Making sense of the Daigou channel
Daigou, pronounced 'dye-go', means 'buying on behalf of', and is an e-commerce channel between mainland Chinese buyers and overseas professional shoppers.
This network of shoppers buy goods in New Zealand or Australia which may be expensive, hard to find or unavailable in China. Categories like mother and baby, beauty, high-end food and beverage and nutraceuticals may make their way from New Zealand supermarket or pharmacy shelves to China via Daigou, sometimes without the brand owners being aware of the scale of the movement.
Almost all purchases are mediated by social media or e-commerce platforms, which make a relationship driven channel viable over long distances and with large numbers of buyers. A lot of Daigou trading takes place via WeChat, China’s largest social media platform. WeChat includes Facebook and Twitter-like functions, and also features online stores and direct payments between users. WeChat’s importance as a social media platform in China makes it an ideal place for part-time and full-time Daigou to do business with friends, family and other contacts.
Daigou also establish their own personal stores on e-commerce platforms such as Taobao. Consumers can browse, shop and review individual sellers on these platforms.
Tips for Daigou
Daigou can be a simple, cost-effective way for New Zealand exporters to build early stage brand awareness, test the market and scale into China, in advance of moving onto a platform like Tmall, Kaola, Little Red Book or JD.com. But if you do plan a purposeful entry to China at some stage, here are some tips:
- Invest in basic complementary digital marketing like a local language website, Weibo and WeChat accounts. Any accounts opened should be registered in your name rather than your third-party distributor. Short-form video and gamification of social medial content is also very popular for engaging and entertaining your target consumers. Without this investment, your entire brand, pricing, logistics and product information is controlled by Daigou. Individual Daigou may choose to position your product completely differently.
- Safety and trust are important factors in the positive perception of New Zealand products in China. If Daigou is your sole channel, your supply chain may not be considered secure because products are often simply sent through the post. Tampering could lead to serious brand and reputation issues.
- Be in control of your IP. You must register your brand and trademarks in China to make sure you have control of your IP. An unregistered Kiwi brand gaining traction through Daigou is an easy target for entrepreneurial opportunists, leaving you open to scams or a tough legal battle. If you are opening a flagship store for cross-border e-commerce then this should also be registered in your name rather than your third-party distributor.
Supply chain for Daigou
Individual Daigou sellers usually deliver goods via:
- Personal parcels - When the Daigou gets an order from China, they purchase the products locally in New Zealand from supermarkets, pharmacies or company web stores. They then package and send the products to the customer through postal or courier services. Delivery to the customer usually takes more than seven days.
- Shipping on behalf - When they receive an order from China, the Daigou purchases from a New Zealand-based platform that both supplies the products and arranges shipping and delivery to the end customer.
These businesses are often called ‘daifa’, a Chinese term for ‘shipping on behalf’. Daifa platforms can include New Zealand-based pharmacies, health shops, duty-free shops or souvenir stores which offer postage and delivery direct to China, as well as normal retail sales in-store. Others are specialist wholesalers who focus mainly on servicing Daigou. Many specialist daifa platforms maintain their inventory of New Zealand products either in Hong Kong or in bonded warehouses in Chinese free-trade zones. Since these products are already in China before orders are placed, fulfilment is much quicker than for parcels sent from New Zealand. This approach is called ’beihuo’ within the Chinese e-commerce industry.
Daigou personal parcel - Xingyou
Pros: exempted from cross-border e-commerce policies and no CIQ check list as long as the items aren't on the Negative Lists for postal articles.
Cons: Longer lead time and less traceability in supply chain; Customs inspections may cause delays; end user may be required to pay a Customs assessed Parcel Tax.
Daigou shipping on behalf - Beihuo (bonded warehouse)
Pros: fast delivery to end user, typically 2-3 days and end user certainty on importation process.
Cons: requires compliance with Positive Lists and other registrations depending on product in question; demand forcasting, inventory planning and packaging format is important.