As Ming Ouyang walks into a Sydney Kmart, preparing to stock his basket with toys, hundreds of people in China are watching the live stream from his phone.

He's filming his visit to prove his purchases are from an Australian shop — so his Chinese customers can be confident they're getting what they're paying for.

Until last February, Mr Ouyang, better known by his nickname Qi Ge, was working in the international trade of iron ore, but now he does this sort of shopping for a living.

He runs his business on Chinese social media app WeChat and takes between 50 and 60 orders from China every week.

He's part of a huge phenomenon known as "daigou", fuelled by a network of tens of thousands of shoppers who buy goods in Australian stores to send to relatives, friends and social media followers in China.

Daigou — which was at the centre of a public storm two years ago, as shoppers stripped supermarket shelves of baby formula to send to China — has grown to include an estimated 40–60,000 shoppers in Australia.

It has now also spawned an industry of "gift shops", set up for daigou shoppers, who are known simply as daigous.

There are now about 1,500 daigou gift shops in Australia and New Zealand, according to an industry expert, and many provide pack-and-send services through partnerships with logistic companies.

Allen Xin runs two such shops, in the Melbourne suburbs of Springvale and Carnegie, which he said sent about 1,000 parcels every week.

Daigou shops have their own distributors and partner with logistic companies. ( ABC News: Christina Zhou )

Supermarket shortages prompt backlash

Outside Mr Xin's Carnegie store, sounds of packing tape can be heard from the street while workers inside diligently pack and stack boxes of baby formula and healthcare products.

How does daigou work? 1. A Chinese customer finds a daigou agent, who may be a family member or friend based in Australia. 2. The customer tells the agent what they want via apps such as WeChat. 3. The daigou asks for a payment, including their commission, and buys the goods. 4. The daigou goes to a gift shop or logistic store to pack and send the goods. 5. The goods are delivered to their customer in China.

Shops like Mr Xin's Aoshang Health have recently replaced a second-hand bookshop, real estate agency and clothing outlet, to name a few, in Carnegie's bustling shopping strip.

His business started out of WeChat in 2013 and about a third of his Carnegie customers are international students, many from nearby Monash University.

Mr Xin, 32, worked as a full-time store manager in the hospitality industry before he resigned to concentrate on his business.

"From the beginning, we built our business from our relatives and friends because they trust us, they know us, and they think we are honest people," he said, adding that his clients grew through recommendations.

"To be honest, it's hard, very hard … the competition is very tough, and we do it step by step."

Allen Xin recently opened his second Aoshang Health shop in Carnegie. ( ABC News: Christina Zhou )

Reports of daigous clearing supermarket shelves of formula and selling them for a profit to offshore Chinese consumers have been heavily publicised.

The Federal Government held talks with major retailers about a shortage of infant formula following the growing Chinese demand, and Woolworth and Coles have four-tins-per-customer policies in place.

Who are the daigou shoppers? There are between 40,000 and 60,000 daigous in Australia

There are between 40,000 and 60,000 daigous in Australia About 19 per cent of daigous are students

About 19 per cent of daigous are students Another 19 per cent are fully committed to daigou or cross-border e-commerce

Another 19 per cent are fully committed to daigou or cross-border e-commerce There are about 1,500 gift shops in Australia and New Zealand

There are about 1,500 gift shops in Australia and New Zealand One in three daigous spend between zero and three hours a week on their daigou business Source: Access CN

Mr Xin said the publicity had prompted some locals to come into his store and argue with employees.

"They say 'you're not right, and you can't do it, you shouldn't export those formula to China'," he said.

Mr Xin hopes there is a better way for the daigou industry to fit into Australian society.

"I think all the Chinese businesses, like [ours], welcome local people to walk into their store."

Mr Ouyang, a Sichuan migrant, said customers made orders while watching the live stream of photos and videos of his shopping visit.

The aim of the live broadcast was to attract more customers, so the profit margin is dropped to between 0 and 20 per cent, he said.

For non-live broadcast orders, his profit margin was usually between 15 and 40 per cent.

Mr Ouyang sends orders to his customers on WeChat. ( Supplied: Ming Ouyang )

Although daigous shop for a range of products, baby formula is still high on buyers' shopping lists.

Chinese parents are sceptical of Chinese milk powder because babies have died and fallen ill after drinking tainted baby formula in the past.

Experts said the end of China's one-child policy could eventually increase appetite for Australian infant formula.

Polar Express Carnegie store manager Tracy Li said there was even demand from some families who did not have a lot of money, because parents wanted their babies to drink better formula.

"There are many babies in China … Australia's population is the same as Shanghai's," Mr Li said.



China's rising middle class fuelling daigous

Mr Li said the number of shops offering daigou services in Carnegie had grown from four to about a dozen over the past two years.

The price to send items had also dropped from $12 per kilogram to about $6.50.

Polar Express Carnegie store manager Tracy Li said parents in China trusted Australian baby formula. ( ABC News: Christina Zhou )

Logistic company Chang Jiang International Express started in late 2013 and now has five main stores and more than 130 collection agents in Melbourne.

Owner Joe Cheng said he had seen dozens of businesses who had "given it a crack in the industry and didn't survive".

AMP Capital chief economist Shane Oliver said increased demand for Australian products would have a positive impact on the economy.

"We've long talked about the rise in the middle class in China, leading to increased demand for Australian-sourced food and produce, and this really is just reflective of that," he said.

Dr Oliver said if Australian companies did not set up a supply chain in China, they could be left vulnerable if the daigou phenomenon went away.

Consumers in China could eventually start trusting the labelling on their shelves and daigous would be squeezed out, he said.

Chinese parents trust the milk formula produced in Australia. ( Supplied )

Livia Wang, director of marketing agency Access CN, recently hosted her second annual conference in Sydney for Australia-based daigous.

She said the daigou business model had been "very grey" because daigous were mainly individuals who bought items from supermarkets and then resold them to their family and friends.

It was now a more sustainable and mature business model, she said, and the stores had proper distributors and could become long-term businesses.

Daigous no longer needed to compete with local mums for stock at the supermarket, Ms Wang said.