Direct Sales in China in 2023, Market Overview, Top Companies, Trends

It has been about 33 years since direct sales entered China in the early 90s. It was a tumultuous journey, with multiple ups and downs — from legal crackdown and strict legislation on one side to explosive growth and the “golden decade” of direct sales on the other.

The latest development came in 2019 in the form of the so-called “Hundred Days of Action” — a series of measures aimed at ending illegal practices in the health products market. It is still early to say if “100 days” will result in stagnation of direct sales in China or will result in a healthy growth in a more civilized ecosystem.

Can a direct sales company enter the Chinese market if it doesn’t have a direct selling license? What’s the path to success like for the companies that do have a license? In this article, we will look in depth at the direct sales market — from a brief history tour to the latest news, from top players to possible trends.

Brief history of direct sales in China

The history of direct sales in China begins in the early 90s. Interestingly enough, we can even pinpoint the exact date, when the direct sales concept was officially introduced: the 14th of November 1990. On that memorable Wednesday, with the approval of the Guangzhou Bureau of Industry and Commerce, Avon established a joint Sino-American company Guangzhou Avon Co., Ltd. The era of direct sales in China has officially begun.

It was a risky decision: Chinese international relationships in 1990 were rather tense and China was considered an unstable economic environment by Western countries. Moreover, Avon wasn’t in the best shape itself. The company was suffering from low earnings and found itself under the threat of a takeover. Venturing into China was one of those “make it or break it” moves for the New-York based cosmetics enterprise.

As you are reading this thirty years later, you may have guessed, what was the result of this dicey move: enormous success. By 1997, Avon’s revenue in China would have reached 1 bln RMB (that would be around 125 million USD according to the exchange rate of that time, which is about 200 million in today’s dollars).

Seeing this dizzying success, Avon’s competitors rushed into the country too. Unfortunately, it attracted not only fair-willed enterprises but a bunch of con artists also — from both the US and Taiwan. That, combined with the rapid growth of the Chinese economy and dire lack of regulations, soon turned the direct sales market into a scam-ridden chaotic mess.

Intervention came in 1994 when the State Administration for Industry and Commerce issued a number of regulations forcing direct sales companies to register and follow certain rules. These were followed by the “Notice on Prohibiting MLM Business Activities”, issued by the State Council in 1998, that effectively banned MLM in China.

As a result, 10 foreign-invested companies were allowed to continue to operate with the “shop + salesman” approach. The direct sales market has entered its first quiet period.

A special opportunity in 2001 restarted the Direct Sales industry, China successfully joined the World Trade Organization (WTO). A clear promise in the terms of accession was to “open up shop-free sales within 3 years.”

In 2005 the Chinese government lifted the ban but with a set of provisions aimed to allow only legitimate direct sales. Most notably, “Regulations on Direct Selling Management”, issued by the State Counsel treated direct sales and MLM as two distinctly different industries.

MLM was defined through the usage of such staple pyramid practices as an upfront investment in the product; absence of return and refund policies; compensation, based on the size of “the network” — people joined via invitation of a particular member. The direct sales model, on the other hand, does not use these methods, it establishes safeguard policies that protect the consumer and recruit individuals to promote the product among peers.

While MLM is outlawed, direct sales are recognized as a legitimate business model and offered some legal protection. 2005 turned out to be the first year of the new direct sales era in China.

Large players started to return to China. According to new regulations, to enter the Chinese market, a company has to have certain registered capital and put down 20 million RMB in deposit (about 3 million USD). Besides, it had to get a license from the Ministry of Commerce — 92 licenses were issued in 2006.

Despite these strict measures, the market proved to be hungry for direct sales: from 2006 to 2007, the market grew 61%. Since then, the direct selling industry has entered its “Golden Decade”.

Yet, the direct sales market was not in the clear. Every now and then certain companies tried to push the legal boundaries too far, operating ever so close to what is considered MLM, rather than “direct sales”.

