The Very Weird World Of China's Instagram Luxury Bag Mules

Photo: Via @chrisellelim.
If you regularly keep up with high-profile personalities on Instagram, you've probably witnessed the avalanche of comments they receive on every single upload. And perhaps you've come across this very distinctive type of response: paragraphs of Chinese letters sprinkled with colorful emojis, linking to an account — usually of a young Asian women — modeling coats, watches, and handbags from a fitting room. These accounts are called daigou (代购), and though they might seem to emanate from your typical spambot, they're real humans facilitating a unique e-commerce community that could only exist in the world's most populous nation.
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Though still largely unknown in the Western world, daigou has been a robust industry in China for a few years — with the market expanding 19 times between 2008 and 2012. The word roughly translates to "buying on behalf of," referring to overseas agents that purchase and carry back merchandise to China. These services are available for anything from face creams to infant formula to luxury goods. But bags are the most commonly requested products due to their favorable pricing abroad and relatively light weight. These buyers generally charge a fee equivalent to 10% to 15% of the retail price for performing their duties — which are a mix between that of a personal shopper and a contraband mule.

With an annual revenue of $15 billion, it's no surprise that many aspiring entrepreneurs are hopping on the daigou train. Attracting a clientele mostly made up of young professionals in first- and second-tier cities, many luxury daigou services are operated by Chinese students living in North America and Europe. Flexible class schedules and expansive personal networks make it possible to pursue this as a side job.

Anna* Wu, a 26-year-old finance trainee in California, dabbled in the business when she was studying in the Southern U.S. Having acquired bags from daigou before, she was convinced that she could start her very own online store after moving stateside. She'd travel to stores on weekends and take pictures of the purses for sale. Over time, she developed friendships with salespeople who'd also take photos for her on their shifts. As she uploaded these snaps to Weibo — a Chinese social-media platform similar to Twitter — inquiries about the bags rolled in. Typically, the customer paid Wu a deposit and service fee after agreeing on the preferred style and color. Then, Wu would purchase the bag and send it back to China. Upon receipt of the correct item, the clients would pay the rest of the amount owed. Rinse, repeat, and you've got yourself an online operation that can easily finance your grocery bill, and potentially much more: ParisTop, a daigou seller, says she's been able to fully support herself in Paris — one of the most expensive cities in the world — with income from peddling Lady Diors, Louis Vuitton Speedys, and various quilted Chanel bags. After the photo-ban controversy and subsequent protests at Dolce & Gabbana's flagship in Hong Kong, a major city for daigou activities, luxury labels are now less strict about patrons photographing their offerings. "There's a salesperson I'm friendly with at every major brand," the aforementioned agent wrote in an instant message. "Because of how much I shop, both the French- and Mandarin-speaking staff don't really mind my business."
Photo: Via @jennifer4393696.
Why bother going through all this trouble to buy a purse, especially when luxury malls and department stores are everywhere in most Chinese cities? The reasons are twofold: First, there's a dramatic price advantage. Deep seasonal discounts and outlets are much more common in the U.S. and Europe, and the prices — without the stiff import taxes and tariffs applied to luxury goods sold in China — are already much lower. In an interview conducted over instant messenger, the ParisTop owner said the difference can vary from a 30% to a 50% discount. Furthermore, carrying a bag that's hand-picked from a Parisian boutique carries much more weight and legitimacy for the Chinese consumer, even if the merchandise is technically the same: Chinese consumers' faith in domestic products has long eroded, thanks to countless reports of counterfeit goods sold in China, such as the recent investigation on fake Prada Saffiano handbags sold at Chongqing's high-end boutiques. According to a survey by RedTech Advisors, 91 percent of respondents were wary of knockoffs.

And even if the bags are genuine, a distrust in quality still exists. Che Er, a famed Chinese economist, has written about the drawbacks in the country's export measures on the Communist Party's news site: Domestic textiles and agricultural goods of higher quality are typically exported overseas, while inferior counterparts are sold locally. Many fear that this rule even applies to Western luxury products made in China, though it has yet to be proved.

On top of their basic duties, daigou agents also inevitably act as brand educators to the newly rich who need the help of a discerning eye. Being in this business means making yourself available as a resource for questions beyond what bag to buy. "There were times when my clients flat-out said they just want a high-end bag, with no preference whatsoever — it's up to us to walk them through everything," said Wu. Ultimately, all the work wasn't worth it for her. "Operating from the U.S., my price levels for European products aren't as competitive compared to someone based in Paris or Milan," she said. "And, if I take orders for mid-range American brands like Coach or Michael Kors, the profit margin just isn't high enough to cover expenses for packing and postage."

For what it's worth, daigou — also plagued with a knockoff problem of its own — may soon be on its way out. Last year, China's General Administration of Customs announced legislation for goods entering and leaving the country: Parcels marked for "personal use" — which many daigou products are — will be taxed if they are valued above 5,000 yuan (US $806). Things intended for resale should be reported as such and are subjected to a higher tax rate. That said, with a sampling rate of just 4% and difficulty of proving that a bag isn't for personal use or gifting, thousands of packages were probably let off the hook at customs every day.
Photo: Via @xqluxury.
However, not reporting a shipment for personal use can have serious consequences: In 2012, a former air stewardess and daigou shop owner was sentenced to 11 years of imprisonment — later reduced to three — for neglecting to provide the proper disclosure of beauty products she purchased at duty-free stores in Korea and later sold, therefore evading taxes amounting to 1.1 million yuan (over US $117,000). More than 95.7% of voters on a poll conducted by CCTV believed that the punishment was way too harsh, so it would seem that the public hasn't been well-versed in the legal gray area that many unreported daigou accounts fall in.

The new legislation also greenlit the monitoring and suspension of accounts on WeChat, a messaging app widely used for sharing images and communicating with clients. "I've heard of sellers who preferred chatting with voice messages instead of typing out correspondences, in fear of surveillance from authorities," said Wu. Brands have also come to the realization that their unbalanced prices might be what prompted all this hush-hush activity: Gucci and Chanel were the first labels to lower costs in Chinese stores, in observance of the euro's weak performance against the yuan. If the heads of the luxury world are slashing their prices, it's only a matter of time before others follow suit.
This turn of events has delighted many a label devotee — they can now do less legwork to acquire their objects of desire at a fairer price. But perhaps it can also be beneficial to all the student-cum-agents out there, who might be better off with more time to focus on academics. This was certainly true for Wu, who quit the race after six months of running around, wrestling her way into wait lists and begging connections to promote her accounts. "As much as I enjoyed the process, it was way too much with my course load," she said. "Now I can go back to being a pure admirer of beautifully made things."

*First name has been changed at the request of the interviewee.
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