Get Rich Quick

The Days of Easy Money Exporting Baby Milk Powder Are Over

People like Jessica once made good money sending Australian products to China. We visited her warehouse to hear why that's changing.
July 28, 2017, 3:28am
All photos by the author

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It took a while for the Australian media to catch onto the fact that parents in China are obsessed with "genuine Aussie" baby formula. By the time headlines about empty supermarket shelves first hit the news in 2016, Chinese families had been importing foreign goods for the best part of a decade.

By then a whole generation of young entrepreneurs—known as daigou—had made it rich buying up Australian products and shipping them back to eager shoppers in China. It's not just baby formula either. Australian health supplements, organics, and food have all fetched top dollar on Chinese resale sites. But lately, according to several retailers, that's started to change thanks to market regulation and fierce competition.

Jessica is one of those early adopters who made money off China's appetite for Australian goods. VICE sat down with the 28-year-old entrepreneur to find out how she got into the business, and whether thinks that business will now survive.

VICE: Hey Jessica, let's start at the beginning. How did you get into this line of work?
Jessica: I tried to get a job as a nurse after I graduated, but I didn't have a [permanent residency] so obviously it was really hard to get a job at a hospital. And I needed income, so I started going into this business, buying things and shipping them overseas. When I started, four years ago, this whole industry was booming. China was basically going nuts, buying everything from Australia including water! And female sanitary pads. It was crazy, and they were looking for lots of baby formula, and I started this warehouse to stock up products.

Tell me about the 2008 Chinese milk scandal. Was that what kickstarted this industry?
So if you search online, you'll find this big brand called Sanlu Group. It's one of China's top 10 biggest brands, and one of the Chinese dairy giants. Even when I was growing up, I ate Sanlu. But it was reported that their baby formula had excessive amounts of a chemical called melamine which is toxic to babies, causing urinary tract and brain problems. So after that, the Chinese people started to feel like they couldn't trust any brands, not even the big brands. Air pollution was another concern. So, until now, people don't trust anything in China.

For example, I can buy the same product from China, but the people would prefer me to ship it from Australia. It's really the same thing. Like Jellycat, the bunny, it's made in China. It's from the UK and very popular, but made in China. And even then, my customers buy it from Australia. They don't care. They know it's made in China, it says on tag, but they don't care—as long as it's shipped from Australia.

Is there really a difference? Do you think products from Australia are better?
One prime example is Maltesers. We've got the exact same thing in China, but a lot of people say that the flavour is different here. And it's true, I tried it. Australia uses different ingredients, better milk, and the quality is different. I don't know, but to the Chinese people everything is made better here.

What's your single best-selling product?
Baby formula. Everyone needs it. The next second largest export are vitamins.

And what's the most unusual product?
Toilet paper. But that was just once because one of my customers needed it from Australia to China, and so I just bought it from the supermarket.

Are you the biggest exporter in Australia?
No, not at all. We've got much bigger dealers here in Melbourne, many big bosses. In their warehouse, their stock is worth up to a million dollars. I think I rank in the middle of that list, definitely not the biggest. But the leading market is in New South Wales, without a doubt

How do Australians feel about your business?
There are two groups of people when it comes to this, and also two different opinions. One of them would be our partners, because they are brand owners, manufacturers, and organic food store owners. We do business and trade with them, so I think they like us. We basically double or triple their turnover. But then there are the other group, who seem to dislike us. As an example, I was once at Box Hill's Woolworths store. My business partner and I were filling up a whole trolley of cereal because it was really cheap. And the manager came over and was really rude. He said that we could not buy in huge amounts, and treated us like we were thieves. My partner nearly cried, because everyone was staring at us and we weren't even doing anything wrong.

That's harsh. Do your friends in the business experience the same thing?
Yes, well another interesting story involves a male friend who had to purchase female sanitary pads for a customer, and went to Woolworths to buy a whole trolley of Libra pads. He had a lot of stares and people talking about him. But we're already used to it. We're just the buyers.

But are you breaking any laws?
No, we only ship legal things.

What's the business like now? Are you making good money?
The business is very tough now, so we actually make very low margins. Every year it's getting harder, and it's currently the toughest period for my business out of the four years. In the last few of months we've actually lost money. We lost some some Chinese e-commerce platform contracts too because they would order directly from the brands themselves. So they've been skipping us, and we're losing business.

Why is that?
It's very competitive right now because of companies like JD.com or Ymatou that are doing the exact same thing, but selling the same things at cheaper prices. And that's because they've got money, they can buy direct from manufacturers and do rebates. In the long-run, the market will belong to them and they won't have any other competitors. We're really trying to survive now, it's very, very, hard —I feel like I just want to give up the business. It's really not stable, and I think I will just do it for one or two more years. The people that I've started this company with [my two other partners]. We're all trying to find another industry.

Jessica wanted a link to her business, so here it is. Check out her site or add her on WeChat at ausbuypro3.

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