It all culminated in January 2019 when the prominent company Quanjian Group was accused of using MLM practices in operating its 20 billion yuan business empire. Owners were arrested and the company ended up in sharp decline.

The “Quangjian incident” ushered in a new wave of regulations that ended “the golden decade” of direct sales in China. Administration of Market Supervision, together with other administrative bodies launched the “Hundred Days Action” program, which suspended some of the direct sales licenses and introduced more strict controlling measures for the industry.

But despite all the regulations, the direct sales market is thriving. There is a huge unsatiated demand for health and beauty products that are traditionally promoted via a direct sales model. The size of China’s direct sales market is estimated to reach 280 billion yuan in 2021 and is expected to exceed 300 billion yuan in 2023.

The history of direct sales in China is a bumpy ride, and it is far from being over. It is and will continue to be in the center of attention for big international and national enterprises, as well as millions of Chinese consumers.

Direct sales licenses: getting and “borrowing”

The turbulent history of direct sales is going through its still phase now. So much so, that the Chinese government completely ceased issuing new direct selling licensing. But the desire of customers to get products and the desire of entrepreneurs to satisfy that demand is not that easy to stop.

There are quite a few companies, both at home and abroad, wistfully eyeing the fertile Chinese market. And wherever there is a will, there is a way: although there is no official procedure in place to get the license and enter the Chinese market, there is a way to tiptoe around this legal obstacle: “License Borrowing”.

In 2009 an eCommerce company “Hong Kong Winalite Group Inc” merged with “FOR YOU GROUP”. One of “For you”’s subsidiaries, a Shanghai company named Shanghai Fudi Health Technology, was one of 23 lucky holders of a direct sales license. This way, Yuelnag managed to bypass the legal scope of China’s “Regulations on Direct Selling Administration” and completed the first direct sales transaction under a “borrowed” license.

In a similar way, in 2010 the American company USANA acquired a direct-selling company China-Baby Care and its business in 21 Chinese cities, successfully entering the Chinese market.

There are a few companies on track to obtaining direct sales licenses through similar acquisitions, for example, an American nutrition and beauty company Vasayo. It still remains to be seen, however, if getting the license in such a costly and roundabout way is worth it.

Top 5 foreign direct sales companies in China

1. Nu Skin (如新)

Country of origin: United States
Founded: 1984 in Utah, USA
Licensed in China since: 2006
Registered capital: 30.07 million USD

Since its founding in 1984 Nu Skin became one of the biggest direct sales companies in the world, selling their products in over 54 countries in America, Europe, Africa and Asia and generating over 2 billion USD in revenue. Nu Skin was one of the first companies that obtained a Chinese direct selling license.

In early 2022, Nu Skin formulated the “2025 Nu Skin Vision” which aimed to become a leading global brand that integrates beauty and health through a vibrant entrepreneurial platform. However, due to the unfortunate outbreak and transmission of the pandemic during the Wuhan conference at the beginning of the year, as well as the pandemic-related restrictions in Shanghai where its headquarters is located, Nu Skin China’s performance for this year has been severely impacted. Its financial reports indicate a 20% year-on-year decline in global performance for the second quarter, amounting to $560.6 million. In China, the second-quarter performance reached $86.8 million, representing a 44% year-on-year decrease, marking the largest decline in recent years.

In August 2022, Nu Skin launched the all-new generation of LumiSpa iO and also introduced NU Stores. Within just one month of its launch, NU Stores surpassed 10,000 openings, aiming to recover from the downturn.

2. Amway (安利)

Country of origin: United States
Founded: 1959, in Michigan, USA
Licensed in China since: 2007
Registered capital: 126.1 million USD

Amway probably does not need a lengthy introduction. Specializing in health, beauty, and home care products, it is one of the largest direct sales companies in the world. It is also one of the oldest — it was founded in 1959 in Michigan.

