AuMake maintains daigou market momentum as Chinese demand stays on trend

Retail company AuMake International (ASX: AU8) has published an interim market update detailing its ongoing push into the daigou market.

To date, AuMake has been developing its market presence by offering a one-stop-shop retail network that sells a range of Australian healthcare, skin, body care, cosmetics, dairy products and baby food products.

AuMake’s near-term future is looking even rosier on the back of several measures announced by the Chinese government earlier this week, intended to further stimulate cross-border e-commerce industry which is anticipated to increase daigou activity next year.

The so-called “daigou channel” is currently experiencing a “significant price differential” between China on-shelf supermarket and daigou products which highlights the importance of the growing cross-border industry in reaching customers based within inland China.

With regards to its products, AuMake launched its first owned brand Propolis Mouth Spray on China’s JiaJia TV 24-hour shopping channel on 20 November with over 700 units of the product selling during a 30-minute segment, according to AuMake.

JiaJia is a potential hotspot for future sales given its 24-hour TV shopping channel and e-commerce platform with an estimated audience of 385 million across China.

Commencing product promotion and sales via JiaJia is an important milestone for AuMake as it signifies the satisfactory completion of a detailed due diligence that legitimises the company’s products and sets a path for future sales growth.

Due diligence involved the thorough assessment of manufacturer credibility, authenticity of ingredients and accuracy of marketing material – all aspects that AuMake can use to supplement its marketing efforts.

According to AuMake, the high degree of technical and cultural competency required to meet these strict requirements provides the company with “unique access to Chinese customers via channels that would otherwise be unavailable to mainstream Australian distributors and brands.”

Milk market progress

One of the most keenly anticipated markets for AuMake this year has been its milk powder product Valerian Milk.

AuMake’s Valerian Milk brand combines valerian root and other natural supplements with milk powder to aid sleep, with the product being sold domestically since early October 2018. AuMake said that sales are continuing to grow and are currently outperforming anticipated average sales of other new milk products coming to market.

Following the successful debut of Propolis Mouth Spray on JiaJia TV, AuMake wants to harness the same channel for Valerian Milk when it launches the product in the coming weeks.

One of the other avenues AuMake is exploring in relation to its milk powder product is commercialising its recently-signed supply agreement with Pure Nutrition.

AuMake said it has been approached by other milk formula manufacturers who have proposed “highly attractive commercial terms” in relation to pricing and delivery times for the development of owned brand milk formula products.

“Should an agreement be reached on these proposed terms, AuMake anticipates significant improvement in relation to gross margin and delivery time performance”, the company said.

Milk formula products have been particularly popular within the daigou space in recent months thereby enabling AuMake to significantly expand its market traction in the space.

The company said that “the increasing sales and popularity of Valerian Milk reinforces management confidence that AuMake is able to identify, introduce and promote new products and brands within the competitive milk formula space.”

Tour groups

In addition to its Chinese mainland product launches, AuMake says it has continued to grow its network of existing relationships with Chinese travel agencies and tour guides. As a result, increased numbers of Chinese tour groups are visiting AuMake stores.

AuMake has confirmed that the momentum it experienced over the past few months has continued with “material improvement being observed across all financial and operational metrics.”

This morning’s market update and positive future outlook helped AuMake shares to add 5% in early trade, currently trading $0.27 per share.