The ANZ daigou market has a pyramid structure. At the base of this pyramid is tens of thousands of grassroot individual daigou shoppers, most of whom are Chinese students and migrant mums and dads. They operate their daigou business through personal networks and buy products from local pharmacies, retail stores and supermarkets such as Coles and Woolworth. Apart from a standard commission, they are keen to maximise their profit margin from local retail discounts and fluctuations in the currency exchange rate. They are very sensitive to retail price and ease of logistics. The next level in the ANZ daigou market pyramid consists of medium-sized daigou retail shop owners and small warehouse retailers. There are over 2,000 retail outlets and small warehouse retailers in the ANZ markets, each with an annual turnover of $2 million to $20 million. Their needs are more complicated than those of grassroots daigou shoppers. Medium-sized daigou retail shop owners and small warehouse retailers need to build a trusting relationship with a large customer base in China. In fact, most are keen to establish a direct connection with ANZ brands so that they can obtain first-hand product information and steady supply of products which can help build their credibility and maximise their profit margin. The top level of the pyramid belongs to tier-1 to 3 wholesalers. There are 20 tier-2 wholesalers and 50 tier-3 wholesalers in the ANZ region who have an annual turnover of $20 – 100 million each. Six tier-1 wholesalers are the top-level players in this market, boasting an annual turnover of $100 – 500 million each. Profit margin and market share are the main concerns for these top-level wholesalers.

THINK CHINA’s Daigou Shopper Study Survey interviewed 309 grassroot daigou shoppers in Australia in 2019. Based on the data from this survey, we can have a general understanding of Chinese daigou shoppers’ habits and behaviours. Firstly, all respondents are temporary or permanent residents in Australia. Daigou shoppers in ANZ are mainly Chinese living in Australia - there are very few tourist daigou shoppers travelling from China to the ANZ region to buy products. Among those surveyed, 80% are female. The dominant age group are those aged 26-35-years-old, accounting for 40.3% of total respondents. Respondents aged 36-45-year-old and 18-25-year-old accounted for 21.8% and 18.4% of total respondents respectively (Figure 1). Survey participants live in suburbs with significant Chinese populations, such as Hurstville and Burwood in Sydney. Participants were university students or young mums who are active on social networks, such as WeChat, and have a wide network of “friends” or followers. More than half (60%) are operating their daigou business as a part-time job while balancing tertiary study or supporting a family. They usually purchase products from local pharmacies, with Chemist Warehouse the most frequently visited store. 58.5% of respondents claim they buy products from Chemist Warehouse, 41.6% purchase from supermarkets such as Coles and Woolworth, followed by other local pharmacies (34.4%) and Gift Stores (31.5%). Only 25.6% order products directly from manufacturers or official suppliers. (Figure 2)

Respondents are native mandarin speakers and also fluent in English. The grassroot daigou often recommend products which they themselves have tried as a consumer giving them great influence among their customers. They are always looking for high-quality products that can help build their credibility as a smart shopper. They are technology savvy and frequently use new digital platforms like live-streaming apps to demonstrate their products in a more vivid manner. WeChat is the dominant platform used to sell products. 84.7% of respondents claim to use WeChat to sell products compared to only 23.7% who claim to use a Taobao store as their sales channel. (Figure 4) Some describe themselves as ‘trend setters’ who have an acute fashion sense, keen to try new experiences and discover niche new products. All of them are shrewd businesspeople reporting they are sensitive to profit margin and claiming to be skilled at bargaining.

Daigou’s commission rate varies. THINK CHINA’s in-depth interviews with daigou shoppers found the mainstream commission rate is 6-8% of the total order. Apart from the commission, daigou also earn profit through the price gap between the listed retail price on their sales channel and the price they pay retailers or suppliers for stock. A lower price from retail or suppliers enables them to earn a higher profit earn, which is why grassroot daigou shoppers are extremely sensitive to promotions, discounts or reward mechanisms in retail stores. At the top of the daigou pyramid structure, larger daigou businesses establishes their profit advantage directly from supply channels. ANZ daigou shoppers purchase products in Australian dollars and sell to their Chinese customers in RMB, with the exchange rate varying from daigou to daigou. The majority of daigou shoppers will charge a slightly higher exchange rate than official rate. For example, when the AUD/RMB official exchange rate is 4.8, daigous will usually charge a rate of 5.0 – 5.2. If daigou shoppers can’t turn a large profit from the retail price, they have been known to charge a much higher AUD/RMB exchange rate of up to 6.0. No matter what exchange rate they charge, it is clearly listed by daigou shoppers and agreed by customers before making the order. Customers will pay for their purchase in RMB through AliPay or WeChat Pay depending on the sales channel they choose. Most daigous charge customers at cost for courier fees.

One key trend we’ve spotted in daigou market is that most individual grassroot daigou shoppers are now establishing a long-term relationship with giftshop owners and small-medium-scaled wholesalers. According to THINK CHINA’s interviews with daigou shoppers, they admitted that this is a better way to keep their business because it can ensure a steady supply at a profitable price. 6 out of the 8 daigou shoppers THINK CHINA interviewed for in-depth research are buying products from fixed giftshop whom they are familiar with and have established mutual trust.

“I can ensure the authenticity and the price of the product through buying from this giftshop, and it is also more efficient for me in terms of time and energy spent on the business. ” One interviewee explained the benefits of this business model. Another daigou shopper we interviewed also described a kind of unique co-operation between individual daigou shoppers and median sized wholesaler: some wholesalers will pool many grassroots daigou shoppers in one WeChat Group Chat to publish product information from the wholesaler stock regularly and collect large quantities of orders from different individual daigou shoppers in a fashion that is similar to group-buying. This trend has made daigou business no longer a game about individual performance. An efficient network from supply to sales between individual shoppers and giftshops and wholesalers is rising to be the mainstream business model, which will trigger ANZ daigou market to become more organized and consolidated.

Tier-2 medium-sized daigou retail shop owners and small warehouse retailers are the key daigou groups brands need to leverage because they have a relatively large customer base and are keen to establish a direct connection with brands. They require first-hand product information and marketing ammunition to promote a brand that has low brand awareness among Chinese consumers. Brands need to pro-actively educate these daigou shoppers on their brand history, correct brand and product information, points of difference, and the right tone of voice that should be used to market your products to stay in line with your brand positioning. Leaving daigou shoppers to explain the product benefits or even create a brand story for you leads to inconsistency, inaccurate information and an untrustworthy reputation among Chinese consumers. Brands must always maintain control over their marketing content.

Brand endorsement is crucial to daigou shoppers since it can build their credibility among their customers. An exclusive offer or unique experience that allows daigou shoppers to build a connection with the manufacturer can often trigger daigou shoppers’ enthusiasm. Daigou conferences, seminars, or exclusive special events are effective ways to engage the daigou community and fuel their passion for your brand. Brands can take an active role in these events to engage daigou shoppers and guide them to promote products in an appropriate way.

Plot supply or sales channels for Chinese daigou shoppers strategically in Chinese communities within large cities such as Sydney, Melbourne, Auckland. Target the daigou retail shops in these areas to maximize shelf display of your products. It is beneficial to have or hire a field team to conduct regular visits to key daigou shops to understand the market dynamics firsthand and adjust your product supply or pricing strategy accordingly.