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Opportunities and Challengesfor
Direct Selling Operationsin China
Harry Yeung
Caring International (Hong Kong) Ltd.
September 30, 2003
Since 1888
Third & Fourth Generation
Founder
Second Generation
Nanshui, Zhuhai, 1888
Headquarter: Hong Kong
Business of LKK Group
HealthBusiness
SauceBusiness
Health Business
- LKK Health Products Group
- Caring International
- Guangdong Nanfang Lee Kum Kee
Guangdong Nanfang Lee Kum Kee
• Approved as direct selling company in
1996
• Stopped direct selling in 1998
• Adapted wholesaling and retailing in
1998
History of Direct Selling in China – (1)
Late 80’s Direct selling started
1995 Ban of direct selling
1996 Reopen direct selling & approved 41 companies
History of Direct Selling in China – (2)
1998 Ban of direct selling
1998 Conversion regulations & approved 10 companies with new operation model
Opportunities – (1)
- Drafting of direct selling legislation is
underway to fulfill China’s WTO
commitment on sales away from a fixed
location
Opportunities – (2)
- One of the world’s fastest growing
economies
- GDP grew from approximately
RMB7.8 trillion in 1998 to reach
RMB10.3 trillion in 2002,
representing a CAGR of 7.3%
Opportunities – (3)
1.00
1.05
1.10
1.15
1.20
1.25
1.30
1992 1993 1994 1995 1996 1997 1998 1999 2000 20010
10
20
30
40
Population
Urbanisation rate
Po
pu
latio
n (
bill
ion
)
Urb
an
isa
tion
ra
te (
%)
Source: China Statistical Yearbook 2002
Opportunities – (4)
- A sizeable affluent group• better education
• possess credit card / mobile phone / digital
camera
• international travelling
• care for health and beauty
• willing to take up learning and money-making
opportunities
Opportunities – (5)
- Social and political stable
- Expanding elderly population
- Many entrepreneurs
Challenges – (1)
- Future direct selling legislation will be
drafted according to China’s
characteristics
Challenges – (2)
- Poor social image due to confusion
with “Chuan Xiao”
Challenges – (3)
- Entry barriers• set up own manufacturing plant
• guaranteed deposit
• overseas distributors were not allowed
Challenges – (4)
- Business regulations keep changing
Challenges – (5)
- Severe competition anticipated
- Ineffective self-discipline
Tips for Survival
• Live in China, among Chinese
• Localization of employees
• Learn by mistakes
• Manage external variables carefully
Tips for Sustaining
• Strengthen government relations
• Be flexible and proactive in making
changes
Thank You !Thank You !