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As daigou channels flounder, Australian and New Zealand companies must build their brands in China

Marketing your brand to Chinese consumers is more important than ever as changes to Chinese laws mean daigou prices are on the rise and consumers will become more selective in their investments.

 

Australian and New Zealand brands have enjoyed immense success off the backs of daigou. These individuals, or networks, who buy and sell Australian and New Zealand products to sell to mainland Chinese consumers at a premium price, have thrived in recent years with estimates there are more than 100,000 operating in Australia alone.

 

 

The success of these channels have seen large numbers of Australian and New Zealand companies forgo marketing spend in China, opting instead to market to daigou in a bid to get their brands in the hands of Chinese consumers. I’ve written in the past about the potential problems with this approach, (https://mumbrella.com.au/daigou-are-short-changing-australian-brands-of-long-term-success-in-china-513601) and a recent move by the Chinese government to clamp down on the unregulated behaviour of daigou could prove damaging for these companies.

 

On 1 January, China introduced laws requiring daigou to register as e-commerce operators and acquire licenses both in China and the country they operate in. These requirements mean the daigou businesses will now be subject to taxation and other charges which is already leading to a rise in costs for daigou, which in term is passed on to the customer.

 

 

With hefty fines of up to RMB 2 million ($420,000) and the threat of criminal charges, a large number of daigou are opting to get out rather than deal with all the extra hassle. This is leading to a reduction in the number of channels available for consumers to access products, and with less competition, prices are rising.

 

It all adds up to a worrying development for the many Australian and New Zealand brands still relying soley on daigou channels to sell their products to China.

 

With prices increasing and less distribution channels available, brand awareness among Chinese consumers will become immensely important. The products Chinese consumers choose to invest in will be the ones they trust and value, which means the strength and knowledge of a brand is crucial.

 

Add to this the current market slowdown in China, where consumers are beginning to spend less and therefore become more selective in their purchases and this all combines to create a perfect storm for foreign companies relying on daigou to market their brands and products to Chinese consumers.

 

As daigou prices increase, the desire to use these channels is certain to wane particularly as the perceived price advantage of daigou over general retail and T-mall flagship stores weakens. With little to no price difference the ease, speed and convenience of established channels such as Alibaba or even JD.com will only serve as further incentive for Chinese consumers to abandon daigou. Some brands have already reported significant sales declines as the daigou market consolidates.

 

In this climate, therefore, it is more important than ever that Australian companies invest in a brand presence in China to build awareness and establish trust in the market.

 

Social media channels like WeChat, Weibo and Douyin (known as TikTok outside of China) along with a local language website, are just some of the channels that Chinese consumers expect a trusted brand to have a presence on, and, of course, these platforms can provide brands with access to millions of potential customers.

 

Foreign brands that are successful in China are the ones that have created a consistent brand message, by building relevant and engaging content promoting the brand, its values and product knowledge to consumers.

 

It doesn’t end there though, there are more opportunities than ever for brands to provide cross border sales to China and establish and run their own flagship store on Tmall.

 

While the China market may be slowing down, it still accounts for the world’s largest retail market with analysts confident it will comfortably reach $5.6 trillion this year. Clearly, this is not a market to ignore.