Thousands of Chinese Kiwi Traders Lost Much of their Billion Dollar Revenue Selling Products to China Due to Covid-19

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Sales of Lydia Pu’s New Zealand products to China have slowed and the Auckland daigou trader is about to start nursing training.

Daigou means ‘buy on behalf of’ and that’s what Pu started doing in 2016 when she struggled to find a job, using social media and a network of friends and family to whip up popular New Zealand products that were hard to come by or expensive in China.

“I was very successful and after 18 months I bought a house. When business was good money was so easy to make, but now it’s so hard.

The global pandemic, border closures, growth in e-commerce, and tighter Chinese government regulations have proven to be an almost fatal combination for the daigou trade, and there are doubts that it will ever make a full recovery.

Due to its informal nature, it is difficult to accurately assess the value of daigou sales in New Zealand, but industry sources estimate that before Covid-19 they were between $ 500 million and $ 1 billion. per year, providing an income of at least 40,000 Chinese residents and international students.

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HY Health in the Auckland suburb of Botany sells to daigou traders and touts itself as New Zealand's largest wholesaler of health products, but many small outlets supplying daigou have closed since the Covid hit. 19.

RICKY WILSON / Stuff

HY Health in the Auckland suburb of Botany sells to daigou traders and touts itself as New Zealand’s largest wholesaler of health products, but many small outlets supplying daigou have closed since the Covid hit. 19.

Daigou’s slowdown

New Zealand infant formula, honey, health supplements and skin care lines sourced from Auckland daigou wholesale stores.

The price difference between New Zealand and China helped increase profits, but that was no longer the case, and Daigu Kiwi faced stiff competition from Australia, she said. .

“We sell the same thing, but Australian products are cheaper. With New Zealand manuka honey, the same brand in Australia is cheaper.

Asian Marketing Strategist and Director of Trace Research Dr Andrew Zhu said the days of daigou making $ 2,000 a week are long gone, and he knows 10 daigou families who have switched to selling goods. real estate.

Carter Yan is the Deputy Managing Director of HLS New Zealand, which represents Anchor, Vogels cereals, Oasis Beauty and Blue River Dairy Sheep Milk, distributing them through Chinese e-commerce channels such as Tmall and JD.com.

He says the 40,000 daigou figure is probably conservative.

Lydia Pu has largely given up her business as a daigou trader and has set herself the goal of becoming a nurse.

Chris McKeen / Stuff

Lydia Pu has largely given up her business as a daigou trader and has set herself the goal of becoming a nurse.

“There is a saying in the Chinese community in New Zealand; ‘every Chinese household had at least one person doing daigou business’.

The Daigous are predominantly women; stay-at-home moms, international students, visitors with work visas and some of the more than 400,000 Chinese tourists who came here every year and bought goods to sell back home.

Yan calculates that sales of daigou have fallen to between $ 50 million and $ 80 million per year, and he says more than half of New Zealand’s 200 stores supplying daigou have closed.

“The Kiwi population who bought in these stores was less than 1%. ”

In February, a2 Milk Company cited declining daigou sales as a factor in a 16% drop in semi-annual revenue.  (File photo)

Amanda Cropp / Stuff

In February, a2 Milk Company cited declining daigou sales as a factor in a 16% drop in semi-annual revenue. (File photo)

Changing consumer trends

Yan can’t see daigou sales return to their previous levels in part because Chinese consumers have changed, and they simply won’t tolerate a three week delivery delay from New Zealand.

“Chinese consumers just can’t wait. In China, if you buy from Tmall in a big city like Shanghai or Beijing, they have 24 hour delivery, and in rural areas like where my parents live in northwest China 1000 kilometers from Shanghai, they receive [goods] within three days. “

Another factor is the rise of Chinese nationalism.

“Everyone wanted foreign products, now everyone wants products made in China, even [western style] cereal. There are a lot of new trendy Chinese brands coming out, ”Yan explains.

Stricter regulation has also played a role.

Alibaba Group's e-commerce platforms such as Tmall have strengthened consumer protection, which Chinese market expert Damon Paling says gives them an edge over daigou traders.

