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Tianjin Property Insight - August 2015

​“Daigou”: The gray market’s implications for China’s retail market

Fueled mainly by rising incomes, gift-giving, and a wish to “stand-out”, the market for luxury retail products soared in Mainland China, seeing rapid growth for the greater part of the last decade. Luxury stores now light up the streets of core urban shopping districts and brands like Cartier, Gucci and Prada have expanded as far as Taiyuan and Nanning. The appetite for luxury goods grew so large that one high-end consumer said that Louis Vuitton has become “a brand for secretaries” – highlighting its growth across income levels. However, many international luxury retailers have seen sales growth slow recently as Chinese consumers become more sophisticated and price sensitive. More importantly, this characteristic is not limited to luxury goods. Mainstream consumers are no longer willing to pay the lofty price tags for imported goods in general, especially when they can buy the same products abroad for 20-30% cheaper. This has given rise to “daigou” (代购), a gray market for imported retail goods reported by the Wall Street Journal to be worth an estimated RMB 75 billion.

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