China’s Vast Network of Gray-Market Shoppers Grounded by the Pandemicwww.bloomberg.com
The daigou business model, where personal shoppers buy products overseas for customers who cannot access them locally, in China is on a decline.
Before the pandemic, the daigou trade was valued at $40 billion in revenue in 2019, but travel restrictions and increased options for domestic shopping have led to its decline.The COVID-19 pandemic further impacted the daigou market as borders closed, disrupting the supply chain and leading to a loss of trust in the authenticity of goods. Companies that relied on daigou sales are now left with excess inventory.
'It's all about knowing the local client now and establishing a long-term relationship,' says Jonathan Siboni, CEO of data intelligence firm Luxurynsight in Paris. 'It's more than just a one-off handbag sale.'
Some brands have raised prices in Europe to narrow the advantage over the prices of their goods in China, undercutting one of the main reasons the daigou started in the first place. 'You don't buy with daigou when you only have a price differential of 15% to 20%,' Siboni says. 'There was a rationale if the differential was 50%, but that's no longer the case.'