Connecting with Chinese consumers is an exercise in trust, communication and strategy, and smaller Australian brands increasingly have a role to play in the Chinese market, says daigou-focused retail business AuMake.
The company’s executive chairman, Keong Chan, tells SmartCompany there are a number of misconceptions about how Chinese shoppers approach the Australian market.
“There’s an assumption in China that the consumer knows what they want. It’s not always true,” Chan says.
Instead, Chinese shoppers rely on connections on the ground in Australia to help decide what to purchase. If your company can’t establish itself as well-recognised by Australian-based daigous, you have little chance of securing this support outside of it, Chan says.
“When that phone call goes and someone asks [a daigou], ‘have you heard of this brand?’ If they say no, then there’s no chance of the sale,” he says.
That’s where AuMake comes in: the business, which was launched in 2010 by husband-and-wife team Joshua Zhou and Lyn Zheng, aims to connect Chinese shoppers and the daigou community with trusted Australian brands through flagship showroom-style stores in Australia.
In October 2017, the company got a chance to ring the bell at the ASX, becoming the first specifically daigou-focused stock to list on the Australian Securities Exchange. In October shares were priced at 23c and by December they had hit a high of 79c. They’re now sitting back around the 27c mark.
Investor interest in the business was strong and in the company’s recent report on the March quarter, it said it is gaining sales momentum. In March, the company raked in record sales of $2.37 million through its e-commerce site and five Sydney retail stores.
Gross profit for the business overall was up 12% to $824,000. The company said it’s also kicking goals with its “owned brand” sales, for which gross profits were up 71.5% for the quarter, to $151,000.
As well as working with a range of Australian brands and partners, AuMake sells and promotes three owned brands: Jumbuck and UGG, Health Essence Australia and Medigum.
Brand quality and communication
Chan says AuMake aims to address a gap in the market by helping smaller brands gain traction with Chinese shoppers.
He estimates there are 50,000 daigous operating in Australia, but there are two distinct types of shoppers that AuMake targets: those turning a profit from sending products to China, and those who send new products back at the request of family and friends.
“The demand from China is insatiable, but we identified this big gap, in how we actually get the Chinese tourist to embrace new brands,” Chan says.
While the likes of Blackmores are now well-known overseas, many other smaller operators struggle to connect with Chinese shoppers in Australia, which is where brands often need to be to develop an appetite in China for their products.
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“The suppliers have no idea how to engage with daigous,” Chan says.
It’s this communication gap that AuMake is trying to fill, curating brands and telling their stories so shoppers can uncover new, local products.
For those thinking about positioning their products so they appeal to Chinese shoppers, trust and quality are still key elements, says Chan.
“It’s about what is is genuinely Australian and what is quality,” he says.
Road to expansion
There are a number of China-focused e-commerce players currently operating in Australia, but AuMake says it intends to ride the wave as the dominant platform focused on promoting new Australian brands to overseas shoppers from within Australia.
The company is also planning on expanding its presence in China, with the launch of a “daigou” hub in Xiaman, with Chan saying there will be big opportunities if the company “can recruit the China-based daigou” as well.
He says the majority of Chinese buyers in Australia already know the AuMake brand and the recent record sales figures are far from just plain luck: it’s about telling brand stories to get sales.
“It can’t be luck. I think there’s an impression from some people that all we do is send it [products] back [to China]. But we’re moving up to 16% as a gross margin, and beyond,” says Chan.