2. Daigou Market
2.1. Key Elements in the Daigou business
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2. Daigou Market
Daigou is a fast-growing overseas purchasing industry in China. By analyzing the Daigou surveys from the China Electronic Commerce Research Center(CECRC) and U.S.-based consultancy Bain & Company, approximate Daigou annual revenue in China from 2007 to 2015 are summed up in Figure 1 [6] [7]. Daigou market started to grow rapidly in 2008 and its business doubled almost every year. By 2013, the market size had reached to 74.4 billion CNY but started to decline dropping to approximately 40 billion CNY in 2015.
This chapter goes through the Daigou market by looking into its key elements, product types and services, business driving forces, as well as the development phases of Daigou.
2.1. Key Elements in the Daigou business
What is Daigou? It is the Pinyin spelling for two Chinese characters: “代購”, which are “Dai”
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and “Gou”. It simply means “buying on behalf of” [8]. Sometimes, people use the term “Haiwai Daigou”, meaning “Oversea Daigou” to describe an overseas person who purchases commodities (usually luxury goods) for a customer in mainland China [9]. Daigou is a business activity where a seller shops overseas on behalf of a buyer, a practice since long time ago. The products offered in this business are mainly from oversea countries and the purchase reasons can be either lower prices, desirable brands, or other qualities that cannot be found or are limited in the local market. Several terms related to the Daigou business will be further discussed in the following sections.
Daigou Agents/Daigous
Anyone can be a Daigou agent or Daigous. These Daigous shop for goods based on their Chinese customers’ shopping list and ship the commodities to China. Daigous are usually Chinese students studying abroad, or Chinese people who live overseas, or travelers, who visit foreign countries frequently [8]. The people involved in this business come in many forms, acting as direct sellers, middlemen or agents. As reported by BBC News, a person who engages in the Daigou business is also called a freelance retail consultant who shops for someone during his/her free time [10].
Overseas Personal Shopper
Overseas personal shopper is also used to describe a person who does the Daigou business.
According to the Oxford Dictionary, a personal shopper refers to “an individual who is paid to help another to purchase goods by shopping on their behalf [11]”. There are also several definitions to describe what a personal shopper is, which can simply indicate “a person, whose
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job is to assist other shoppers in selecting merchandises; a person, who is employed to choose items for his/her customers; a person, who is hired to buy goods and services for another; a person, who make competitive purchases based on the customers’ instructions, etc. [12]” In the Daigou business, an overseas personal shopper refers to a person who travels to other countries/cities to purchase the desired products on behalf of his/her Chinese customers.
Third Party
Investopedia defines third party as, “an individual, an entity or a group who is involved in a transaction but he/she is not the principal party and has only a lesser interest [13]”. The third party takes an important role in the transaction he/she is the major actor in both the purchasing and shipping of oversea products to mainland China. In this paper, third party means anyone who is other than the direct seller or buyer for the Daigou business. It includes frequent traveler, oversea exchange candidate, delivery company, service provider, consignor as well as online platform provider, who plays the role as a middleman supporting a product or service between seller and buyer in exchange for money or goods.
Frequent Traveler
Frequent traveler refers to “a person who leaves his/her home city/country and travel to other places for short intervals for business, tourism, family visits, employment, study or exchange [14]”. Business travelers, such as an overseas key account executive, flight attendant or tourist guide, are “travelers whose expenses are covered and paid by the company or entity he/she works for [15]”. Travelling by plane is the usual way to go oversea, especially for people travelling from mainland China to other western countries. So in this case, frequent travelers are also referred to as frequent flyers. These frequent travelers are the key partners, playing the
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third party role of middleman in the Daigou business. However, if a traveler buys an oversea product and sells to a buyer directly, then he/she is not regarded as a third party in the Daigou transaction but a direct seller instead.
Consignor
Consignor is also one of the third parties in the Daigou business. He/she is a person who delivers a consignment in which goods are sent in the possession of another party to sell and receives a certain percentage of the revenue from the sale. Consignor refers to “a person consigns or purchases goods only when he/she receives the orders from a seller, who then sells the received oversea products to his/her buyers [16].”
Haitao
Baidu, one of the most popular engines in China, defines Haitao(海濤) as “the purchase of cross-border products through contacting with oversea sellers [17]”. Advanced payment is required for each transaction. This term is extensively used for the past few years and mainly involves in the use of online platform for the whole buying procedure [18]. Haitao also refers to the phenomenon of scouring the global websites to buy the oversea products that the Chinse customers want [19]. Its online platform business model will be presented later in this paper.
Currently, lots of websites have been using the term of “Haitao” to indicate their Daigou activities and “Haitao” shoppers are commonly used to describe those groups of people who run Daigou businesses.
Surrogate Shopper
“Surrogate”, is popularly used to describe the Daigou business or shopping by many academic
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specific role or office, or a surrogate mother from the explanation of Oxford Dictionary [20]”.Surrogate shopper can be used to describe a person who shop on behalf of someone rather than him/herself. However, since this paper focuses more on the Chinese community, we will then use the Chinese term “Daigou” in the entire paper.
Luxury Goods
Luxury goods, the major products in the Daigou market, are “items that are unique, expensive or difficult to obtain [21]”. “It is products which are not necessary but which tend to make life more pleasant for consumers. Due to its costly value, they are often bought by people who have a above average income [22]”.
Consumer Goods
Consumer goods are another kind of products frequently traded in the Daigou business. It
“refers to items of common or daily use, that are bought and used by end-users for private consumption, rather than by manufacturers for producing other goods [23]”.
Currency
“Currency is a money system used in a particular country [24]”. Oversea products are purchased in foreign countries using that country’s currency but customers usually pay in Chinese currency.
Their exchange rates from foreign currencies to Chinese currency should be considered because the depreciation of foreign currencies stimulate Daigou consumption and overseas travelling from the Chinese community, and vice versa. Chinese currency (CNY), i.e. Chinese Yuan Renminbi (RMB), is used in the whole paper. The data of exchange rate is clued on 17
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November 2016 with the reference of the world’s trusted currency authority named XE [25].Its exchange rate is subjected to change and is used as reference only. The common currencies in the Daigou markets are shown in Table 1.