Disappearing Chinese Shoppers Cost LA's Economy Billions In Lost Revenue
No matter how large or small, there's no industry or sub-economy that will come out of the coronavirus pandemic unscathed. In fact, COVID-19 has hurt niche industries and workers that many of us didn't know existed.
Take Nicole Zhang, for example. On a recent afternoon, the 45-year-old mother of two stood in line at the Costco in Chino Hills, phone in hand, checking dozens of messages on WeChat, a popular Chinese social media app. Zhang, who also lives in the area, spends a lot of time in this line, and her cart was filled typically high with everything from dietary supplements to CK underwear, Tommy jeans to Adidas leggings, and an assortment of other items -- many of them Chinese-made -- that would soon be on their way back to China.
Zhang is what's known in Mandarin as a "daigou agent" -- "purchasing agent," in English -- or overseas personal shopper. She earns her living buying goods in the U.S. for Chinese customers who either can't access those items or don't want to pay higher Chinese prices.
Several times each week, Zhang checks for discounts and new products at Macy's, Nordstrom, Bloomingdale's and a host of retailers, like Costco or the shops at the Desert Hills Premium Outlets near Palm Springs, then posts pictures on WeChat and takes orders.
"Under good circumstances," she told me by phone in Mandarin, the "price for certain brands can be as low as half or even one third of the price in China."
Cheap enough, in other words, that she can mark up the prices and still offer savings to her customers. Other daigou agents, she told me, might net $200 off a Coach handbag, while Zhang makes just $15. The benefit to underselling, she explained, is a large and consistent customer base. She told me she usually has 700 to 1,000 active customers and fills 200 to 300 orders each month.
Zhang said that on her busiest days -- around Christmas, Thanksgiving and Chinese Spring Festival -- she'll shop from 9 a.m. to 10 p.m., putting up to 300 miles per day on her Toyota Sienna minivan. She said sometimes she drives as far as Las Vegas or San Francisco.
"Some of my customers can order tens to hundreds of items at a time," she said. "It takes up half the space in my garage."
And sometimes she's so busy she has to outsource labor to helper-shoppers.
But then came the pandemic and the almost immediate demise of her industry -- albeit an untaxed, unregulated sector with a particularly niche clientele.
She told me that since the pandemic hit, she's lost 60% to 70% of her customers. "Compared to the same month last year," she added, "I'm only making 30% of the money I made."
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Even though Zhang can still shop online, not being able to enter brick-and-mortar stores has hit her business hard.
"My customers who want to buy handbags want me to show them how it looks with me carrying it," she said. Besides that, shipments that used to take 10 days now take up to three weeks.
Zhang declined to say how much money she made before the pandemic, and no official data appears to exist about daigou agents in Los Angeles or the U.S., because most of their exports are undeclared.
But an article published by USC Annenberg Media in 2019 said one agent "netted $10,000 over the Christmas season" in 2018. And a 2015 report from Bain & Company, a Boston-based consultancy firm, found that 70% of luxury brands bought by Chinese were purchased abroad or through daigou agents. The estimated market value of those goods at the time of the study was $7.7 billion to $10.5 billion.
Another daigou agent I spoke with, 26-year-old Leah Zhang (no relation to Nicole Zhang), is also feeling the sting.
She's a part-time personal shopper, also based in Chino Hills, who mainly works in L.A. Leah said she usually fulfills dozens of orders a month. But this year, she's only filled three orders, and those were for face masks back in January, when there was a serious shortage in China and Americans had no idea what we were in for. She told me it took about two months for those orders to get to her customers.
As for luxury goods, she said, "The golden age of this industry is probably gone."
BRICK-AND-MORTAR SHOPPERS STAY IN CHINA
While daigou agents earn their living from customers in China, there's a whole other cohort of Chinese shoppers purchasing in L.A. each year: tourists.
According to Ernest Wooden, Jr., president and CEO of the Los Angeles Tourism and Convention Board, L.A."hosted almost 1.2 million Chinese visitors" in 2019. This made China the top overseas market for Los Angeles tourism.
