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China’s luxury daigou market, which sustains a practice where people from Europe and the US buy goods on behalf of shoppers in China, is a profitable business, raking in an estimated CN¥43 billion (US$6.2 billion), according to Jing Daily. Because luxury goods are much more expensive in China than they are in Europe, many shoppers who can’t afford to travel, rely on daigou to attain their Chanel, Louis Vuitton, and Valentino. Jing Daily makes the point that daigou offers shoppers an opportunity to buy luxe goods they otherwise wouldn’t have access to, however, this practice, despite the short-term benefits, has long-term negative consequences on luxury brands.
The Business of Fashion reports on findings released in March, 2017 noting luxury goods are the most expensive in China, compared to other global regions. For example, “Balenciaga products were about 25 percent more expensive in China than in France. Louis Vuitton goods cost nearly 50 percent more, while Armani came in at about 70 percent more expensive.”
The aforementioned Business of Fashion article notes that Chinese taxes and duties, “with added yuan coming from exchange rates and the distribution costs for the individual brands in China,” account for the large price gaps.
However, the Chinese might be shifting the way they buy luxury goods. 2016 marked the first year since 2001 that Chinese spending within China has shown growth, according to a new report in Quartz.
With efforts underway by the Chinese government to discourage daigou as well as to cut back on governmental mark-ups on luxury goods, Chinese shoppers are beginning to shop more at home, notes the Business of Fashion. How exactly the Chinese government plans to shut down daigou remains to be seen, but is certainly a story worth following.