Daigou retailer debuts on ASX
A former oil and gas drilling company has resumed trading on the Australian share market under a new name and purpose: selling Australian products to Chinese tourists and “daigou”.
AuMake International sells Australian cosmetics, vitamins, long-life milk, baby products, and wool and leather products through its wholesale warehouses and retail stores.
The company wants to become the leading retail brand for “daigou” and Chinese tourists buying “clean and green” Australian products, and consolidate the highly fragmented number of daigou stores through acquisition.
Daigou are Australia residents or visiting Chinese, often international students, who buy goods on behalf of people in China and either take the goods to China in person or mail them.
The word daigou itself means “to purchase on behalf of” in Chinese.
AuMake executive chairman Keong Chan says Chinese consumer demand for safe, reliable, trusted Australian products is growing, fueling the number of daigou Down Under.
“The majority of Chinese living in Australia are daigou,” Mr Chan told AAP on Thursday.
“They have friends or family back home (in China) that will be asking them to buy products in Australia and to send it back to them.
“As long as Chinese are immigrating and living in Australia, or coming here to study, the number of daigou will continue to grow.”
Daigou gain traction
There are about 40,000 daigou in Australia, who potentially could reach 50 million Chinese consumers, and AuMake isn’t the only business looking to cash in on the growing trend.
Last month, Dr Matthew McDougall launched the online platform, DaigouSales.com, in an effort to legitimise daigou sales, which some still consider to be a gray area under the law.
Ultimately, he wants daigou to be seen as a legitimate sales channel. Like B2B and B2C, he thinks brands should consider D2C, daigou to consumer.
“If we can create a channel that’s professionally recognised as a precursor to B2C…you can prove interest in the brand and a response to your marketing. It de-risks China,” he said.
However, in the past, daigou have proved to be a risky channel for Australian brands.
Daigou helped turn Bellamy’s into a household name in China, but they stopped recommending the brand to their buyers after the infant formula company started selling directly to Chinese consumers amidst speculation of a government crackdown on the suitcase trade.
The crackdown never materialised, and Bellamy’s was forced to slash prices on excess stock in China as well as Australia. Its share price plunged and CEO Laura McBain resigned.
The trend has proved to be a mixed bag for retailers too, which have struggled to keep shelves stocked with certain highly popular items.
Speaking at the Global Food Forum in Melbourne in April, Woolworths’ CEO Brad Banducci said, “It’s a very vexing issue for us as we end up out of stock for our poor customer. We used to be out of stock on infant formula for Bellamy’s and now it has moved to a2 milk and others.”
For some people who advise Australian businesses on entering the Chinese market, these are all strong reasons for retailers and brands to tread carefully with daigou.
Don Zhao, co-founder and executive director of Azoya International, said retailers should not depend on daigou as their sole channel to reach Chinese consumers.
From Titan Energy Services to AuMake
AuMake replaces Augend Ltd, which used to be called Titan Energy Services, a provider of drilling and other services to the West Australian energy sector.
In December 2015, Titan Energy went into voluntary administration, and later changed its name to Augend.
Augend subsequently acquired Perth-based ITM Corporation, a wholesaler and retailer supplying Chinese customers living in Australia and China.
ITM acquired AuMake in February 2017.
AuMake was established seven years ago by husband-and-wife Australia-based Chinese tour guide team Joshua Zhou and Lyn Zheng.
It has five retail outlets in Sydney and plans to open a flagship store on George Street in Sydney’s CBD in mid-October.
AuMake raised $6 million in an oversubscribed offer of shares at eight cents each.
The company will use the funds to expand its retail network, acquire brands attractive to daigou, and develop its online capability.
Titan Energy shares traded at $8.88 when the company went into administration.
Under the AuMake name and business, the company’s shares were at 17 cents at 1115 AEDT – 98 per cent lower than the last traded price of Titan Energy but well above the AuMake issue price of eight cents.