"Those 1.2 million people spent $3.2 billion in Los Angeles," he said. "That's one of the highest spend ratios that we have with any group coming into Los Angeles."
Except, as the entire travel industry takes a massive hit, those Chinese tourists have stopped coming.
"LAX is normally the largest U.S. gateway airport to Asia and specifically China," LAX spokesperson Heath Montgomery told me by email. Now, he wrote, it's experiencing "an unprecedented decline in passenger traffic -- currently down more than 95% compared to the same time last year. Passenger traffic between LAX-China (pre-COVID 19)," he noted, "represented approximately 7% of LAX's international traffic."
Michael Wu, the 50-year-old manager of America Asia Travel Center, gets a good chunk of his business from those Chinese tourist-shoppers.
Speaking by phone from his office on Garvey Avenue in the heart of Monterey Park, Wu told me about his business. Or in this case, the lack of it. Besides the usual tours he offers to downtown L.A., Hollywood, the Getty Center, big amusement parks and farther-away destinations such as Yosemite National Park, he said the retail shopping excursion is equally high on Chinese tourists' to-do lists.
"A shopping trip is indispensable to Chinese tourists," Wu said. "Many of them come to the U.S. mainly for shopping."
Despite so many goods -- makeup, handbags, dietary supplements, luxury watches -- being manufactured in China, they're cheaper and more widely available on this side of the globe.
Wu told me that during a 10-day, pre-pandemic tour, his agency would normally set aside one to two days for trips to shopping malls or outlets. On a typical tour, 15 to 20 clients will file out of a 25-seat bus or 14-seat van (he has a fleet of 30 vehicles) and spend up to $6,000 each. Their favorite spot? The Desert Hills Premium Outlets, where daigou agents like Nicole Zhang might also be shopping for customers back in China.
Wu told me some of his clients like to go bigger. Wu said that some Beverly Hills luxury watch and jewelry shops built a relationship with his agency, which gets a 2% to 5% commission on purchases.
"If it's a six- to seven-tourist group, we will arrange them a luxury SUV," Wu said. "And for seven to eight we will arrange them a fancy Mercedes-Benz."
Wu's agency is one of dozens of San Gabriel Valley agencies that mainly serve Chinese tourists.
Of course, that was before the pandemic.
"From about mid-January, a lot of tourists from Asia stopped coming to the United States because the countries do not allow the traveling," Wu said.
Wu told me he used to get 5,000 domestic and international customers a month, and in a normal year served about 30,000 tourists from China.
But now? "Nothing!"
He surmised that if things remain on this downward trajectory, the company will lose at least $15 million in revenue this quarter. Since mid-February, the company has laid off about 150 employees: consulting, ticketing, and sales agents; tour guides; drivers. The company's usually bustling seven branch offices across Los Angeles are down to one or two employees per office, working just four hours a day.
Yet he hasn't lost faith. "Hopefully, we can go back to business in June," he said.
But "back to business" is a relative.
Helen Wang, manager of Travel Landing USA, an L.A.-based ticketing agency on Wilshire Boulevard, told me her business for the past two months has consisted of rescheduling or cancellation. Bookings are down 90% to 95%.
Wang told me she usually sells more than 34,000 tickets during this quarter, with 40% of them for Chinese travelers. When we spoke, she hadn't made a reservation for over a month. Wang said it's hard to estimate the company's losses because the situation keeps changing.
But she too is optimistic.
"If we can survive this, after this pinch, we will be very busy," Wang said.
Wooden, of the L.A. Convention and Tourism Board, hopes the county's tourism sector can first rebound by attracting nearby visitors from places such as San Francisco and Phoenix, then other domestic travelers, then, finally, the international arrivals.
He's confident that travelers from China will be the first of those from abroad who land in L.A., money in hand. "Los Angeles is going to be right at the head of the line" of tourism recovery.
But Nicole Zhang worries that the sluggish market may cause her a further financial loss.
"I don't know how many people still want to buy from me after the pandemic," Zhang said. "If the economic environment is not good, people may not buy anymore."
In the meantime, Zhang fulfills orders from her few remaining customers while looking for other work.
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