New law to put daigou under greater scrutiny
Amid consumption upgrade, new law will bring daigou using online platforms under greater scrutiny, and rid e-shopping of frauds, fakes
A new e-commerce law that will take effect next year will increase the cost of daigou (which is Chinese for buying things on behalf of somebody else), thereby helping address deep-seated problems in this booming industry and better regulate online merchants and e-commerce platforms, experts said.
A daigou is usually an individual (a middleman, if you will) who shops for foreign products overseas for consumers on the Chinese mainland, usually for a fee.
Consumers can contact daigou through online shopping platforms. Generally, this sort of trade helps consumers to save on import duties since it happens on a one-to-one level based on personal acquaintances.
From the New Year’s Day, the new law will make it mandatory for daigou to register and pay taxes.
This is expected to bring order to the sector that has developed rapidly and chaotically in the past few years, resulting in problems like counterfeit products, said Dong Yizhi, a researcher at the China E-Commerce Research Center, or CECRC.
Dong said this law will help protect consumers from fake or substandard products. But, on the other hand, such a law will also likely increase the cost of buying imported products.
The new law states that e-commerce traders or those who sell products or provide online services must obtain licenses, register as market entities and pay taxes.
Daigou using e-commerce platforms will come under greater scrutiny as the latter are obliged to assess more carefully the safety and authenticity of goods circulating on their platforms and the credentials of the merchants selling those products.
“The new law is necessary to control the lawless competition in e-commerce,” said Liu Junhai, a business law professor with the Renmin University of China, agreeing that the law explicitly defines illegal conduct in the e-commerce sector, and protects consumer rights.
Zhang Huifang, a clerk from a technology company in Shenzhen, South China’s Guangdong province, is supportive of the law. “Too many fake and unqualified products are being sold by daigou through social media and instant messaging apps. It is time to regulate the market,” she said.
China’s cross-border e-commerce sector has been growing exponentially over the past few years as the country’s middleand high-income shoppers are demanding increasingly diversified and personalized products and services.
According to iiMedia Research, a market consultancy, the country’s cross-border online shopping grew 20.6 percent to 7.6 trillion yuan ($1.09 trillion) in sales last year.
Market researcher eMarketer estimates that by 2020, a quarter of the Chinese population, or more than half of China’s digital buyers, will be shopping for cross-border products, either directly on foreign-based websites or through third parties.
Wang Yunfang, 30, who teaches at a middle school in Beijing, recently placed shopping orders on a cross-border e-commerce platform with a few taps on her smartphone, without having to leave her home. Within days, French red wine, dried cranberries from the United States and Ferrero Rocher chocolates from Italy materialized.
“These products are of high quality and affordable. When I was studying abroad, I often brought back some foreign cosmetics, handbags and electronic devices for my relatives and friends at home during visits. After returning to China, I found online shopping is very convenient and more discounts are available,” Wang said.
Wang is among a growing number of Chinese consumers who are shopping online for imported goods, including food, alcohol, jewelry and cosmetics, among other luxury items.
Cross-border e-commerce players are wooing them with a wide range of authentic and high-quality overseas products.
Shanghai-based online seller Ymatou provides a diversified cross-border shopping service. “Chinese consumers have an increasing demand for premium brands and highquality imported products, ranging from toothpaste and toothbrushes to mattresses, clothes and handbags,” said Zeng Bibo, founder and CEO of Ymatou.
Zeng said with consumers’ demands becoming more and more personalized and diversified, not only more highquality goods but all-round services are needed.
The company recommends products with excellent quality and reasonable prices to customers by utilizing big data technology to analyze commodity sales, user ratings, brands’ influence and price information.
“After years of development, cross-border online shopping has become a daily occurrence for Chinese consumers. With rising incomes, consumers have begun to pursue a highquality life and prefer shopping online, with rising awareness and recognition of overseas brands,” said Lyu Haoze, an analyst with the CECRC, adding that the younger generation of consumers are more interested in buying overseas brands.
To exploit the opportunity such consumers offer, Shanghai-based e-commerce startup Red was set up in 2013 to connect the former with overseas sellers, creating a community of trust and sharing, with more than 70 million users by the end of October.
It initially began with the objective of helping Chinese people traveling abroad to share their shopping experiences online, before morphing into an e-commerce site with social media characteristics, selling international luxury brands and sought-after foreign products.
The company relies on word-of-mouth marketing, and lets its users share photos of products they bought, purchase tips and overseas shopping stories online.
“We hope to resonate with the ongoing consumption upgrade in the country, as people pay more attention to quality consumption,” said Qu Fang, co-founder of Red.
The startup has inked partnerships with Cosme, Japan’s largest online cosmetics shopping site, and Kirindo, the largest drugstore and pharmacy chain in Japan. About 80 percent of its users are younger than 30. And 90 percent are well-educated women pursuing a high-quality lifestyle.
“The demand for international brands is rising rapidly, thanks to cross-border online shopping, which is probably one of the fastest growing trends in e-commerce,” said Elaine Chang, president of Amazon China, the local unit of the global online marketplace.
Amazon is luring a rising number of Chinese buyers to purchase foreign products with its Amazon Global Store, which covers top destinations of Chinese customers’ crossborder shopping, including the United States, the United Kingdom, Japan and Germany.
Amazon said Chinese consumers would enjoy authentic deals from overseas markets and be able to buy genuine products directly from Amazon’s overseas fulfillment centers, which cover popular items such as Nine West shoes, Lego blocks, Rimowa luggage and Godiva chocolates.
Lyu of the CECRC said with the development of e-commerce and developed logistics networks across the country, consumers in second- and third-tier cities and even rural areas have increasing access to a range of high-quality, branded products.
Chen Tao, an analyst with the Beijing-based internet consultancy Analysys, said: “E-commerce platforms hope to seize the opportunities emerging from the ongoing consumption upgrade in China.”
Chen also said compared with Amazon, domestic online retailers have a better understanding of local consumers’ needs and how to operate in accordance with local market conditions.
Zhang Zhouping, a senior analyst with the CECRC, said cross-border e-commerce greatly reduces the cost of communication between sellers and buyers, lowers commodity circulation and improves efficiency.
“China’s strong support for cross-border e-commerce comprehensive experimental zones, and the gradual improvement of taxation and regulatory policy environment, will greatly boost the growth of the industry,” Zhang said.