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The role of the daigou in China is changing. The classic image of the daigou is of an entrepreneurial and well-connected individual who buys global luxury brands on behalf of Chinese clients abroad, where prices are lower and hard-to-find products are more accessible. But the new model daigou is also working closer to home, and mixing emerging Chinese designers with foreign brands.
The motivation for the evolution of the daigou’s role comes from a wave of young Gen Z Chinese consumers who are seeking more interesting and affordable fashion and don’t care as much about the name on the label.
This is good news for new brands in China – and elsewhere. In a fiercely competitive market, any well-designed brand has the potential to catch consumers’ eyes. What’s needed in the early days of a new brand’s development is an effective sales channel.
The options are widening all the time in China, ranging from the online route with a presence on the likes of shopping platform Taobao, to working with one of the new breed of multi-brand boutiques (of which there are now estimated to be more than 1,000) and collaborating with daigous. A word of caution: we are talking here about daigous offering bona fide products rather than those operating in the murky underworld of counterfeits.
New Chinese brands are hardly luxury in pricing terms, rarely selling products for much more than $200. They might be termed ‘light luxury’ in their individualistic approach to design and their low volume runs, with pieces often mixed with high-end foreign brands by the new breed of open-minded Chinese consumer.
The growth of these brands has been fuelled by the Covid-19 pandemic, with limited international travel and consumers prompted to pay more attention to local brands. On top of that, many young Chinese are increasingly interested in supporting homegrown design talent.
How the daigou supports startups
The grey market world of the daigou is viewed through gritted teeth by many luxury brand executives, largely because of their disruptive impact on pricing. However, an under-appreciated and more positive contribution from the daigou is during the early stages of development of a new fashion brand. It’s here that the daigou can play the role of incubator or influencer, introducing the brand to a wealth of new consumers.
Fax Copy Express, an independent Chinese brand established in 2020, positions itself as “cost-effective, everyday and fashionable commercial”, with prices ranging from RMB 500-1000 ($70-$140). It began selling via Taobao, then experimented with daigous, and has now opted to work with Chongqing-based multi-brand retailer SND as its sole distribution channel.
One brand manager, who identifies himself as @1026, says a new kind of market is emerging that taps into this kind of combination of boutique, daigou and Taobao direct sales.
Likewise, Shanghai-based designer Keren Wang has used all three channels since she founded 1Cothen in 2019 to offer “things you’d really wear… but with a special something”. Average prices are RMB 1000-2000 ($140-$280). She says that in its first few seasons, a typical small independent brand isn’t really “a complete brand”. This makes it more logical to work with daigou channels, which tend to focus on the sale of individual products rather than specific brands.
Wang Liuwen, who founded the Ann Andelman brand just over a year ago, opted for what she calls “a rhythm of development that differs from traditional brands”. As an influencer, or key opinion leader (KOL), herself, she was adept at marketing her brand through internet-savvy KOL-style promotional videos. Wang Liuwen prefers to think of daigous as “vertical buyers” — meaning they tailor their purchases to their own regular customers. Many of these vertical buyers serve consumers with a fixed aesthetic, so they are more than willing to source from several different brands if they match that aesthetic.
Chinese consumers who use daigous are often important opinion leaders, including fashion enthusiasts, internet influencers, well-known stylists and celebrities. They’re all well used to using daigous as their personal shoppers. Typically, the daigous are located in Europe and are experienced at finding the best for their customers.
A sales director of a Chinese luxury store explains: “Big daigous have to be VIP customers at a lot of stores, online and offline. That way they enjoy high discounts and prioritised rights to many products. There are basically no stores that don’t cooperate with some daigous.”
Daigou culture: the importance of instinct
Selling through daigous can provide exceptional returns for startup brands, although don’t expect a daigou to deliver lots of data. The daigou relies on networks of connection and instinct to zero-in on the sweet spot where the right product finds the right customer.
Daigous communicate extensively within their own circles. Managers of Chinese startup brands are often friends with daigous, who can provide guidance on product development and positioning.
The daigou’s traditional role was initially threatened when luxury brands began to bring retail prices in China closer to those in the West, although this appears to have had a minimal impact on their development (a well-connected daigou still regularly secures discounts of up to 30 per cent on global luxury brands). The figures remain breathtaking: Boston Consulting Group estimates that of the RMB 230 billion ($35 billion) spent by Chinese consumers in the overseas luxury market in 2020, as much as 70 to 80 per cent was spent through daigou shoppers.
However, the role of the daigou in supporting a new or emerging brand has its limits. The daigou is typically a small-scale, self-employed operation that enables emerging brands to sell single products, in effect operating as a kind of brand incubator.
But as a new brand grows, the daigou’s role diminishes. “When a brand’s development has got to a certain level, if that development is achieved through selling single products, it won’t actually reach the groups of people who want it,” says designer Keren Wang.
This is the point at which emerging brands need to design more complete collections and develop their own brand universe. At this point, some choose to enter online showrooms, while others move to physical spaces via multi-brand stores. More ambitious brands might also open their own pop-up shop for direct sales.
Zhang Xuanwei, who runs multi-brand boutique chain SND, is optimistic about the potential of emerging brands in China. “I think the future will see many interesting brands such as these,” he says. “This is a response to market demand; young people don’t distinguish so much between domestic and foreign brands. And they don’t care as much as they used to about price. If the designs are good and the prices are acceptable; if the fabric is good and the brands present themselves at a high level, people are willing to buy them.”
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