Chinese to allow direct sales

Free Press, April 10, 1999
By Jennifer Bott

The main distributor of Amway Corp.products in Asia was cheering Friday after the Chinese government said it would lift by 2003 an April 1998 ban on direct selling of merchandise.

While the decision may not have an immediate impact on Amway Asia Pacific Ltd. -- which found an alternative means of selling in China in July -- it welcomed the move as a sign of government respect.

Last year, the Chinese government banned all direct selling of products, citing concerns about criminal abuses in independent distribution networks that promote door-to-door sales and motivational meetings.

This was a blow to Amway Asia Pacific, the exclusive distribution vehicle for Ada-based Amway Corp. in nine Asian countries. Amway Asia Pacific, with sales of $587.6 million, had invested more than $100 million in the country in the last five years.

In July, the Chinese government granted Amway China, a subsidiary of Amway Asia Pacific, permission to resume selling, but under a different format.

In most countries, independent Amway sales distributors buy Amway products, mark them up for profit and sell them to consumers. Under the new system in China, so-called sales representatives take orders, sell the goods at full retail price, pick them up at distribution centers and deliver them. The sales reps then receive a 15-percent commission.

In addition, the Chinese government demanded that Amway stores be established for walk-in business. Amway China converted spaces in its distribution centers to serve that purpose.

Holly Clemente, a spokeswoman for Amway Asia Pacific, said the company has no plans at this time to change its sales system in China in light of the most recent government decision.

However, she did say after facing a ban there and negative publicity, the change in policy "gives us a higher degree of credibility."