SHOPPING FOR CHINA: INSIDE THE SECRET WORLD OF DAIGOU
B.C. IS A CENTRE FOR DAIGOU, AN INTERNATIONAL INDUSTRY WHOSE WORKERS BUY GOODS AT STORES TO SEND TO CHINA. NO ONE KNOWS HOW BIG THIS UNDERGROUND TRADE IS– OR WHERE IT'S HEADED POST-COVID
Dolly Tan wasn't planning to become part of a global network of people who buy things in other countries— everything from Canada Goose jackets to makeup to food products—to ship them to people in China for a fee.
But a few years ago, a friend of a friend in China asked the young Burnaby mother to buy milk powder for her. That customer was willing to pay for Tan's time to get it from the store and find a courier to ship it. Then someone else asked her to buy baby food. After a while, it was, well, everything.
“When I have friends who want to buy luxury goods, I go to outlets and buy luxury goods for them,” says Tan, who was contacted through the popular Chinese social media platform Wechat for an interview. “I also sell snacks and some daily necessities and healthcare products. Canada Goose is also popular, but the shipping costs are a little bit higher.”
Now Tan works part-time in what's known around the world as daigou—the practice of buying outside China and getting products back there, either by flying with them or sending them through courier companies, for a fee.
That surrogate-shopping phenomenon exploded in many countries a little more than a decade ago as Chinese citizens decided in increasing numbers that they didn't like the prices, the quality or even the safety of what they had available in their own country. A scandal over the 2008 discovery of melamine in Chinese infant formula that resulted in kidney damage made many wary of that product in particular. Makeup and food in China have also come under scrutiny. When it comes to luxury goods, Chinese buyers have turned to daigou to ensure they're getting the real thing, not counterfeits, or to get products for half the price they would sell for in China—or both.
As a result, daigou has become so big and, at times, so pervasive that Australia once imposed a limit on sales of baby formula because of the way products were being cleaned off the shelves by those buyers.
Craig Patterson, a Toronto-based Canadian retailing expert, says the practice was very prevalent before the pandemic, to the point where some stores were limiting how much of one item a shopper could buy in a day.
It's also a black-hole piece of the economy, since daigou shoppers typically avoid paying tax or declaring in any way what they're doing. That makes it hard to measure how big (or small) a part of the retail sector they are in nations where the practice is prevalent, like South Korea, Britain, Italy, France, the U.S. and Canada.
Various media reports have referred to estimates of a million such shoppers around the world and billions of dollars in sales, but no one really knows.
In B.C., people at the local branch of the Retail Council of Canada have heard of the term but have no statistics. It's the same at the Business Council of British Columbia.
Various media reports have referred to estimates of a million such shoppers around the world and billions of dollars in sales, but no one really knows
Canada's federal tax court shows no cases with references to daigou, and the Canada Revenue Agency's only comment on the practice, in response to a question, was a generic email noting that Canada's tax system is based on voluntary compliance and that “[w]hether the degree of activity in Canada is sufficient to be considered as carrying on a business in Canada needs to be determined on a case-by-case basis.”
Costco, Canada Goose and Nordstrom—three places mentioned by shoppers or retail workers as popular spots for daigou—didn't respond to requests for interviews or information.
The only details that anyone has on what's going on are official Canadian statistics that calculate underground economic activity, which has always been somewhat more pronounced in B.C. than most other places in Canada. Statistics Canada had reported it at about 3 percent of the province's gross domestic product in 2016, but others think it's higher and has grown more than elsewhere for various reasons.
Not an easy life
But even if the official organizations don't know exactly what's going on, the shoppers are there. There aren't quite as many as in previous years, thanks to the pandemic and a new Chinese law from 2019 aimed at requiring daigou shoppers to register and pay import taxes. Still, daigou remains an attractive occupation for many immigrants, students and others because the work is so flexible, requires few English-language skills and can function with almost no workspace or infrastructure except a vehicle for transporting goods. It also pays well, especially because it's tax-free for most.
Tan says that, in some cases, a daigou shopper could make a profit of 90 yuan—about $17—on a single can of milk powder that sells locally for $20 to $25.
