Avon's Calling in China

Avon Products Inc., the world's largest door-to-door cosmetics distributor, said this month that Avon Products (China) Co. Ltd. received the first direct-selling business license in that country after an eight-year ban.

Avon China now can roll out its previously tested single-level direct-selling model nationwide. The permit was issued in February.

China banned direct sales in 1998, saying it was hard for consumers to tell the difference between legitimate sales networks and fraudulent pyramid schemes. However, the government issued rules to regulate direct sales in December, clearing the way for Avon and other companies to apply for licenses.

To get a license, companies must have a record of law-abiding direct sales experience in foreign countries; registered capital of no less than 80 million yuan in China; and a company information disclosure mechanism. If a company is found guilty of breaches such as bribery or cheating customers, it can be fined as much as 500,000 yuan, or roughly $62,130.

Avon began operations in China in 1990 and invested $40 million in its manufacturing facility base in Guangzhou, which started manufacturing in 1998. It features 600 products including makeup, fragrance, accessories and healthy food.

To comply with Chinese law, Avon China shifted to a retail model in 1998 and currently provides products through a network of 6,000 beauty boutiques and 1,000 beauty counters. Avon China said the boutiques will remain important and that its development in China is based on these boutiques.

Other companies await government approval to begin selling directly. Nu Skin filed a license application, and Amway is expected to file its application by the end of this month, the company's general manager for eastern China said.

Melissa Campanelli covers postal news, CRM and database marketing for DM News and DMNews.com. To keep up with the latest developments in these areas, subscribe to our daily and weekly e-mail newsletters by visiting www.dmnews.com/newsletters

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