Sales at Amway Inc, the multi-level marketing company that earned about 40 percent of its total revenue in China last year, are likely to be unaffected by a recent investigation of Nu Skin Enterprises Inc and heightened scrutiny from Beijing's commercial regulator.
We've been vigilant for 20 years, Douglas Devos, president of Amway, told Reuters last week. Pyramids are frauds. Direct selling is not pyramids. When there's a crackdown on pyramids, that's great because it distinguishes legitimate direct selling from fraud.
Devos estimated that Amway's China sales, which amounted to $4.8 billion in 2013, will surpass $5 billion this year and grow between 6 and 8 percent.
Amway reported about two-thirds of its $11.8 billion global revenue last year in the Asia-Pacific region, where sales in Japan amounted to about $1.2 billion, followed South Koreawith sales of less than $1 billion.
Last week, China's State Administration of Industry & Commerce (SAIC) announced that it confiscated 3.11 million yuan ($500,600) from Nu Skin and fined the firm 250,000 yuan.
The Provo, Utah-based company marketed items it was not licensed to sell and overstated the potential results from using some of its products, SAIC said in a statement. Six Nu Skin sales agents also were fined 130,000 yuan and were ordered to turnover 1.37 million yuan in illegal sales.
SAIC also is preparing to amend its regulations on direct selling and increase its supervision of the business. The new rules are expected to tighten guidelines for sales agent training.
In October, SAIC also issued fresh regulations covering incentive systems aimed at stopping pyramid sales.
Amway, which launched its China business in 1995, was briefly shut down in 1998 after officials voiced concern about the sales techniques and incidence of fraud at multi-level marketing firms.
Amway subsequently revised its business plans and opened retail outlets as part of its operations.
If there's ever a question about our business, they know where to find us, said Devos.
Ada, Michigan-based Amway last year broke ground on a $10 million botanical research center in Wuxi to investigate plants used in traditional Chinese medicine. Amway also owns a manufacturing plant in Guangzhou and R&D facilities in Shanghai and Guangzhou.
The company presently employs 9,000 workers in China and claims an active sales force of 300,000, operating in 280 cities throughout the country.
($1 = 6.2122 Chinese yuan)