ASX-listed retailer AuMake has launched its first ‘daigou hub’, aimed at introducing new Australian brands to the influential daigou market and satisfying the growing Chinese consumer demand for local goods.
Australian retailers will by now be familiar with the ‘daigou’ phenomenon, with entrepreneurs capitalising on Chinese demand for Australian products by purchasing items here and shipping them to buyers in China for an often inflated price.
AuMake has transformed this into a professional operation. The company aims to introduce Chinese consumers to Australian suppliers in four major categories: healthcare, skincare, baby formula and wool.
It has just opened its first ‘daigou hub’ in the heart of Sydney’s Chinatown, combining livestreaming technology with face-to-face interaction to raise the profile of Australian brands. The 430-square-metre space has been designed to encourage visitors to stay and socialise, with a presentation space, a café, product displays and a livestreaming area.
Shoppers at the new AuMake daigou hub.
AuMake chairman Keong Chan said the hub was the result of twelve months of industry consultation with suppliers and daigou. The opening was viewed by a livestreaming audience of 730,000 people in mainland China. Chan said video was increasingly popular with Chinese consumers, who want to see their daigous interacting with Australian suppliers.
“Livestreaming…is fast becoming a key component of the decision making for consumers in China when they look at the brands and products they are going to purchase,” he said.
“Being able to see, in real time, suppliers demonstrating their Australian product and interacting with their trusted daigou is the next evolution of their increasing desire to understand the origins of the product they are purchasing.”
The daigou hub opening follows the launch of AuMake’s showroom in Sydney’s Auburn last week and allows the company to cater for three distinct segments: independent tourists with its flagship stores; Chinese tour groups and large scale daigou at the Auburn showroom; and daigou at the Haymarket hub.
Chan said the company plans to continue to expand within Sydney in the coming months and then nationally.
“AuMake’s store blueprint will be replicated in other major capital cities and once complete in 12-18 months’ time, we expect it to have a significant positive impact on the supplier/daigou/Chinese tourist landscape across Australia,” he said.
Acquisition of Jumbuck and Health Essence
AuMake isn’t just interested in being a go-between for suppliers and consumers. It is also focused on acquiring brands in order to take control of the manufacturing process and lower margins.
In November 2017 it acquired Jumbuck Australia with the aim of adding more wool products to its range. Jumbuck is well known within the daigou industry as a manufacturer of high-quality Australian wool products, and the company will produce products for AuMake under its trademark ‘UGG AUS’, which will be promoted as a premium brand.
In FY17, AuMake sold $411,371 of wool products from servicing customer-driven enquiries with minimal marketing support. The company plans to increase this by implementing a coordinated marketing strategy for the promotion of UGG AUS products across AuMake retail stores. It anticipates gross margins for wool products sold via AuMake stores will increase from 26 per cent to between 45 and 60 per cent, depending on the product.
Aside from increasing margins, having control of the manufacturing process allows AuMake to produce designs and styles to suit fast-moving Chinese consumer tastes.
Also in November AuMake acquired a 50 per cent stake in supplements brand Health Essence. The products, which include fish oil and grapeseed oil capsules, are already popular with Chinese consumers and AuMake said in a statement it will promote Health Essence as an alternative to more well-known brands.
Opportunity for SMEs
“AuMake’s daigou retail model aims to address the fundamental issue of how to effectively introduce new Australian brands and products to the influential daigou market to satisfy the growing Chinese consumer demand for safe, reliable Australian goods. To date, new brands and products vying for the attention of Chinese consumers has largely been restricted to traditional retailers and e-commerce sites, where cut through and face-to-face engagement is limited or non-existent,” said Chan.
“This new model will provide a simple, cost-effective path for new and small-scale Australian suppliers to have a direct connection with daigou and Chinese tourists. That hasn’t been an option for them before, not without significant investment or relationships.”
The benefits for retailers who manage to break into the Chinese market are huge. Australian retailers made the third-largest number of sales during the Alibaba online shopping event Singles Day in 2017 with Chemist Warehouse exceeding its 2016 record of $17 million just seven hours after trading started.
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