In 2022 and beyond, Amway’s goal is to develop in three directions: intelligence, personalization, and lifestyle, aiming to provide consumers with comprehensive health solutions. Amway strengthens its business by leveraging digital solutions to support its distributors in expanding their businesses. It has been reported that Amway (China) achieved double-digit growth in performance in the first half of 2022, marking the first time since 2019. This demonstrates that Amway’s long-standing strategies of experiential, youthful, and digital approaches have yielded positive results.

3. Oriflame (欧瑞莲)

Country of origin: Sweden / Switzerland
Founded: 1967 in Stockholm, Sweden
Licensed in China since: 2007
Registered capital: 26.11 million USD

Oriflame is one of the few European direct selling companies to enter China. The company focuses on cosmetics and adopts a more traditional approach to promotion. However, the Chinese market has been affected by external factors in the past two years. Faced with challenges, Oriflame launched a dedicated China Business Support Program in 2021, aiming to lower performance assessment requirements and provide entrepreneurial fund rewards. In January 2022, Oriflame held a 55th-anniversary competition launch event online, announcing a focus on activities and customer acquisition efforts.

4. Herbalife (康宝莱)

Country of origin: USA
Founded: 1980 in California, USA
Licensed in China since: 2007
Registered capital: 14.166.667 USD

Herbalife is a world-leading direct sales company, specializing in nutrition and weight management. Starting in California in 1980, it now has branches in more than 90 countries and regions around the world, including China.

Shanghai became the home of Herbalife China’s headquarters, but this is not all.

In 2021, Herbalife achieved a global performance growth of 4.7%, reaching a record high of $5.8 billion in revenue. In 2022, the company invested $400 million to build a digital growth platform, marking the largest single investment in its history. However, the overall global success couldn’t mask the declining performance in the Chinese market. Herbalife (China) underwent significant layoffs at the beginning of the pandemic. In an attempt to cater to the milk tea trend, the Chinese company tried to upgrade its nutrition clubs to milk tea shops to attract younger consumers, but the results were not significant. Herbalife’s financial report for the first half of 2022 showed a decline of over 10% in global sales and gross profit, mainly due to a 40% decline in performance in the Chinese region.

5. Perfect (完美)

Country of origin: Malaysia
Founded: 1994 in Guangdong, China
Licensed in China since: 2007
Registered capital: 38 million USD

Perfect is an overseas enterprise invested and established by Perfect Resources Malaysia Co. in Zhongshan, Guangdong province, China in 1994. Perfect (China) has faced significant challenges in market development due to the pandemic. In 2022, the company initiated an image and structural upgrade for its entire product line, aiming to enhance the cost-effectiveness perceived by consumers. Currently, Perfect focuses on digitalization, fashion, and youth empowerment as its clear strategic direction. In July 2022, Perfect successfully held a seminar in Hainan, overcoming various obstacles and injecting more confidence into the market.

Top 5 Chinese direct sales companies

1. Yofoto (三生)

Country of origin: China
Licensed in China since: 2007
Registered capital: 156 million HKD

Yofoto (Sansheng) was founded in 2004 and obtained a license in early 2007. It has quickly become a leader among domestic direct selling companies. Starting out as a company that produces and sells health supplements, Yofoto evolved into a “one-stop” health management enterprise, helping their customers throughout all stages of life.

In 2022,  Yofoto, the parent company, launched new products under brands such as Dongfang Suyang(东方素养) and Yufang Tang(御坊堂). These brands primarily focus on Chinese-made, traditional Chinese culture, and trendy elements to attract young consumers. They adopted a digital operation strategy centered around “community maintenance, livestreaming sales, branch office upgrades, and short video marketing” to drive engagement. The livestreaming training and sales efforts have proven to be effective. During the online carnival in 2022,  Yofoto introduced the concept of the metaverse for the first time, bringing a fresh perspective to the industry.

2. New Era (新时代)

Country of origin: China
Licensed in China since: 2007
Registered capital: 100 million RMB

New Era (XinShiDai) is a large-scale enterprise that engages in a wide range of activities — from scientific research and production of raw materials to actual direct sales of their products. It is one of the oldest direct sales companies in China, established in 1995 in Beijing.

