Decline of China’s personal shoppers impacts foreign businesses

Personal shoppers, known as daigou, were crucial routes for foreign brands to tap China’s huge senior market. Shoppers would source and purchase either hard-to-find or expensive products from abroad and bring them back. The pandemic has hit this business and others that relied on it.

Why it matters

For many foreign brands in luxury, but also in infant formula or cosmetics, Bloomberg reports, this army of shoppers was a direct line to $40 billion worth of revenue in 2019. Many daigou would travel outside of China, meaning that certain brands could enjoy the Chinese market without having to make a formal entry. Many firms will now be forced to enter the country properly.

Problems

• With the halt in overseas travel, shoppers have been unable to collect products. Without the daigou as a mark of authenticity, many are looking elsewhere.
• As the business remains tough, not only because of the pandemic but because of government efforts to clamp down on tax avoidance at customs, many former customers are finding legitimate e-commerce solutions.
• Infant formula is a particularly telling product. New Zealand’s A2 Milk saw revenues fall around 30% in H2 2020, partly as a result of lost daigou sales.

Solutions

• E-commerce importers, with platforms like Tmall International and JD International have picked up a lot of this business and expect high annual growth (around 30%) in the coming years.
• Other brands are now deploying a one-to-one consultant structure in an attempt to provide a similar service to the kind of VIP consumers that would have employed a daigou.

Sourced from Bloomberg