The US-based cosmetics and healthcare products firm Day Light prepares to restart its direct selling business in China if it gets approval from the Chinese government.
New regulations on the direct selling come into force next week. Licences could be issued next year.
"We have waited six years, and we do not mind waiting a bit longer to develop the direct selling business," said Yin Lian, executive general manager of Sun Shine Industrial Development (Shanghai) Co., a wholly-owned subsidiary of Day Light.
He said the firm will also open hundreds more outlets in China; it currently has more than 230. All these efforts are to pave the way for the firm's future development in the direct selling business when the market is fully opened, Yin added.
The company initially entered the Chinese market in 1994, distributing water purifiers through direct sales. Four years later, however, the government banned direct selling because of worry and confusion over pyramid schemes; many consumers found it hard to tell the difference between direct selling and pyramid schemes. So, Day Light and nine other foreign direct sellers including Amway and Avon were approved to adopt a business model of outlets and employ promoters.
Day Light instead decided to give up its sales business in China at that time and focused on expanding production. It has invested US$50 million in China and has three production bases in Jilin, Jiangsu and Guangdong, which make cosmetics and healthcare products.
"We are preparing the application materials required by new regulations on the administration of direct selling, which will come into force next Thursday," said Yin. He expected the company to get its direct selling licence early next year. Industry experts estimated the government could issue the first batch of licences in March.
Day Light is more cautious this time around, said Yin. "We will not set a goal for the sector for the next three years." He added that the current single commission system allowed by the new regulations will not drive the company's growth far.
But he added: "We expect the Chinese government to allow a multi-level payment system, which is generally adopted in the global market, in the future when the market is more orderly and more mature."
Yin said the traditional retail model will push business development more rapidly than direct selling at the moment.
In April this year, the firm began a programme to open 1,000 outlets in China by the end of next year. So far, it has opened over 230 stores in 28 provinces and municipalities on the Chinese mainland, excluding Hainan, Qinghai and Tibet.
"The company will invest US$200 million in new stores, developing R&D capacity and expanding production facilities," Yin said.
(China Daily November 25, 2005)
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