Mary Kay initiatives battle online counterfeit sales

With almost half the products carrying the Mary Kay cosmetics brand sold online in China found to be fake, its local subsidiary is working with the law school at prestigious Peking University on research to promote e-commerce legislation in China.

One of their joint efforts is an e-commerce legislation research center, the first of its kind in China.

Government representatives, major e-commerce operators, and experts from academia and industrial associations participated in a recent conference sponsored by Mary Kay, sharing their views and agreeing on closer cooperation for a better online business environment.

"Mary Kay has a long history supporting consumer protection initiatives," said Nathan Moore, chief legal officer of Mary Kay Inc.

"What I was impressed with today is that the research center will really take all the key stakeholders involved and look at all the issues to come up with the solution that fits the Chinese market to protect the customers and the brand owners," he said.

The company said it has been the victim of unauthorized merchants in China selling expired, tainted and fake Mary Kay products online and in other outlets.

With support from government agencies, the company discovered more than 600,000 counterfeit items in China last year alone that had a combined value of more than 70 million yuan ($11.44 million).

It also commissioned third-party inspection and appraisal institutions to buy and inspect Mary Kay products sold online. The results showed 49 percent of them were fake.

"It's bad for the consumer and the brand owner, and it can impact consumer confidence and even their safety. Mary Kay's sales force is our only authorized sales channel," Moore said.

He noted that Mary Kay invests millions of dollars in research and tests every year to ensure its products meet standard for safety, quality and performance.

The company now holds more than 800 issued and pending patents to protect its intellectual property and ultimately protect customers, he said.

The company itself does not operate any official online retail channel directly open to individual customers.

As a direct sales company, Mary Kay's sales team is comprised of "independent beauty consultants", Moore said.

But the company adopted e-commerce tools very early for its in-house operations so consultants can deliver better services to customers, he said.

When the Internet started gaining ground in the US in the mid-1990s, the first question asked by Mary Kay Ash, the founder of the company, was not about costs or return on investment, but "how this is going to help our sales force", Moore recalled. He has been with the company for 18 years.

Favored in e-commerce

In China, Mary Kay began to use an e-commerce platform within the company in 2003. Each year several million orders from beauty consultants are handed online, which greatly improved operation efficiency and reduced cost, Moore said.

In 2010, even before Mary Kay US, the company's China operations launched a mobile e-commerce platform that allows the sales team to make and manage orders and browse information using their cell phones.

Today, the women at Mary Kay are tech-savvy and digitally connected, so the company is making efforts to create even more digital business tools.

Beauty consultants in China can soon have classes and introduce both products and business opportunities to women over their iPad, according to the company.

"It's basically running business in the palm of their hands," Moore said. "It's another example of us taking the e-commerce focus on to our consultants to give them a better business tool."

Moore said that he remembered a time when people said that e-commerce was going to supplant retail sales and person-to-person service.

But there's a way for direct selling company to leverage the new technology and empower its own business model, he said.

"Because it's still about relationships," he said.

Network works

"The social media today is about relationships and there's a saying that direct selling is really the original social network.

"Before the Internet (era), direct selling was about relationships - it's about leveraging my relationships in my town, in my community to build the business. Technology can be used to empower and facilitate the same thing."

Moore said that the company has noted more Internet-dependent customer behavior and is looking at options to allow beauty consultants to have an online interface with their customers.

"Instead of buying directly online, they (customers) will go through the beauty consultant," he said. "That's essence of Mary Kay's business model."

This year marks the 50th anniversary of Mary Kay. The company now has a global sales force of more than 3 million people and has a presence in 37 countries and regions.

China is the fastest-growing market for the company with sales increasing 64-fold from 1999 to 2012. According to the company's up-to-date performance this year, China is likely to surpass the US to become Mary Kay's No 1 market worldwide, Moore said.

"The future is very bright in China," he said, adding that the company is investing heavily in building a distribution center and producing brand-new nutrition products to expand its business here.

The company now has hundreds of thousands of independent beauty consultants in China and operates a manufacturing site in Hangzhou, Zhejiang province.

hantianyang@chinadaily.com.cn