Direct sellers come knocking
(Shanghai Daily)
Updated: 2005-09-22 11:10

Herbalife International, one of the five biggest direct selling enterprises in the United States — Avon, Amway, Marykay and Nuskin are the others — will open 30 stores by the end of this year.

Although the new regulations said companies don't have to open retail stores to enter the market, it does require companies to set up service outlets in areas where the company conducts door-to-door sales. The outlets are to cater to customers and provide refund or exchange services.

Herbalife, which opened its first outlet in Qingdao, Shandong Province, on Tuesday, said it will expand the business in coastal cities first.

"We believe coastal cities have both higher awareness of legal direct sales practices and more disposable income for health-care products," said Lily Huang, spokeswoman for Herbalife's China operations.

Direct sales were banned in 1998 amid reports of rampant fraud and pyramid sales schemes. The ban came as a major blow to some of the world's biggest direct sales companies. Avon and Herbalife had only started to build up sales networks in the country.

China said at the beginning of this month it will lift the seven-year long ban on direct sales in December, allowing both domestic and international companies to tap into a US$50 billion market.

Hong Kong sauce producer Lee Kum Kee and Taiwan's cosmetics direct seller Kelti Group, both announced new investment plans to reenter the market.

Lee Kum Kee plans to invest 100 million yuan (US$12.33 million) to open stores in 25 cities while Kelti said it will invest US$89 million to build a plant in Shanghai's Songjiang District.

The huge potential has even attracted firms that usually only reach customers through traditional retail channels to make a foray into the market.

Shenzhen-based Joincare Pharmaceutical Group Industry Co Ltd, one of China's major drug and health-care products makers, announced yesterday it will enter the direct sales market after one year's preparation.

Joincare, which generates 70 percent of its revenue from drug sales and the remainder from health-care items, plans to sell the latter category through door-to-door sales.

The Shanghai-listed firm, with annual sales of three billion yuan, sells Taitai health-care drinks and Eagle ginseng tea at supermarkets and pharmacies.

Close