The two words are daigou and peihuo. They are well known in Beijing, but often whispered in half-voice. But everyone knows them because they define practices that are considered improper but tolerated, as we tell you in this article
Daigou and peihuo are not just any Chinese words. They are words that are part of the Chinese dictionary of the fashion system, and other products in an annoying way. For example, they are also concerned with powdered milk. But internationally well-known terms. They have totally different meanings from each other, but, in the end, there are not a few cases where they end up intersecting. For instance, when the consumer sees his purchase barred by peihuo and turns to daigou. Thus, in the end, these two words have in common that they identify a grey area of the luxury goods trade.
The grey area of luxury in China: peihuo
The closest literal translation to peihuo (really) means is ‘accompanying products‘ or ‘matched purchase‘. But if we resort to English phonetics we will get closer to its real meaning because the pronunciation is very similar to ‘paywall‘ and works in much the same way. That is to say: it is the practice, unwritten and not even confirmed, of some luxury companies to impose on customers the purchase of a series of complementary and preparatory products in order to then be able to access the next level. In other words: that of being able to buy the desired and most valuable product.
For example: if I want to buy a Hermès bag, Maison’s salesperson suggests that it would be better to buy other products of the brand first in order to form a curriculum thanks to which I will be able to get in line for the bag. Outside China, the spending ratio is 1 to 1. If the bag costs 20,000 euros, I will have to buy other products and spend 20,000 euros. But Shanghai writer Ashley Lin says that the ratio is higher in China and can be as much as double that. Translated: in Beijing, I would have to spend 40,000 euros on clothes, bracelets, shoes, and more before getting my hands on the bag.
Hermès, the leading brand in this practice that now finds new followers such as Rolex, Chanel, and Celine, has never confirmed the existence of a peihuo. It only states that the sale of the bag is at the discretion of the boutique team. This ‘secretive‘ practice (all Chinese luxury social channels, however, are talking about it), especially when it becomes too unreasonable for the customer’s pocket, is arousing resentment and protests. And this is where daigou comes in. Because if you feel that submitting to peihuo is unfair or too expensive, you have two options: go second hand or daigou.
The Mandarin term, which translates as ‘buys on behalf of‘, is used to describe Chinese (but also South Korean) buyers who buy sought-after products abroad and resell them at home for profit, dodging taxes and fees. More succinctly: it is a purchase that a Chinese person commissions from another person living abroad against payment of a premium justified by overcoming the difficulties of purchase. In English, daigou is also called ‘surrogate shopper‘ while ‘proxy shopping‘ is the practice. An unauthorised channel, but one that is not so fought against by politicians and brand names.
Only one danger: daigou can be a vehicle for distributing fake products. Daigou arose because the price of a luxury fashion product abroad was much lower than in a Chinese boutique. They used to be individuals, now they are real organisations that until the pandemic benefited from the development of online sales. The revenues of the daigou industry amount to USD 40 billion in 2019, according to an estimate by the Beijing-based consultancy Proresearch.
But now that China has stopped international travel, trying to keep the virus at bay, daigou revenues have stalled. But it is easy to foresee new growth as soon as they pick up again, even behind the growing demands of Gen Z luxury consumers. The role of the daigou is thus destined to evolve and will become increasingly closer to that of the personal shopper. It will have to continually update itself because young Chinese are not only looking for the most famous brands, but also for interesting clothes and pieces that are affordable even if they do not have a famous brand name on the label.