Prior to COVID-19 many companies relied on the daigou trade to reach consumers.

The world “daigou” literally means means to by on behalf of someone else. ASX stocks AuMake (ASX:AU8) and Mediland Pharm (ASX:MPH) operated physical stores welcoming Chinese tour groups and international students that would buy goods for others and either send or take them back to China.

For some years it was a roaring success but also one of COVID-19’s earliest casualties.

When the pandemic hit China in January, the trade was eliminated as consumer confidence diminished and borders shut to China in February.

AuMake at least has been able to find its feet again, reaching its customers online. In the September quarter it made $3.2 million of which $2 million was online.

Chairman Keong Chan says the paradigm in the industry has shifted. While he admits the border closure has had an effect, he believes the tour groups aren’t gone forever.

“I think now with the border closure it has become very obvious how important they are to the trade – (sending) Australian products to China,” he told Stockhead.

“But the way we approach it now: there are two groups still there.

“People who aren’t travelling – they’re still buying things in China, in fact they’re buying more than ever before, particularly at luxury end, but they do it within China because they obviously can’t leave at the moment.

“And second, international students – they’re still doing things, again in China.”


The next opportunity for daigou sellers

But Chan doesn’t think it’s just a case of border closures forcing marketplaces onto people’s screens.

“We’re actually thinking about a different online business model and we’ve talked about (being) a social ecommerce marketplace,” he said.

Chan explained that ecommerce platforms in China aren’t just for ordering something and getting it delivered. They are in effect social media platforms too.

One example he pointed to was Pinduoduo (NDQ:PDD) which recently listed in the US and despite only being four years old has a market cap above US$100 billion.

“They [Pinduoduo] are really clever, they use things like games and they gamify the experience,” Chen explained.

“When you open the Pinduoduo app you don’t actually see a lot of products to search for, you go on there because you see something really interesting.

“If you decided you wanted to buy sunglasses, shoes or something like that you can then do that through the platform, through Pinduoduo or through AuMake in the near future.

“You can buy that product and then share it with your friends. And the more people that buy it the cheaper the product becomes.”

Chen pointed to TikTok as another example. He noted in China it operates as a way for people to buy things and has a daigou-like effect of broadening a potential consumer base.

“You can click on the person or celebrity, click on their profile and buy their products. It’s such a different way when you contrast it to the way buy products in Australia.”


Going viral

Chen says this way of doing ecommerce is going to go around in the world over the next few years and companies seeking to market to Chinese consumers need to catch up.

“It’s the fastest growing ecommerce segment in China, we believe that’s going to go around the world in the next few years,” he explained.

“The reason I bought this up is because we have a clear view of what the future might be.

“We’ve looked at this stuff happening in China and we think for the brands here in Australia – that’s what we need to do.”