Online agents cut luxury bills for chinese buyers


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Online agents cut luxury bills for chinese buyers

  1. 1. Online agents cut luxury bills for Chinese buyers By Julie Zhu in Hong Kong ©Bloomberg 'Daigou' agents are shopping in Hong Kong and bringing their goods across the border into mainland China May Liu earns about $2,500 a month as an office worker in Hong Kong, but she spends about 10 to 15 times that on luxury goods, buying everything from Prada handbags to US cosmetic brand Fresh. While Ms Liu loves shopping, she buys mostly for others in her role as a daigouagent – a growing group of people who specialise in helping mainland Chinese consumers secure products from overseas. She started her daigou business just a year ago as a way to earn more money, but this young mainland Chinese woman was soon bringing in up to $10,000 a month. Ms Liu now boasts about 2,600 clients, who use Weibo, China’s equivalent of Twitter, and WeChat, a popular messaging app, to order goods. “I didn’t know how much money I would make. I didn’t have any expectation of profits,” says Ms Liu, who asked to use a pseudonym. “I only knew it would be profitable.” But she has not given up her day job in the office realising that being a daigou agent, while highly profitable can also be illegal. Some agents focus on ferrying goods from Hong Kong to mainland China. But the phenomenon has spread to expatriate Chinese who are increasingly helping compatriots back home buy brands from cities such as Paris, London, New York, Hong Kong, Tokyo and Seoul. The daigou boom is an example of how ecommerce is rapidly transforming the Chinese retail market. According to Chinese media, there are hundreds of thousands of people working in the daigou business. A search for the term on Alibaba’s Taobao, China’s largest online marketplace, produces over 240,000 virtual stores and nearly 15m items from child car seats to air purifiers to pocket printers. The China e-Commerce Research Centre says the daigou market grew 19-fold between 2008 and 2012 when it reached Rmb48bn ($7.9bn), and reckons that it rose
  2. 2. again in 2013 to Rmb74bn. According to a recent study by Bain, about 60 per cent of the Chinese consumers who buy luxury goods have used daigou at some point. The business is thriving for several reasons. Many Chinese believe the same product is better made when bought overseas because of the mainland’s uneven reputation for quality. The rising strength of the renminbi, growing purchasing power of Chinese consumers, and a spate of high-profile food security scandals in China, have also spurred demand for safe and high-quality foreign products. Mo Daiqing, an analyst at the research centre, says the main reason Chinese are turning to daigou is because China imposes hefty import tariffs on luxury goods. For example, it levies a 50 per cent duty on cosmetics, one of the dominant daigoucategories, and that is before the imposition of the standard 17 per cent value added tax that is added to imported luxury products. “The same brands of milk powder, cosmetics and handbags are much cheaper in Hong Kong, the US, Japan and South Korea than in mainland China,” said Ms Mo. But the industry is increasingly drawing attention from customs officials in mainland China and Hong Kong, particularly with the rising numbers of so-called “parallel traders” who take advantage of multi-entry visas to cross the border at the southern Chinese city of Shenzhen many times a day, carrying products for resale that they do not declare at customs. Dong Yizhi, a lawyer who specialises in ecommerce, points out that the daigoubusiness is not illegal if the agents pay import taxes, but says that when agents pay duties the premise of the business becomes moot. “If they pay customs duties, the price disparities will be much smaller and they won’t make money,” said Mr Dong. Chinese citizens can legally import Rmb5,000 ($823) of duty-free goods for personal use each time they return to the mainland. But Shenzhen customs officers are taking a tougher line on parallel traders who cross the border back into the mainland more than once a day with goods over the value of Rmb500. Liu Lizhen, a Shenzhen customs official, said the move was aimed at clamping down on the abuse of the multiple re-entry system. This has become a more serious issue in Hong Kong since 2009 when it started allowing Shenzhen permanent residents to enter the former British colony without restrictions. “We once found a person who had crossed the border 26 times a day,” said Ms Liu. According to the Shenzhen customs bureau, more than 20,000 parallel traders operate at the six land border checkpoints between Hong Kong and the southern Chinese city. Hong Kong’s immigration department said just over a thousand parallel traders were arrested last year for breaching the terms of their stay in the territory. Despite the crackdown, May Liu, the daigou agent, says she is not worried, and still travels to Shenzhen a few times a week. “Carrying so much stuff across the border every time provides me with a lot of exercise. I don’t even have to go to the gym,” jokes Ms Liu.