ASX-listed daigou business surges 25pc

Keong Chan (tallest) Director of ITM with Jiahua (Joshua) zhou managing director and Co founder of AuMake and
LINGYE (Lyn) ZHENG non executive and Co founder of AuMake
Pic Nick Moir 29 june 2017
Keong Chan (tallest) Director of ITM with Jiahua (Joshua) zhou managing director and Co founder of AuMake and LINGYE (Lyn) ZHENG non executive and Co founder of AuMake Pic Nick Moir 29 june 2017
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Investors have poured into Australia's only listed daigou business, boosting the share price more than 25 per cent this week, enthused by the company's recent acquisition spree.

AuMake Australia - a retail business that connects Australian suppliers directly with daigou shoppers and Chinese tourists - this week announced the acquisition of wool manufacturer Jumbuck Australia.

The deal comes just one week after AuMake acquired Health Essence, a health supplements business, and one month after raising $6 million and listing on the Australian Stock Exchange.

"We are having to move quickly because there is just so much demand for Australian products in China," says Keong Chan, chairman of AuMake.

"We have literally 20 business enquiries every day, people asking us to please, please work with them. They want access to China and Chinese tourists and we are just so convenient for them."

Daigou means to "purchase on behalf of" in Chinese and there are an estimated 40,000 shoppers who buy high quality Australian products and ship them back to China.

AuMake has identified four key categories that underpin the voracious Chinese demand for high quality Australian products: wool, healthcare, skincare and infant formula.

Jumbuck Australia - previously run by a Chinese family - will produce wool products for AuMake under the trademark UGG AUS.

Prior to its acquisition, Jumbuck recorded (unaudited) sales of $285,895 in FY16 and $754.624 in FY17, enjoying a 260 per cent increase on year-on-year sales and at an average gross margin of 32 per cent.

"Daigou tastes can change very quickly," says Mr Chan. "So we wanted a business that had all the manufacturing plants and equipment here in Australia. It's important for us to control the supply chain."

Health Essence products include fish oil, liver detox, grapeseed oil, squalene and propolis.

"So many of these smaller brands were not getting the traction with Chinese shoppers they thought they would," says Mr Chan. "We have those shoppers."

AuMake uses a far-reaching network of WeChat users to connect directly with customers and build relationships.

But further to this, the company has opened a new facility in Auburn, in Sydney's west, designed to operate as a showroom for busloads of Chinese tourists looking for Australian products on their way to the Blue Mountains. To facilitate this, the company has a strategic alliance with the local Chinese Tour Guide Association.

Shares in AuMake have jumped over 300 pper cent since listing at 8 cents and are trading around 32 cents.

Several other enterprises serving the daigou market have sprung up in the last twelve months. DaigouSales is an e-commerce website allowing Australian brands to market directly to Chinese nationals. The brands pay $249 a month, plus a 2.5 per cent transaction fee.

While the daigou model has certainly piqued investor attention, these businesses are still at the mercy of Chinese authorities who have been known to suddenly crackdown on the import of foreign goods.

Earlier this year, the government imposed bans on foreign books, movies and games being imported into China.

This story ASX-listed daigou business surges 25pc first appeared on The Sydney Morning Herald.