Chinese customers willing to pay a premium for authentic luxury goods from daigou in UK
Laden with shopping from Harrods and clutching her fashionable Chanel bag, Julie Li is glued to her smartphone WeChat-ing clients back home in China. A 30-year-old finance graduate from Beijing, she is a full-time freelance retail agent, known in Chinese as daigou.
"I worked as a daigou alongside my day job for about three years. Then six months ago I decided to quit my job to fully concentrate on the business," said Li - not her real name.
She reckons it earns her 20,000 pounds ($25,000) in a good month.
She has just left London's upmarket Harrods department store with a consignment of cosmetics. Clients in China are willing to pay a premium for authentic luxury goods that are cheaper and more readily available in the UK than at home.
Having developed three major wholesale clients, who have their own networks of more than 300 customers, Li buys 10,000 pounds' worth of top-end lipsticks every day. "The weak pound after Brexit is also giving a boost to my business and sales have doubled in recent months," Li added.
She charges a premium of 5 percent above the retail price and buyers are usually middle-incomers in China with a strong appetite for high quality products. "I believe the quality standards, the product ranges and the cheaper prices are the main factors that Chinese consumers look West for," she said.
Retail experts said customers must be convinced the goods they receive are genuine and that the supplier is reliable.
"An important issue is the uncertainty faced by consumers about whether these products are genuine or not. The higher the demand for a product, the more the chances of fakes or adulterated products," said Pervez Ghauri, professor of International Business at Birmingham Business School.
Daigou are almost exclusively from the Chinese mainland and the purchases they offer range from luxury bags to top brand cosmetics, from health supplements to baby milk formula. The business has boomed in recent years, accounting for 34 billion yuan ($5.02 billion) to 50 billion yuan in global sales last year, according to a report from consultancy firm Bain & Co.
In 2008, the China baby milk scandal, which involved milk and infant formula being adulterated with melamine, led many Chinese parents to shop for milk formula abroad through daigou.
Geoffrey Wood, dean of Essex Business School, said Chinese consumers prefer Western brands as they believe key Western countries not only have more rigorous production standards, but also have the will to enforce them consistently.
Seizing the opportunity of the milk scandal in China, 29-year-old Jimmy Zhen - also not his real name - began buying milk powder while also holding down a full-time job.
"In the beginning, I only shopped for my family and friends. Through word of mouth, I was able to develop a large customer base, and build trust with my clients," Zhen said.
The UK government capped sales of milk formula at two cans per customer in 2013, so he pays students 50 pence above retail price to buy them and is now shipping more than 8,000 cans a month.
Li said: "I do not plan to do this forever. But right now as long as the demand is there, I am happy to continue."
(China Daily 11/08/2016 page16)