September 4, 2023
SYDNEY – The era of the “daigou” – shopping agents, mainly students and tourists, who make money by buying and sending products back to China for resale – appears to be ending in Australia.
For years, daigou in Australia made lucrative sums by often reselling Australian infant milk formula back in China or other items such as vitamins and beauty products.
But the practice seems to be drying up.
The travel curbs during the Covid-19 pandemic brought a sudden stop to the influx of arrivals from China, which was the largest source of Australia’s foreign students and tourists.
In 2019, 1.4 million visitors arrived from China. But just 241,720 came in the 12 months up to the end of March 2023.
Other factors have also been contributing to the decline of the daigou.
Chinese students often relied on income from daigou sales, but can now find alternative sources of work due to Australia’s booming job market.
The unemployment rate in Australia is just 3.7 per cent, which has led to surging demand for casual workers in areas such as hospitality and retail.
Chinese consumers are also increasingly buying local products.
One of the major products sold through daigou in Australia was infant milk formula. For years, many families in China sought formula from abroad following a contamination scandal at home in 2008, which caused the death of six infants and made some 300,000 others sick.
Formula from Australia and New Zealand was viewed as safe and reliable. But China’s birth rate has been declining, causing lower demand. Chinese regulators have also imposed some of the world’s strictest standards for formula, which means parents can be more confident about products that are locally made or imported.
Dairy firm a2 Milk, which was founded in New Zealand, revealed in August that it experienced a slump in daigou sales, amounting to a 39 per cent drop in the year up to June 30.
According to the company’s annual financial report, the value of its daigou sales to China dropped from more than 12 billion yuan (S$2.27 billion) in 2019 to less than 3 billion yuan in the past year.
“During the pandemic, consumers shifted away from purchasing English label (infant milk formula) via Australia-based daigou,” the report said.
“Some consumers shifted to CBEC (China Cross-Border E-Commerce) channel but most shifted to China label (formula) brands and channels… (The) seller base and environment (are) improving, but (have) yet to recover.”
At the height of the daigou frenzy in Australia in 2018, a consumer crisis was sparked after parents complained about the lack of infant milk powder on shelves – a problem that was blamed on mass purchasing of products by daigou.
Supermarkets and chemists imposed purchase limits – often two cans of formula per customer. These days, outlets typically have well-stocked shelves and have removed their two-can curbs.
The chief executive of a2 Milk, Mr David Bortolussi, predicted that daigou sales would recover to only half of what they were before 2020, even though international students are returning and shipping times as well as costs are improving.
“There (are) a lot of things that are conducive to a daigou recovery,” he added. “Unfortunately, we’re not seeing a significant rebound in that.”
Mr Bortolussi said: “I can be reasonably definitive about that. (The daigou channel) will not get back to the same size that it was.”
It remains to be seen whether daigou sales of other items will increase as Chinese travellers return.
At its height, the daigou phenomenon spawned businesses in Australia that attempted to make it easier to buy and send back products to China. More than 1,000 shops opened to assist Chinese travellers, but many closed with the onset of the Covid-19 pandemic.
One of the best-known businesses is Aumake, which listed on the stock exchange in 2017. It had stores that stocked health products, skincare, infant formula and wool items and also enabled daigou to hear about products directly from suppliers.
But the firm said on its website that it “evolved” and transformed during the pandemic to focus on enabling brands in Australia and New Zealand to promote and market products to China and across Asia.
The company’s share price was worth more than 70 Australian cents (61 Singapore cents) in late 2017, but as at Friday, it was valued at less than one Australian cent.