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Another Scam of Chinese Oversea Shopper (Daigou).

A Weibo (China’s biggest microblogging platform) post on Oct. 9 has been reposted 13,000 times and got almost 4,000 comments: Someone found Chinese characters written on the bottom of several Enfamil formula packagings in a Canadian Walmart. Why is this seen as a scandal in China? This article explains how this causes Chinese netizens to lose trust in the popular overseas purchasing model Live Daigou (直播代购zhibo Daigou).

Screenshot of Weibo.com

Chinese characters written on formula packaging in Canadian Walmart

Chinese characters written on formula packaging in Canadian Walmart

What is Daigou?

Daigou, the literal translation of “purchasing on behalf of”, refers to a person living outside of China mainland or living in China mainland but travelling often overseas, who set up an unofficial reselling activity aiming at residents of mainland China. Often used platform by Daigou agents is Taobao, but also WeChat and Weibo are used for more social-oriented e-commerce. Daigou has been extremely popular in China over the last 10 years, the figure from Daigou Hunter shows: almost two hundred million CNY (around 28 million USD) of Daigou sales revenue has been made on Taobao.

Daigou Hunter: Daigou sales revenue on Taobao from last month

Why Is Daigou So Popular in China?

The activities scope of Daigou can be roughly divided into 2 parts: luxury and non-luxury products. While the main reason for purchasing luxury products from Daigou is price attractiveness by avoiding Chinese high tariffs and more buying options, non-luxury products from Daigou means authentic foreign products with better quality. Baby food is one of the most popular product categories of Daigou, e.g. according to Daigou Hunter: Aptamil’s Daigou sales revenue of last month on Taobao has reached over 10 million CNY (around 1.5 million USD) Chinese parents have been deeply concerned about baby food safety ever since the Chinese milk scandal in 2008 which was a widespread food safety incident and sickened nearly 300,000 infants according to CNN China.

What Is Live Daigou?

With the huge economic benefits this business model has brought, Daigou market has become a hotbed for fakes in recent years. High internet and smartphone penetration in China, strong awareness of technology among Chinese consumers as well as the large demand for authentic overseas-products have bred a new Daigou model: Live Daigou. Live Daigou refers to Daigou who makes short videos of the purchasing process and posts on social media or sends directly to the buyer, in which he/she marks the ordered products to prove the authenticity.

Screenshots of Taobao: Canadian Enfamil Daigou with free service of making video clips/marking products

However, Live Daigou can no longer prove authenticity, as a lot of fake Live Daigou come onto the market. Faking shared location on social media and/or making set-upped purchasing videos are common scams for fake Live Daigou. In this Weibo post, Chinese netizens believe that the products with Chinese characters on them are from some Live Daigou, who hasn’t really purchased the formulae, but only marked them and made a fake video of the process. Actually, this is not the first time someone overseas discovered Chinese-character marked formula and posted on social media. With time passing, Chinese consumers have lost their faith in Live Daigou either.

Screenshot: WeChat post of Hipp formula with Chinese characters on packaging in a German drugstore

Screenshot of Taobao: results coming out by searching for “altering WeChat shared location”

Opportunity for International Baby Food Brands

This widely-spread post on Weibo reveals the Chinese consumers’ distrust of Daigou / Live Daigou. On the other hand, the Chinese government has strengthened the customs policy and inspection, which directly leads to a much higher cost for Daigou. Although several international brands such as Aptamil have already built their official online shop on Tmall and have a big sales volume, many Chinese consumers are still searching for safe purchase channels for high-quality baby food from overseas, that provides a huge opportunity for many other international baby food companies.

Screenshot of Aptamil official store on Tmall: 100% original from Germany

Daxue Consulting has taken a special interest in researching the baby food market in China

As seen in our previous baby food market analysis, not only is the baby food market is experiencing rapid growth but due to scandals similar to the Canadian Walmart one, Chinese parents have a proven preference for foreign baby food.

To know more about China Baby Food Market in China, please don’t hesitate to contact us.