Avoid import tax
The Chinese call it ‘Daigou’ which basically means ‘order something for someone else’. A personal shopper abroad gets an order from China and sends the stuff to them in an attempt to avoid China’s high import tax for foreign luxury products.
Market researcher Bain believes Chinese customers bought about half of their luxury products abroad last year, while that number has grown to 70 % in the first quarter of 2015 as a strong yuan currency increased their spending power. Chinese customers mostly use Korea and Japan as their operating base.
There are several ways to get those imports: first is to use tourists that bring several items along when they return, but personal shoppers are becoming increasingly popular.
Second-hand items sold as new
Cosmetic items are the most popular target for this daigou trade, followed by leatherwear, watches and jewelry. Consultancy firm Bain estimates foreign purchases through a daigou agent to reach 55 to 75 billion renminbi, some 8 to 11 billion euro, in 2014.
Several observers believe the growth in second-hand luxury items is because of this daigou trade. Items are bought in Europe with a discount and then transferred to China where they are sold as new.
China is trying to counter
The Chinese government is trying to counter this popular practice. It has for example lowered import tax on several foreign items, like cosmetics from 5 to 2 %. Diaper import tax was lowered from 7.5 % to 2 %, while import tax on costumes for example was also lowered.
Brand manufacturers like Estée Lauder and L’Oréal have also made an effort, by lowering their prices even further in an attempt to discourage parallel import. China is also contemplating adding more tax-free areas.
The question is whether this will suffice, as parallel import is still a lucrative business, even after lower taxes. Wealthy Chinese people also consider status to be important, with a foreign product adding to their status. On top of that, foreign products are also considered to be more qualitative.
