellers were making serious incomes by purchasing commodities overseas for Chinese customers. And despite the government’s efforts to regulate e-commerce operators via a crackdown on daigou trade, the industry continued to thrive until COVID-19 brought the world to a standstill.

    Daigou industry revenues ballooned to 40 billion in 2019, according to estimates by the consultancy Proresearch in Beijing. But now that China has shut off international travel, trying to keep the virus at bay, the future of daigou shoppers has been halted and is under review.

    Bloomberg highlights how some daigou shoppers have turned to overseas partners, but the practice has affected their business because customers distrust third-party sellers. Meanwhile, other professional shoppers have exited the trade for different career paths. And companies associated with the daigou trade, such as Blue Sky International Express, a logistic provider for daigou shoppers, became insolvent.

    Jerome Fu, director of the Sydney-based marketing provider Honeyroo, said that about 30 percent of daigou specialty stores have shut down either temporarily or permanently in Australia. Additionally, ABC Australia reports that various Australian businesses are struggling because of overproduction and oversupply.

    For instance, A2 Milk had to revise its profit forecasts twice in five months as its sales shrank, and the company was forced to write off about 90 million in unsold nutritional powder stocks. According to Farm Online, A2 Milk stated that COVID-19 travel restrictions and “new regulatory factors” have altered the once “highly engaged” daigou trade in China. Naturally, competitors aren’t performing better.

    “The longer this happens, the harder it will be for Danone, Reckitt, and A2 Milk to rebuild China sales as their local customer bases shrink,” Bloomberg Intelligence analysts Catherine Lim and Kevin Kim wrote in a report published in July.

    Given the circumstances, it’s understandable that brands have turned their attention towards e-commerce platforms like Tmall and, hoping that the booming duty-free sector and the proliferation of cross-border e-commerce services will mitigate losses from the daigou trade.

    But the COVID-19 pandemic wasn’t the only existential threat to the industry. The new e-commerce law that went into effect on January 1, 2019, and global price harmonization strategy implementations by certain luxury brands like Chanel killed the middleman and the intermediary business.

    As the repatriation of spending becomes the norm and COVID-19 continues to wreak havoc on the daigou industry, professional shoppers and daigou agencies must incorporate disruptive technologies like blockchain and cryptocurrencies to keep their businesses afloat.

    Disruptive innovation has also taken the Chinese retail world by storm. But, until recently, the daigou business model has failed to evolve with technology. This failure has been unforgiving and has penalized professional sellers, putting some daigou traders out of business because of authenticity scandals. For obvious reasons, in an industry that cannot operate without trust and transparency, blockchain and cryptocurrency-enabled systems became necessities that provide traceability and safety.

    Today, professional shoppers that want to overcome industry distrust should partner with luxury brands or blockchain technology companies and invest in authentication and tracking services that provide customers access to the entire supply chain ecosystem. This way, they create value for all parties.

    In this new reality, luxury brands don’t have to overcome reputation fallouts. Consumers don’t have to worry about fraudulent and unethical practices because they can verify the authenticity of their products and trace their origins. And the daigou shopper will be able to build strong customer relationships that foster loyalty.

    “Brands can counter daigou influence in many different ways,” says Vogue Business, also stating that luxury labels “might consider formalized relationships with the most established daigou shoppers, who can play the role of personal shoppers and influencers among their hyper-loyal clientele.”

    Identifying the need for collaborative partnering is the first step in the right direction for daigous. But instead of integrating these sellers into a brand’s influencer marketing strategy and transforming them into brand ambassadors, luxury labels should incorporate them into the supply chain. The assimilation of the daigou into a blockchain-enabled framework transforms the seller into a brand custodian forced to accept — without objections — the regulations imposed by the luxury brand. This practice mitigates the risks that come with transforming professional sellers into “influencers.”

    So what is the future of this business? Many believe the traditional daigou business model will eventually get replaced by boutique, full-service consultancy firms that manage the services of various expert sellers. These agencies will deliver personalized customer services and transform the way brands interact with their end consumers.

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