Yolanda, who worked for a headhunting firm in China before she came to live in Richmond with her son in 2017, says she's been making between $2,000 and $4,000 net on purchases of $20,000 to $40,000 in a month, after paying for gas, courier fees and the goods themselves.
“In the past four years in Canada, I worked full-time as a purchasing agent and I did nothing else except this.”
But it's not the easiest life.
“Industry competition is certainly big. Hard work is inevitable—get up earlier than the chicken, go to bed later than the dog, basically, is the life of daigou,” says Angela, another young mother who spends considerable time scouring stores—mostly supermarkets and Costco—to get products on sale. “When I was full-time, I did my shopping during the day and went to sleep at 3 or 4 at night.”
Angela, who has run to outlets like Coach to grab the “best bags” during holiday sales, saves up her Shoppers Drug Mart points to buy skincare products.
Daigou shoppers also need to find a reliable local courier that specializes in getting packages to China, although that's relatively easy in a city like Vancouver, which has so many ties to the country.
Some shoppers simplify their lives by focusing only on certain products for a limited group of customers. Zlatan, a young man who dedicates about two hours a day to daigou, concentrates almost exclusively on Canada Goose, buying about 200 to 300 items a month.
“It is tiring to purchase too many different kinds of goods,” says Zlatan, who started his buying business in 2015. “If I do this kind of product purchasing, there are too many categories of them, and I need to go to different places often, and the time, cost and transportation will be higher.”
“Hard work is inevitable–get up earlier than the chicken, go to bed later than the dog, basically, is the life of daigou. When I was full-time, I did my shopping during the day and went to sleep at 3 or 4 at night” –Angela, daigou shopper
Like almost every daigou shopper, Zlatan buys for a network of people who became his customers through personal references—something they prefer to going to a nameless platform, to ensure they're getting authentic luxury brands. And because he specializes in one product, the process is simpler.
“Many new customers are introduced to me by old customers who have trust in me,” Zlatan says. “Based on this good foundation, it is easy to make a deal and won't take too much time.”
An industry built on trust
But the pandemic, plus the recently introduced controls in China, have added hurdles for daigou shoppers, even those with a relatively friction-free process like Zlatan. “The COVID-19 pandemic affects all industries, including daigou,” he says. “The main effect is that there are far fewer flights than before, which impacts the efficiency and speed of logistics.”
Calgary resident Jayden Yow, who ran a Facebook page for a company he had created called Canada Daigou Agency, says his business is now defunct. “I think the trend now is everybody is buying online for themselves.”
International stories have documented the decline of daigou buying during the pandemic and even predicted that it will die off entirely, as more retail outlets offer simpler online shopping options and better prices.
That's what Yolanda thinks of her future. “I am not optimistic about the industry's prospects because it is born out of the needs of a special period. Especially after the introduction of China's e-commerce law in 2019, the industry has been strictly regulated and cracked down on.”
She sees others quitting. “Many American daigou around me are out of business. Hong Kong daigou have no business because Hong Kong customs is closed.”
But still others think the demand will persist and that daigou will morph into new strategies. International retail observers say that big companies, which often avoided any connections with daigou before, could very likely start relying on that network to enhance and sell brands. Also, they predict, Chinese buyers will keep looking for trusted shoppers rather than just going to online platforms.
“China is and will remain a huge market with a strong demand for authentic and high-value goods. The daigou industry is built on trust, with consumers in China placing their trust in their personal shoppers overseas to source and ship authentic products,” writes Australian professor Haiqing Yu, who specializes in Chinese digital media and culture. “Daigou-based parallel trading can be understood as a contemporary type of shuttle trading in the era of social commerce 2.0, which is user-driven, characterized by community and global crowdsourcing.”
As for those still working at this shadow job locally, they're adapting. Tan says she has kept sending products to China in spite of the new taxes and rules there. She just makes sure not to include the price of anything on the waybill. And she relies on the fact that there's too much package traffic for the Chinese authorities to monitor everything.
“I don't think customs will look at all the packages,” Tan says. “In fact, I don't know whether customs will open your box to see what is inside.”
Tan has kept sending products to China in spite of the new taxes and rules there. She just makes sure not to include the price of anything on the waybill. And she relies on the fact that there's too much package traffic for the Chinese authorities to monitor