CBEC/daigou market change under the Coronavirus (Covid-19) pandemic

by Frank Xu  
March 30, 2020
Frank is a brand/business strategist and researcher with extensive experience in Chinese digital marketing.

As the coronavirus outbreak continues, lots of industries and business are experiencing difficulties. CBEC market between Australia and China is also seeing some key behavior changes due to the disruptions brought by the pandemic. At Think China, we’re working at the frontline of CBEC market in this unpredictable time. We’d like to share with you our insights on some of the key changes happening in both CBEC market players and end consumers.


Before we go into the details, here follows is an overview chart showing the timeline of development of Covid-19 in China and Australia and the impacts on CBEC and daigou market.


In summary, there’re four key impacts on the CBEC market between Australia and China during the outbreak of Covid-19:

1. SHIFTING PRODUCT DEMAND

The coronavirus outbreak has made demand for hygiene products and health product surge. Face masks, hand sanitizer are the hottest products when China reached peak on confirmed cases. Health supplements to enhance immunity are also in high demand. Traditional high demand on baby formula remains strong while cosmetic/skincare products sales are clearly going down.

2. LOGISTICS UNCERTAINTY

With cities in lockdown and unclear border restrictions around some provinces in China, normal supply chains and delivery system for the daigou trade were interrupted during the outbreak in China.

The cut of flights between AU and China extended the normally two-week daigou delivery process into four weeks and even longer.

Many daigou were avoiding sending perishable items like fresh fruit and food in case the packages do not clear the border quickly.

3. RETAIL DAIGOU STORES LOST FOOT TRAFFIC, BUSINESS SWITCH TO ONLINE

Due to the cut of outbound tourists from China and the panic of Chinese residents in AU, retail daigou stores in AU experienced lowest traffic with the fading traffic in all Chinese suburbs.

Daigou in AU are all switching their business to online.

4. DECLINE OF INDIVIDUAL GRASSROOT DAIGOUS

Australia’s travel ban has seriously disrupted the international students daigou group. Chinese international students are blocked outside Australia, daigou activities are no longer their consideration. The Individual grassroot daigou model which relies on physical purchasing products from retail POS has also become no longer workable with the spread of Covid 19 in Australia. Individual daigou shoppers who haven’t established a stable connection with big wholesalers are dropping out of the business.


From the perspective of CBEC market players, the overall market demand from China is still there and has become even stronger in some particular aspects. But disruption also exists and some strategy change is happening.

1. Big CBEC platforms in China benefited from stable stock and logistic process

Given the demand for IMF remained the same, travel restrictions disrupted individual daigou shoppers on product supply and delivery process. Consumers in China switched to choose to buy from official CBEC channels like Tmall and JD due to its stable product stock and logistic process. For example: Friso’s official flagship stores on Tmall and JD are reported having a 50% increase on sales orders during the Covid-19 outbreak in China. Aptamil from Danone also showed obvious sales growth on Tmall and JD.

2. Mid-large scale wholesaler/distributers in Australia paused expanding retail networks in both Australia and China

For wholesalers in AU, their business are not much impacted since the demand is still there and they are more capable to maintain a steady supply on products and logistics than individual daigous. But most players are pausing their plan to expand their retail stores in AU. One example is Reach China, which sells supplements, foods and personal care products will delay its plan to roll out retail stores in both AU and CN. Another player AU Make also stressed its diversity in customer base and focus on online customers to drive through this crisis.

3. Individual daigou shoppers switched business from offline to online

Most individual daigou shoppers switched business model to online platforms fully to avoid social contact. Online live-streaming became unprecedented popular among grassroots daigou shoppers since it can function as product display, introduction and sales talk and both the sellers and buyers have more time and patience to watch livestreaming sessions due to self-isolation at home. And with the spread of coronavirus in AU, lots of daigou shoppers chose to go back to China and operate their daigou business remotely online in China.