The new era company has three major product brands: health and nutrition products “Guozhen (国珍)”, cosmetics and makeup “Shareland” (香兰阁), and cleaning products “Zhuzhen (竹珍)”. Their signature items are based on pine pollen and bamboo leaf extract.

The company has branches in 31 Chinese provinces and has expanded to South East Asian countries, South Korea and Russia.

As a representative of state-owned enterprises in the direct selling industry, New Era has also been affected by the overall environment and experienced a downturn. In recent years, New Era has made significant efforts in exploring the e-commerce direction. Currently, its key weapon for enterprise transformation and market upgrades remains the young e-commerce platform Jiankangke (荐康客). The innovative community mindset and sharing mechanisms of the Jiankangke(荐康客) platform have to some extent boosted New Era‘s customer expansion efforts and provided a certain level of traffic guarantee. In terms of offline activities, New Era has conducted a series of health science popularization events over the past year, collaborating with industry experts to bring health knowledge closer to consumers through health lectures, and spreading health concepts and awareness.

3. Pro-Health (宝健)

Country of origin: China
Licensed in China since: 2007
Registered capital: 50 million USD

Hong Kong-funded enterprise, Baojian Group, also known by its westernized name “Pro-Health”, like many direct sales companies, integrates research and development, production, distribution, sales, and services. Pro-Health’s line of products includes nutrition and health care supplements,beauty and skincare, and daily chemicals and cleaning products.

Throughout its history, Pro-Health had the reputation of constantly being on the same page with the Government. The company encourages its sales partners to give back part of their income to society, innovating the concept of public welfare.

Pro-Health has a relatively traditional sales team, and its performance has remained stable at around 1 billion yuan for several years. However, in the past years, the COVID-19 pandemic and industry regulations targeting elderly fraud have had an impact on the aging Pro-Health team.

4. Kangmei (康美)

Country of origin: China
Licensed in China since: 2014
Registered capital: 695 million USD

Currently, Guangdong Shennong Enterprise Management Partnership (广东神农氏企业管理合伙企业), established in November 2021 and with Guangzhou Pharmaceutical Industrial Park holding a 45.86% stake, has become the largest shareholder of Kangmei Pharmaceutical. The acquisition by Guangzhou Pharmaceutical Industrial Park has brought a turning point to Kangmei’s direct selling business, and the slogan “Guangyao · New Kangmei” (“广药•新康美”) has become a new market appeal. In the first half of 2022, Kangmei’s direct selling business experienced the strongest market alliance. Hengjiu Health Industry Company (恒灸健康产业公司) and Kangmei Era reached a cooperation agreement to jointly create “Guangyao · New Kangmei · Ai Xiaobai,” (“广药•新康美•艾小白”) resulting in a significant improvement in the market. It is rumored that Kangmei Era is planning to use this as a benchmark to comprehensively integrate the company’s direct selling business.

5. Tiens Group (天狮)

Country of origin: China
Licensed in China since: 2011
Registered capital: 49 million USD

At the 27th anniversary global carnival of the Tiens Group in 2022, Qiang Li, who previously served as the minister of education at Tiens, returned to the company and assumed the role of vice president and general manager of the China Region. With a live broadcast, Tiens Group announced the restart of its operations in the Chinese market. However, the JTMM global cross-border social membership new e-commerce platform, built by Tiens Group during the August 3rd celebration in 2021, did not achieve significant results. Tiens Group has now become a shining example of success outside the Chinese market.

Additional direct sales companies, outside of top 5

Mary Kay (玫琳凯)

Country of origin: United States
Founded: 1963 in Texas, USA
Licensed in China since: 2007
Registered capital: 22 million USD

Mary Kay was founded in 1963 in Texas and exclusively focuses on direct sales of cosmetics and makeup products. Due to industry consolidation and the impact of the pandemic, Mary Kay’s market experienced a significant setback, leading to a major adjustment in its Chinese management team. In 2022, Mary Kay named its future five-year development strategy the “Mulan Plan,” which not only highlights female culture but also incorporates a deeper understanding of the female spirit into the company’s core values. Since 2022, Mary Kay has placed greater emphasis on employee happiness and implemented multiple measures to enhance workplace flexibility. In terms of sustainable development, Mary Kay has put forward the “Beauty Sustains” development strategy, aiming to create value for China’s economy, society, environment, and other fields.

