2. Daigou Market
2.4. Development Phases of Daigou
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France and Rolex watches from Switzerland. To purchase these merchandises, consumers are willing to pay premium prices in order to get what they want, especially for limited edition products. For example, Miss Sasa used 380,000 CNY to buy a red crocodile Hermes Birkin handbag through a Daigou online platform. She was willing to pay 40,000 CNY more in order to get that product because she could not find the same model in China [50]. Consumers purchase these luxury goods because it gives them a sense of accomplishment, belonging, status, wealth, brand loyalty as well as exclusivity [47].
2.4. Development Phases of Daigou
The development phases of Daigou was between 2007 to 2015 (presented in Figure 3) [6][7].
The scale and complexity of the Daigou business has changed over time according to different
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regarded as a home business with a few sellers shopping on behalf of their families or friends and one transaction is usually between one seller and one buyer. Therefore, its business scale was relatively small. During that time, buying options were limited according to the destinations where the sellers traveled to. During the global recession in 2008, the prices of Western goods were slashed dramatically [51]. With the increase of in purchasing power and a taste for luxury goods, Chinese people were easily able to get oversea products for a lower price. In the same year, the poisonous milk powder scandal aroused the concerns of quality issues in the local markets, pushing the Chinese people to look for better products in foreign markets.Hence, the industry became increasing popular. Every year, thousands of consumers looked for oversea products through Daigou agents or platforms, especially ten days before Christmas and after holidays when Daigou agents usually got time to travel around and shop for their customers [51]. Nowadays, cosmetics, milk powder and handbags ranked as the top three best sellers in the Daigou market [6]. Due to its huge demand, even with the increase in customs restrictions in 2010, the Daigou orders still increased extensively and its market nearly doubled every year. For instance, in Australia, the Daigou trade revolved around everyday items ranging from food, beauty products, wine, to clothing. On the other hand, Daigou first grew to prominence in Europe by shipping fashionable and luxury goods such as Louis Vuitton handbags to China.
As the market matured, some of the Daigou platforms established their own logistic systems as well as online shopping websites by taking advantages of third party and technology innovation, which scale was much larger and more diverse. By 2012, there were already hundreds of
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“Haitao” and cross-broader e-commerce platforms, websites, apps as well as social media sites involved in the business.
However, the growth of the Daigou business, caused some undesirable problems such as smuggling, counterfeiting, tax avoidance and trust issues. The Daigou market started to change at the end of 2013 because of many factors working against the whole Daigou business. For example, the introduction of the Shanghai Free-Trade Zone allowed international companies to directly sell their products to local customers online at significantly reduced costs [52]
Furthermore, the development of Alipay ePass, a combination of payment, logistics and market support system, opened Chinese customers up to a whole new set of direct international shopping. They had much wider selection of products than before [53]. In 2015, the market had dropped back significantly. Its decline was considered to be a turning point for Daigou business.
Worse still, on April 2016, the government moved a step further to launch several stricter customs regulations on consumer goods and increased the import taxes on foreign products [54].
Under these business challenges, the impacts on Daigou business are still full of uncertainty and its future outlook will be covered in the last Chapter.
On the other hand, other than reviewing the development period of Daigou, a newly launched paper by the CECRC has precisely used four phases to describe the whole development of Daigou in a novel perspective [55]. These phases were as follows:
Phase 1: Daigou 1.0 – “Retail Time” by exchange students(“散戶時代”歡樂的留學生？) Phase 2: Daigou 2.0 – Anxiety with the coming of cross-border e-commerce(跨境電商元年來 了散戶急了？)
Phase 3: Daigou 3.0 – The growth of professional Daigou agents(職業買手是“新代購”的
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Phase 4: Daigou 4.0 – Broadcasting of Daigou process (“我美我直播”買手也能當網紅？)
In the first phase, oversea exchange students were the major players in the Daigou business.
They used their free time to shop on behalf of their buyers living in China and then shipped the desired oversea products back to China in order to make money to support their oversea studies and daily expenses. After gathering a certain amount of customers, they established online or WeChat shop to further promote their businesses. Though the he scale was still small. Later on, the second phase started in the second half of 2014, with “Haitao” and e-commerce groups started to get into the Daigou business.
As time passed, large online companies, such as Tmall.com, JD.com and 163.com, few in popularity occupying large market shares in the Daigou business. With their better payment systems, logistics as well as communication platforms, some Daigou shoppers were forced to move out from the market or acted strategically to continue their Daigou businesses. During the third phase since the market was maturing and the demand was rapidly increasing, sellers ran Daigou business more professionally and even took it as a full time job. Sellers worked as a group with ten to twelve people per group. Limited edition and luxury products were their main targets due to higher profit potential. To secure payment, they used pre-paid order method and received money before orders.
In the fourth phase, due to many quality and trust concerns, such as fake or damaged products, sellers amended their usual business models by using social media and marketing strategies to better promote themselves and alleviate buyer concerns. Detailed description of the whole
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purchasing process through their websites and online platforms were then extensively used to show the authenticity of their oversea products. In order to be more systematic and be legitimate, some Daigou agents chose to go through the proper China’s custom procedures but not all agents could follow the instructions appropriately because of costs and complexities.
Therefore, similar to Daigou development between 2007 and 2015, this 4 phase analysis also indicates how the Daigou business has extensively changed over time according to different business environments. Its business scale has become more and more complex compared to a decade ago and the Daigou business is currently facing several business challenges. In order to remain competitive, adjustments of the current business strategies are necessary.
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