A Fast Entry-To-China Strategy: Daigou
By Tom Griffiths, Commercial Director of VERB China
With brands facing slowing sales in the European and US markets, some are turning to the now reopened China market to help alleviate some of the financial damage. Over the past 2 months, the list of brands that have launched on Tmall is impressive. Alexander Wang, Prada, Cartier, Miu Miu, and Giorgio Armani have all opened stores, Bulgari announced theirs will be opening next month. Even The Hermitage has launched a store – hoping to replicate the success of The British Museum’s 2018 store launch which drew in $51m in sales.
While launching on Tmall is a great strategy for many brands, the whole process can be lengthy and resource-intensive. For smaller brands, it’s probably not best undertaken during a crisis where teams are working remotely and brands are looking to cut costs. At VERB China we have been working on a creative solution for this, and we strongly believe we’ve found one in Daigou.
What is Daigou?
Daigou is a Chinese term that basically means “buying on behalf of”. It refers to a phenomenon where overseas Chinese will buy and ship products back to China for other people. Originally the industry sprung up to cater to products and brands that were unavailable in mainland China or where international goods were preferred for safety or quality reasons.
In late 2019, the Chinese government legitimised Daigou, by forcing the traders to register as businesses and to pay taxes. Daigou was, for a long time, a grey market as in the luxury sector, resellers made extra margins by not paying the high import taxes on luxury items. Legitimacy is no longer a worry if a brand uses legitimate Daigou.
For many brands, a Daigou strategy is not too dissimilar from using affiliate channels. In markets such as Australia and New Zealand, Daigou are actively encouraged by some brands as a way to gain sales and traction in the Chinese market ahead of an official store launch.
We work with luxury and premium clients and understand the issues that some brands in this sector will have with cultivating this kind of sales channel. Brand protection, price controls, and fitting Daigou into a long-term China strategy involving, eventually, owned sales channels are all important factors to take into account when planning a Daigou strategy. We at VERB China work with a carefully cultivated list of Daigou who already work with the world’s top labels. They know and respect brands, and are legitimate businesses in China.
For more information on how VERB China can help your brand with sales in the Chinese market, get in touch.