Ann: Trading Halt, page-23

Then came Covid-19. China slammed its borders shut to keep out the virus, putting a halt to most overseas travel—and the business of Li and other daigou operators. Although she places some orders through overseas partners, without Li on-site to personally vouch for the provenance of the products, many clients don’t trust the authenticity of the goods. That skepticism has led her to lose more than half her business. “Many of my daigou peers have exited the market,” she says. “I just hang in there hoping the border can reopen soon, but the longer we wait, the more likely my clients have found other channels and leave forever.”

The collapse of daigou has also left businesses, whether infant formula makers or cosmetics retailers, struggling. Before the pandemic, some foreign companies grew rapidly thanks to the trade. By selling to personal shoppers and letting them handle the delivery back to China, they didn’t have to invest in building local retail operations of their own. Companies could also avoid requirements to comply with Chinese labeling and packaging laws.

“The whole daigou sector has dried up,” says Sage Brennan, co-founder of China Luxury Advisors, a consulting company in Los Angeles. “A lot of consumers have gotten into more legitimate cross-border e-commerce, and that becomes easier as time goes on than relying on the gray markets.”