"Daigou undercut brands' full-price sales in China...[investment in China] isn't paying off as it should be" - a brief excerpt from the recent The Wall Street Journal article based partly on our Daigou Report 2024.

Since the release of the report, I have had conversations with people from around the industry and the points of view and data points that have come pouring in have served to further reinforce the thought:

Daigou represent the biggest threat to luxury in the next five years.

This is of course a purposely bold statement, and it is not aimed at lessening other issues, but at its core it touches on so many aspects of the business both in the short term and long term.

I wrote previously that brands must take a top-down approach – in one manifestation of tackling this issue you can envision a task force created at the global leadership level that aims to outline the specific issues for the brand (as the Daigou issue does not affect all brands equally), create sub-task forces to tackle the issues and measure the impact of changes.

Many of these were hinted at in the WSJ piece:

💿 Price Harmonization – is there currently a 3–5-year plan on how global price differences will evolve? The extreme solutions of China price cuts is not viable, and global price increases may alienate local consumers, but where is the sustainable middle ground.

💿 Daigou Identification – identifying individuals who are operating as daigou in stores and controlling their purchases is a sticky subject. The resulting bad press from misidentification could be potentially harmful, but at the same time a deeper understanding is necessary.

💿 Wholesale Excellence - tracking and tracing where these items are coming from on a wider scale is both the question I get asked most often and also the information many brands are completely blind to. Traceability across distribution chains, with the potential coupling of high-tech solutions to trace and track, may lead to some interesting findings, and eventually some uncomfortable conversations with wholesale / retail partners.

💿 Behavioral Shifts – when talking about this topic, I am often reminded to put myself in the shoes of a consumer. Let’s assume I trust that the items I receive are authentic, I pay anywhere between 10-40% (much more extreme discounts are available) less than the price I would pay in the store. What’s my journey? Go to the store, check the items out, walk out, buy online, wait a day or three, enjoy my product. Will I ever go back to buying in the store? Likely not assuming availability of the items.

This last point highlights one of the deepest issues, the irreversibility of the consumer behavioral shift.