The Daigou Effect: How Brands can Break Down Chinese Borders and Drive Growth
Australian brands have the opportunity to tap into the wants and needs of the massive China population through a growing export and e-commerce ecosystem – Daigou.
Research by Nielsen and China Road reveals myriad opportunities for Australian brands to engage in the growing trend of Diagou – a person who facilitates the buying and selling of international products on behalf of a customer in mainland China.
There is an estimated 100,000 – 200,000 Daigous operating in Australia, turning over approximately $100 billion annually across the retail sector. Now with close to 2 million Chinese tourists visiting Australia and New Zealand every year, Daigous open up new channels and new ways for brands to continue engaging with Chinese consumers after they return home.
Consumers from China have an increased demand for high quality and genuine branded products, with consumers paying up to a 100% premium on a product if there is an underlying assurance and a trusted person sourcing and delivering the product.
The majority of the rising middle class in China is also willing to spend more on products that have a perceived higher quality. Health-related products such as vitamins and beauty products are the most popular and in high demand, as are fresh food like dairy, beef and seafood.
The Daigou industry is built on trust, with consumers in China placing trust in their networks in Australia and New Zealand to source authentic, quality and safe products. Daigous can play an incredibly important role in introducing brands and in building brand confidence in the Chinese market. Companies in the Pacific that have been successful in China have embraced the Daigou and worked with them to build a sustainable business in China.
For Chinese consumers, word-of-mouth marketing is by far the most powerful form of advertising. A Daigou based in Australia can have anything from 100 to 100,000 personal contacts in their network, enabling a personal recommendation of a brand or product to an incredibly wide network in China with instant results.
The use of WeChat allows for direct payment, allowing the Daigou to have regular and instant conversations with their customer base, as well as providing an instant and automated purchasing and logistics process. For example, a Chinese consumer can now sit at home and directly bid and order live lobster in Australia via a webcam on a boat.
New technologies has allowed for new logistics channels to export products. China Road, a full service solution for premium brands entering China, is just one company providing Daigous with the ability to export products directly to the buyer’s front door.
There is minimal risk and little investment from brands to invest in a Daigou and the level of knowledge the Daigou needs to know about the brand they are selling is minimal. However to maximise the Daigou opportunity for you brand, a business model is required.
Phase 1: Seed the brand into the market through the Daigou, giving you maximum flexibility and cost-effectiveness
Phase 2: When you reach a certain scale and have built enough brand equity, transition into a focused e-commerce platform
Phase 3: Create a ‘retail experience’ through concept stores that allow consumers to experience your product
In addition, brands need to consider new ways to engage the consumer, both locally and abroad, and be prepared to rethink and pivot based on what’s happening in the market.
Daigous can help companies grasp a better understanding of Chinese consumers’ nuances and needs, and the world is slowly realising this with Daigous now existing in NZ, Italy, Korea and the United States.
Source: Nielsen and China Road Daigou White Paper | September 2017
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ABOUT THE NIELSEN AND CHINA ROAD DAIGOU REPORT
To better understand the Daigou opportunity and ecosystem, Nielsen and China Road (a full service solution for premium brands entering China) invited a core group of Australia’s Daigous for a dinner in Sydney. The goal of bringing together this group was to develop a point of view on the potential opportunity and watch-outs for Australian brands, and to glean a better understanding of how the Daigou ecosystem and logistics actually works.
This paper reflects some of the key learnings and fascinating insights that were shared in this discussion. It also provides guidelines on how brands can best leverage this new way of doing business – should they wish to be agile and open to playing the game according to some new rules.