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US cosmetics giant Avon Products Inc has been awarded China's first license for direct sales, after the country lifted a seven-year ban on the business on December 1.

 

The Ministry of Commerce (MOFCOM) on February 22 approved Avon's application for a direct selling licence, allowing the company to hire independent promoters to sell products directly to consumers, according to information on the MOFCOM website.

 

The ministry also granted certificates to seven of Avon's employees, allowing them to train door-to-door vendors for the company.

 

"We are still waiting for the government's formal notice on the license approval," Sun Changqing, vice-president of Avon (China) Co, said yesterday.

 

Sun said it has no comment on the possible influence of the approval on its business before it receives more details from the government.

 

Information on MOFCOM's website shows Avon is the only company approved for the direct selling business so far.

 

Other foreign direct sellers are still either preparing their applications or in the process of having their applications considered.

 

US-based Nu Skin Enterprises, for instance, submitted its application two weeks ago and is waiting for approval, a company official told China Daily.

 

Meanwhile, Amway, a US company selling cosmetics and nutrition products, is still applying for county-level approval.

 

"We need to get the approval from the commercial offices of most of China's 2,300 counties as the first step," said an official from the company, who declined to be named.

 

The company will then hand in materials to the provincial governments, and finally to the Ministry of Commerce.

 

"It will take time," the official said.

 

China is allowing foreign-funded companies like Amway, which has been adopting a business model of selling goods through retail outlets and "non-employee" sales representatives since 1998, to continue their current practice until December 1, 2006.

 

This is why companies are not rushing to get their licenses.

 

"We will do it step by step, and we are confident we will get the license within the year," the Amway official added.

 

China issued new regulations on direct selling last September, which has put a strain on companies such as Nu Skin and Amway, who saw China business decline last year.

 

Avon said its China revenue fell 22 percent in the fourth quarter as its Beauty Boutique owners placed smaller orders in anticipation of lower direct selling returns.

 

Avon's business in China has kept falling since it started a pilot direct selling scheme in April 2005.

 

The company posted a year-on-year 19 percent decline in revenue for the second quarter and a 16 percent decrease for the third quarter.

 

Nu Skin said in its fiscal report that revenue in Greater China was US$55.5 million for the fourth quarter of 2005, compared to US$62.8 million for the same period in 2004.

 

Its number of active distributors was down 17 percent in 2005, and executive distributors decreased 19 percent compared to the previous year, primarily as a result of declines on the mainland.

 

However, these companies are confident they will weather troubled times and are hopeful for Chinese market prospects.

 

"We expect sales in China to grow at least 10 percent this year," Nu Skin said.

 

In addition to foreign companies, domestic firms like Tiens, a Tianjin-based health care products seller, are also preparing their license applications.

 

It is uncertain how many licenses the Ministry of Commerce will issue this year. 

(China Daily February 28, 2006)