Melaleuca (美乐家)

Country of origin: United States
Founded: 1985 in Idaho, USA
Licensed in China since: 2007
Registered capital: 12.01 million USD

Melaleuca is a direct sales company that was established in the USA in the middle of the 80s. As the company’s sales pitch goes, Melaleuca does not sell products, but a brand-new life “experience”, where health is an “attitude to life”.

Melaleuca was one of the direct sales companies that received a warning from the American Trade Commission, for the use of misleading advertisements. As it turned out, only 1% of Melaleuca “evangelists” are making any profit from selling the life-changing products, and this piece of information somehow wasn’t mentioned in the company’s promotional materials.

Melaleuca seems to be doing just fine in China. In the first half of 2022, Melaleuca China promoted 26,000 partners, representing a 36% year-on-year growth. The number of new entrants increased by 22.1% compared to the same period last year, and the personnel service fee increased by 36 million yuan, a growth of 7.7%. Melaleuca China’s market development remained stable and achieved significant growth against the overall industry downturn. In 2022, Melaleuca upgraded its official website, mini-program, and video platform. In the second half of the year, Melaleuca will undergo digital upgrades in consumer feedback, business strategies, and empowering tools. Data from Melaleuca’s global annual conference in 2022 showed that as of May 2022, Melaleuca had shared a total of 6.7 billion US dollars in profits with global partners over its 37-year history.

USANA (BabyCare)

Country of origin: United States
Licensed in China since: 2007
Registered capital: 30 million USD

BabyCare has always been the most low-key foreign-funded direct selling company in China. It was not until the American direct selling giant USANA supported it with capital and products that it gradually developed into the backbone of the industry. Many BabyCare distributors have mastered the network operation method in the USANA era Therefore, the impact of the epidemic on the company is not as great as other companies. In the first half of 2022, USANA achieved a rare performance growth. At present, USANA spends a lot of money to build a studio to try webcasting, but the company does not plan to invite external anchors or use external platforms, but builds its own live broadcasting platform and uses the company’s internal personnel to complete it. In 2022, the online celebration of USANA’s 30th anniversary was held in the company’s own broadcast hall.

Infinitus (无限极)

Country of origin: China
Licensed in China since: 2007
Registered capital: 14 million USD

Infinitus once achieved its peak performance in the golden decade of direct selling in China but faced significant challenges during industry storms and the pandemic. In 2021, Infinitus experienced the passing of Mr. Li Wendai, the third-generation leader of Lee Kum Kee (李锦记), and also witnessed the completion and opening of the Infinitus Plaza in Baiyun, Guangzhou, with a total investment of 4.5 billion yuan. In 2022, as Infinitus celebrated its 30th anniversary, it launched four major initiatives: an upgraded identity system, the grand launch of a new brand, efficient empowerment through digital tools, and a series of activities and support plans to commemorate the 30th anniversary. In the future, Infinitus will focus on new brand layouts and product development in segmented markets such as health experience consumption, healthy snacks, body management, and family nutrition supplementation. It aims to explore new ways of experiential consumption and ultimately restore the market. In early 2022, the company ventured into the new tea beverage industry and opened its first concept store for health drinks.

With this, we conclude our overview of the Chinese direct sales market and hope you found it useful.

Despite the legal difficulties related to direct sales licensing, the Chinese market is still full of opportunities. As long as you adapt to local legal and marketing reality, review your decision through the prism of cultural differences, and understand and cater to the mindset of the Chinese consumer, direct sales certainly can be profitable. (Source: TMO Group)

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