On China’s long list of food safety scares, the tainted baby-formula disaster of 2008 stands at the top of the list, so it’s hardly surprising that there is huge demand for baby formula from overseas.
Chinese students studying overseas have found a way to cash in on this demand. Known as daigou, they use Chinese social media to connect with customers, then mail them milk powder or formula bought overseas. With the help of friends and relatives, they can set up extensive networks.
One of these daigou, who asked to be referred to as Yuxi, studies at the University of Melbourne. She told TWOC that a 200% profit margin on each tin of baby formula is a common expectation in this underground market. Listing a wide range of Australian products from baby formula and vitamins to fish oil and “breath pearls” on her WeChat social media account, she made 2,000 AUD in her first month as a daigou. Sales have kept growing. “My customers refer me to their friends when they know my products are genuine and my service is good,” she said.
Being a daigou is not easy. Yuxi has to spend hours every day driving around and talking to pharmacy staff to source her supply of goods – before other daigou get their hands on the best deals. Her home has become a mini-warehouse as she must keep her supply flowing when certain products are out of stock in the actual pharmacies.
When new customers still have doubts on the authenticity of her products, even after she has posted hundreds of photos on WeChat of herself and the uniform-wearing pharmacy employees, she decides to live-stream herself getting out of her car and walking to the pharmacy on WeChat. On a regular day of sourcing goods, Yuxi smiles and speaks to her customers on WeChat video-calls while picking up tins and bottles from the shelves, negotiating with the pharmacy staff, and eventually filling in the custom forms for the parcels to China.
Locals are not always pleased. Australian media have complained about Chinese daigouclearing the shelves and leaving the Australian babies hungry. Parents think it’s the Australian babies who need to be looked after first. Earlier this year, the Australian Deputy Prime Minister Barnaby Joyce announced that the Department of Agriculture would launch active investigations on increasing reports of illegal exports of baby formula to China.
With her trolley full of formulas and vitamins, Yuxi is used to being frowned upon by Melbourne residents and pharmacy staff.
“But I didn’t steal, or hurt anyone, or sell weight-losing prescription pills illegally like some other daigou do. What on earth is wrong about me buying these things? Do they think Chinese people don’t deserve to consume Australian products?” she asked.
Australian pharmacy chains, Chemist Warehouse and Priceline, along with supermarkets like Coles and Woolworths have been restricting customer purchases to certain quantities. Signs in Chinese are commonplace in stores.
The restrictions have proven difficult to implement and ineffectual at stopping the daigou.
“Even if we limit it to three items per person, how many threes do I have on the shelf?” a staff member of a Priceline pharmacy in Melbourne, who asked to be referred to only as Kelly, said while indicating that the “A2” brands and “Swisse Cranberries” are popular. “They come in as teams and pretend they don’t know each other,” she said. “I can’t stop them from emptying the stock and sending everything straight overseas. We are only running a business here.”
Beyond daigou, there are other avenues through which the Chinese can purchase Australian products. Last September, Chemist Warehouse announced a new agreement with Chinese company Alibaba, which allows Chemist Warehouse to directly sell products to Chinese customers through Alibaba’s e-commerce site T-mall. Sales of 88 million AUD is projected in 2016. Other Australian brands including Blackmores and Nature’s Care have also started sales through the T-mall platform.
Although the agreement has made headlines on several Chinese news outlets, the Chinese consumers’ everlasting fear of fake goods has kept them cautious, if not overly skeptical. In the feedback section of the Chemist Warehouse T-mall shop, many are suspicious of whether the shop is truly run by the same Warehouse in Australia. “The Swisse Hair Skin Nails (a drink to replenish collagen protein) came to me really fast and was shipped from Ningbo in China. The package looked slightly different and there was deposit at the bottom of the bottle. I’m not convinced that this is made in Australia,” one customer wrote.
In fact, since the beginning of this year, the option to order straight from Chemist Warehouse’s official website in Australia has become available to Chinese consumers. However, as the website is entirely in English and sometimes difficult to access without a VPN, it has no way to compete with the daigou on WeChat, who keep customers informed in the Chinese language with information on everything from the method of taking vitamins to what to do when tariffs occur at customs.
During an interview with TWOC, “Christopher”, the manager of another Melbourne pharmacy, said he isn’t so worried about the daigou that he comes across every day. “China has babies to be fed, too.” Nevertheless, he expressed that he hopes Australian manufacturers will not send products overseas before leaving enough supply for Australia. Other than that, “the demand from the Chinese market is not necessarily causing problems, but helping us to create more jobs in Australia,” he said.
Last year, The Free Trade Agreement (FTA) between China and Australia came into force on the 20th of December, with key outcomes including elimination of the 15 percent tariff on infant formula by the January 1, 2019.
“I wouldn’t worry about the government investigation, it should take a few more years for them to start a crackdown or something. But for sure this is a hard time for us, given that the manufacturers are sending the Chinese supply straight to China,” Yuxi says. “And when the 15% tariff is removed, the FTA will leave us no way to make more money.”
By then, Yuxi says, she will have completed her degree and moved on to another career anyway. The daigou days of product sourcing may well be coming to an end.