The Covid-19 crisis has hit the travel industry. Airports are closed, planes are canceled, and duty-free stores are shut down. Chinese travelers used to be the main consumer target of Travel Retail worldwide. By 2025, the Chinese are expected to make 50% of their luxury purchase in China. Before the global pandemic, travel was a key strategy to enable Chinese shoppers to purchase luxury goods at a lower price. How could they benefit from it without neither European market access nor duty-free stores?
Travel Retail needs to reinvent itself and daigou could be a great alternative to duty-free opportunities.
What is a Daigou in China?
A Daigou, 代购 in Chinese, literally means “buyer for”. In a word, a daigou is a personal shopper. His role is to buy international products worldwide to sell them in China. Each week, half a million packages are sent to China. The daigou market is estimated to reach 2.5 billion dollars in China.
Chinese shoppers crave luxury and foreign goods. Especially, they want to benefit from the international prices rather than the Chinese prices. A Chanel bag with a suggested retail price (SRP) of 2 450€ in France can reach 5 000€ in China. The daigou decided to play with the taxes by importing personal goods and selling them out of stores. The conventional trade model is totally transformed!
To be clear, daigou takes care of everything from marketing to retail, logistics, and delivery. They look at whatever people may demand. Today, cosmetics and luxury products are among the most requested products.
Learn more about daigou with ABC News documentary video
Travel Retail: Pros and Cons of Daigou Strategy
The daigou business model can benefit your client experience in China, especially during this time of the pandemic. Chinese consumers develop a strong relationship with their daigou based on trust and loyalty. They are very confident in daigou recommendations and discoveries. If a daigou recommends a new product coming from small international brands, Chinese shoppers will trust them. This method could improve your brand visibility, accessibility, and experience in China.
In the meantime, you should be aware that daigou are considered to be a grey market for the Chinese government. They avoid taxes, they manage their own network, and they could be ill-intentioned. If you do not speak Chinese or do not master how a daigou network works, you can fail. You need to rely on a local agency to find trusted daigou who will maintain your premium brand perception and avoid counterfeited products.
In Travel Retail, you can use daigou as a short-term strategy. You will offset the current sales loss generated by the closed airports and duty-free stores. As a matter of fact, Chinese shoppers love to shop at a lower price. For them, it is even fancier to show you have a premium or luxury product found at the best price.
A Chinese Shopping Trend under New Regulations
Daigou used to be at the source of a major tax loophole in China. As we showed you previously, daigou use WeChat to communicate with their shoppers and get paid with WeChat Pay or Alipay. These digital payment apps are even more complicated to track for the Chinese government. All of this has led to a grey market area.
According to this new regulation, daigou must register as a business activity. It means they will have to pay the relevant taxes on their profits and would not be able to sell their purchase as “personal items” anymore. So, if a daigou is caught not being registered as a business activity, he will be accused of tax evasion, law violation, smuggling with a 2 million RMB fine.
By the way, the recent law on animal testing is also a direct reaction to daigou. This new step towards cruelty-free beauty products aims at helping ethical brands entering the Chinese market without using a daigou.
The Duty-Free Alternative to Target Non-Travellers Chinese Consumers
Chinese people canceled their travel worldwide and reduced their travel within China. If you want to do business in China, you cannot only target Chinese travelers anymore. You need to build a strong strategy to target Chinese duty-free lovers… in China!
Outsource Marketing & Shipping Responsibilities
You can confide in daigou about your marketing. If you have direct contact with them, you can share your storytelling and heritage. They will promote your brand in the light of the values and premiumness you want to share with your customers. You can even improve your customer loyalty. How? The daigou will answer clients’ questions and give recommendations on private WeChat groups. Chinese give a lot of importance to product recommendations and reviews.
If you do not have any logistics partner, you can benefit from daigou shipping methods. They can import and deliver your products faster thanks to cross border e-commerce platforms. Indeed, the rapidity of delivery is a very important matter for Chinese consumers.
Promote your Cosmetic Brand
As we mentioned, daigou are new KOLs. They create small ecosystems on WeChat based on product recommendations and top tips. People have the feeling to share an intimate circle of people still interested in the same brands as them. For beauty lovers, they will have the chance to discover booming international cosmetics brands that are not already sold in China. Compared to travel retail, there is a plus-value than basic beauty advisors in shops. Clients can now request tips anytime during the day.
In China, Key Opinion Leaders (KOLs) are key. Especially the 3rd and lower-tier cities give a lot of importance to KOLs and celebrity endorsement. 87% of the luxury shoppers in Chinese lower-tier cities value KOL recommendation more than any other recommendation. If you can find a reliable daigou who will promote your brand effectively, then go for it!
How to find and contact the perfect daigou for your brand?
Gentleman Marketing Agency is the #1 digital agency in China. We can help your brand perform with daigou to boost Travel Retail. We have already worked with L’Oréal Travel Retail and YSL Beauty Travel Retail. Take a look at our case studies to know more and contact us if you want to talk about your next project in China!