Uncredited / AP

Alibaba Group’s e-commerce platforms such as Tmall have strengthened consumer protection, which Chinese market expert Damon Paling says gives them an edge over daigou traders.

The Chinese government, aware of the tax it lacked in daigou operations, cracked down on the so-called “gray” channel that dodged import duties, and the impact of this was felt before Covid-19 was ‘exerts additional pressure.

China’s network of cross-border bonded warehouses closely monitored by customs has grown tremendously, where orders from e-commerce platforms are packed and shipped.

Damon Paling, a former New Zealand trade commissioner in Shanghai and director of several companies exporting to China, says cross-border e-commerce platforms offer good protection for consumers.

“Customers think they’re selling legitimate products, not fakes… consumers say ‘do I really need the daigou? I can be sure that I will get the right product in the right place at the right time, and if the product is not up to specification I can return it ”.

Adapting to the decline of daigou

China’s chief trade and business adviser to New Zealand Louie Li said the daigou market was already contracting before the pandemic as many big brands opened their own stores. online and daigou could not compete on price.

Louie Li, managing director of Ctom Group Holding, says the lack of Chinese tourists has contributed to the decline in sales of daigou for its skin care and health supplements, but overall growth increased last year thanks to exports to Taiwan and Korea.  He believes that before the pandemic, the New Zealand daigou trade was at least $ 1 billion a year.

Provided

Louie Li, managing director of Ctom Group Holding, says the lack of Chinese tourists has contributed to the decline in sales of daigou for its skin care and health supplements, but overall growth increased last year thanks to exports to Taiwan and Korea. He believes that before the pandemic, the New Zealand daigou trade was at least $ 1 billion a year.

Li is the managing director of Ctom Group Holding and has seen daigou’s sales of its skin care and health supplements drop by 80%, but says a new sales model is already evolving. .

Kiwi daigous become “brand ambassadors” who work with distributors, brands and manufacturers, and do direct product promotions.

“Some have a million subscribers on TikTok, some have over 100,000 subscribers … I know quite a few who make $ 1,000 a week.”

Li is converting the former Bayer New Zealand headquarters in Auckland into a factory, and there will be a live broadcast room overlooking the production line, so brand ambassadors can show customers how the products they buy are made.

Linden's Marketing Director Leaves China Elva Wei and Founder Brigit Blair Adjust Losing Daigou Business, Skincare Company Plans To Open Its Own Store On Chinese E-Commerce Giant Tmall.

provided

Linden Marketing Director Leaves China Elva Wei and Founder Brigit Blair Adjust Losing Daigou Business, Skincare Company Plans To Open Its Own Store On Chinese E-Commerce Giant Tmall.

In China, major thought leaders like Austin Li have a huge following, and when he did a live promotion in June for New Zealand-made Grin toothpaste, 40,000 tubes sold in just one minute.

Although using well-known Chinese influencers costs a lot more than selling through daigou, Louie Li says the gain comes from increased brand awareness.

“It’s marketing rather than sales.”

VIYA

Pic’s peanut butter, made by Nelson, has performed well online during the virus outbreak and uses Chinese online influencers. This live promo of Chinese celebrity Viya in 2020 saw 30,000 jars sold in 15 minutes.

Linden Leaves skin care entered the Chinese market about five years ago, and daigou sales were about a quarter of sales before the pandemic.

“We took advantage of the daigou boom in the early years because at that time, anything labeled ‘made in New Zealand’ was popular with Chinese consumers, and orders were pouring in without us having to do much. efforts, ”says Linden Leaves China Marketing Manager Elva Wei.

However, the lack of price control has become a problem, with Chinese daigou distribution stores underestimating each other and charging much less than regular retail stores and drugstores.

Linden Leaves’ relationship with a Korean luxury department store has also been damaged by the sale of Korean New Zealand daigou in the same market through e-commerce channels at a fraction of the price, and Wei says they have taken steps to stop this.

Last year, the company chose a single New Zealand distributor for China that ships daigou orders directly to consumers, and Wei says the control of the product’s destination has paid off.

“We know it’s going to China, and it won’t affect the other channels that we don’t want the stock to flow to.”


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