Chinese CBEC consumer needs and buying behavior also have some key changes worth noticing. In terms of consumer needs, we’ve witnessed three key trends:

1. HYGIENE NEEDS BECOME THE FIRST PRIORITY

Hygiene products like face masks, gloves, hand sanitizer become the most urgent needs for Chinese consumers during coronavirus outbreak. According to an online survey by GlobalWebIndex, 54% of Chinese respondents picked “Face Mask” as the product they are struggling to get during the virus outbreak, followed by anti-bacterial hand santizer/gel. They tried every way to buy these products without thinking too much about price during the crisis. Overseas friends and daigou are one of the key channels for them to get these things.

2. HEALTH RELATED PRODUCTS NEEDS ALSO SURGE

Consumers are highly health conscious right now. They’re pro-actively looking for products that can help build strong immunity for themselves and their family. Supplements are on the rise. For example: Blackmores standard vitamin C supplements and Immune Recovery range became best sellers in their portfolio during the crisis.

3. NUTRITIOUS FOOD FOR KIDS AND ELDERS BECAME A STRONG DEMAND

Infant formula demand remained strong and even performed better during the epidemic. Also nutritious diary products with long shelf life are also welcomed among Chinese consumers as a nutritious food source for whole family especially for elder people. Nutritious (high calcium or Vitamin D) milk power products for adults are also becoming the must-buy item for Chinese residents in Australia to send back to their friends and parents in China.

The buying behaviour of Chinese CBEC consumers also changed in three aspects:

1. DELIVERY IS KEY, PRICE BECAME LESS RELEVANT

Due to the travel restrictions both in and outside China, on-time delivery became the most important criteria for CBEC consumers when making a purchase decision. They no longer compare prices between different channels, guarantee on delivery is the decisive factor.

2. BULK BUY FOR FUTURE IS A MAINSTREAM BEHAVIOUR

Panic of supply shortage and future travel ban across the world, Chinese CBEC consumers are buying for future stock, especially for products like baby formula, high-consumption daily products like soaps, sanitizer, detergent and health food/supplements etc. Plus the fact of slow delivery, bulk buy became the mainstream buying behavior during quarantine period.

3. BRAND OFFICIAL CHANNELS OFFER ASSURANCE

The crisis disrupted operation process of lots of Individual daigou shoppers, the unpredictable delivery date made lots of CBEC consumers choose official flagstore on Tmall and JD, which were less disrupted in terms of product stock and delivery. Brand official store also offers assurance on quality and authenticity during this unpredictable period.

Lastly, for Australian brands who want to engage daigou communities and marketing to Chinese CBEC consumers, they’re also adjusting their marketing plans and approaches to be more adaptive in this special time of changes.

1. RE-PLAN MARKETING CALLEDAR

March used to be the kick-off season for CBEC marketing plan in AU. Women’s Day, O Week in 2020 were all interrupted by the Covid-19 outbreak in AU and ensuing travel bans. Lots of brands have cut marketing activities, especially offline events and save budget for the 2nd half year. The October golden week, Single’s Day and Christmas/new year will be the foreseeable peak season for CBEC market this year in terms of marketing activities.

2. RE-ADJUST PRODUCT SELLING POINTS

Some brands re-emphasize its communication focus to answer the current dominant disinfectant/hygiene needs. Example: Thursday Plantation picked its Tea Tree Oil as a hero product during the epidemic and communicate its antiseptic function rather than previous natural healing benefit.

3. Build a healthcare professional image and be supportive

HCP and other healthcare professionals became the most influential source during the virus outbreak. Brands tried to leverage HCP to build professional endorsement on products. Some brands offered HCP video footage to endorse product/ingredient health functions to daigou shoppers to help them better sell in live-streaming sessions.

Another adaptive approach is offering hard-to-get face masks, sanitisers or protective gears as donation/reward to engage daigou shoppers. Some big distributor in Australia are helping brands to execute these activities to show care and support to both Chinese daigou shoppers and consumers in this difficult time.




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