China to Ease Life For Amway, Avon
China is preparing to issue its first set of comprehensive rules governing direct sales, which will give companies such as Amway Corp. and Avon Products Inc. long-desired legitimacy and boost their businesses here.
With the government expected to issue regulations by year end, direct sales -- selling goods or services through salespeople rather than in retail stores -- finally will have a legal basis in China. For companies already doing big business in the country, the rules are expected to strengthen their ability to build networks of salespeople. For newcomers, the rules will afford a more level playing field on which to compete with the giants.
"We are anticipating a significant expansion of our business with the new regulations," says Corey B. Lindley, executive vice president and chief financial officer of Nu Skin Enterprises Inc., a U.S. seller of personal-care and nutrition products. "All companies are treated equal. That is most important."
AVON CALLING?
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In fact, executives say, the draft regulations skew in favor of foreign companies. Only a handful of domestic companies are expected to qualify to do business because of stringent capital and sales requirements. Chinese companies are lobbying for changes, but executives say the government is unlikely to heed them.
"There is no room for tears in a market economy," says Yu Weixiang, a former head of a research institute under the Ministry of Commerce, one of the agencies promulgating the rules. "Quality products and real competitiveness will speak for themselves."
Beijing banned direct sales in 1998, lumping such businesses together with pyramid schemes, which had proliferated. After lobbying by the industry, the government allowed 10 foreign direct-sales companies to continue operations in China, but with restrictions. Companies were forced to revamp their businesses by setting up stores and suspending the traditional compensation method for salespeople.
Under China's pledge upon entering the World Trade Organization, the country must allow direct-marketing companies to operate. The new rules would allow both domestic and foreign companies that meet certain requirements to apply for direct-sales licenses, say people who have seen the draft rules. The requirements include having registered capital of $10 million in a China unit, cumulative company sales of at least $60 million for the past three years, manufacturing facilities within China and a bank-deposited guarantee of between $2.4 million and $3.6 million. Foreign applicants also must be members of the International Federation of Direct Marketing Associations, have at least three years of direct-sales experience globally and operate in at least five countries or regions outside China.
According to people who have seen the draft, companies still would be required to set up some stores along with their sales networks. A company's payments to salespeople couldn't exceed 25% or 30% of the its total retail sales.
For bigger international brands operating in China, the rules are expected to reduce their risks. Amway's sales network in China grew to more than 180,000 people last year, with sales of $1.2 billion, up 66% from 2002. Avon (China) Co., which this year bought out its Chinese partner's stake to become a solely foreign-owned enterprise, has 6,000 stores and 1,500 sales counters here. The company says its net sales in China -- a figure that excludes bad debt, returned merchandise, allowances and discounts -- was $157 million last year, a 20% increase from 2002.
Both Amway and Avon declined to comment on the draft rules, noting they are incomplete. Industry executives say the rules will let companies recruit salespeople more aggressively and pay them based partly on the sales revenue of people whom they have recruited.
The rules are also expected to benefit newcomers. Until now, those not among the 10 chosen companies have been required to operate solely through retail stores. Nu Skin, which runs boutiques in eastern and southern China, says it plans to change its business model to combine retail stores with direct sales after the rules take effect. The company forecasts China sales this year will exceed $100 million, compared with $38 million last year.
Gabrielle Chou, head of the China Direct Marketing Association, a Shanghai-based trade association representing foreign and Chinese direct-marketing players in China, says, "People are so happy with the upcoming rules that we've only received a minor number of complaints," mostly about the high registered-capital requirement.
中国将颁布首部直销监管法规
中国准备颁布首部全面的直销监管法规，此举将让安利公司(Amway Corp., X.AWY)、雅芳(Avon Products Inc., AVP)等公司获得他们盼望已久的直销合法地位，进而大力提振其在华业务。
预计中国政府将在年底之颁布这部法规，从此直销在中国终于有法可依了。所谓直销，即通过销售人员而非零售店销售商品或服务。对于已经拥有大规模在华业务的公司而言，该法规的颁布有望增强其建立销售人员网络的能力；对于业界新秀而言，新法规则将为其与行业巨头进行抗衡提供更公平的竞争舞台。
销售个人护理用品和营养品的美国公司Nu Skin Enterprises Inc.执行副总裁兼首席财务长科里?林德利(Corey B. Lindley)表示，随著新法规的颁布，公司期待能大力扩张现有业务。所有公司都将获得公平待遇，这是最重要的。
据业内管理人士称，事实上，正在起草的这项直销法规对外国公司更为有利。由于法规对直销公司的资金和销售提出了苛刻的要求，预计国内只有少数公司有资格从事直销业务。中国公司正在就修改草案进行游说，但业内管理人士称，政府可能不会理会他们的建议。
曾担任过中国商务部下属某研究机构主管的俞伟祥(音译)称，市场经济不相信眼泪，企业要靠产品质量和竞争实力说话。商务部是颁布这项法规的部门之一。
中国政府1998年对直销活动发出禁令，逐步收缩曾经繁荣一时的直销业。经过行业人士的游说，中国政府只允许了10家外国直销公司继续在中国有限度地开展业务。这些公司不得不改变其业务模式，被迫设立店铺、并暂停传统的销售人员薪酬制度。
根据中国在加入世界贸易组织(World Trade Organization)时作出的承诺，中国必须允许直销公司开展业务。据看过法规草案的人士称，新法规将允许那些符合一定要求的国内外公司申请直销执照。这些要求包括，在华公司的注册资金要有人民币1,000万美元、在过去3年内公司累计销售额至少达到6,000万美元、在中国境内有生产设施、有240万至360万美元的银行存款担保，另外外国直销企业还必须是国际直销协会联盟(International Federation of Direct Marketing Associations)的成员、有至少3年的全球直销经验、除了中国以外，至少还有在其他5个不同的国家和地区有业务。
据看过法规草案的人士称，在建立销售人员网络的同时，直销公司仍被要求设立一些店铺。公司向销售人员支付的薪酬不得超过公司总零售额的25%或30%。
对于在中国开展业务的国际大型直销企业而言，直销法规将会降低它们面临的风险。去年安利在中国的销售人员已超过180,000人，销售额达12亿美元，较2002年增长了66%。雅芳（中国）(Avon (China) Co.)今年买下了中方合作伙伴的全部股份，成为一家外商独资公司，目前公司在中国共有6,000家店铺、1,500个销售柜台。雅芳称，公司去年在中国的净销售额较2002年增长了20%，达到1.57亿美元，其中不包括坏帐、退货、供应商津贴和折扣等。
安利和雅芳均拒绝就法规草案置评，称该法规尚未最终完成。但行业管理人士称，在新法规下，直销公司将得以大肆招募销售人员，并可部分根据销售人员的销售业绩支付薪酬。
新法规还将惠及直销行业的新公司。到目前为止，除了那10家允许从事直销业务的公司外，其他公司都只能通过零售商店进行销售。Nu Skin表示，公司计划在法规生效后改变现有的业务模式，将零售店销售和直销结合在一起，该公司零售店分布在中国东部和南部地区，Nu Skin预计今年在华销售额将超过1亿美元，高于上年的3,800万美元。
中国直复营销协会(China Direct Marketing Association)会长Gabrielle Chou称，人们非常欢迎颁布这样的法规，只有少部分人表示不满，其中多数都集中在注册资金过高上。该协会是代表在华中外直销企业的一个行业协会。
