HANGZHOU, China — Roughly 28,000 young women crowded into the Dragon Sports Arena here for a three-day gathering in September hosted by Mary Kay Cosmetics.
The goal was to pump up the crowd, and the song-and-dance troupe, the video testimonials about transformed lives and the awarding of the signature pink Cadillac to a top earner had the desired effect.
“I love the corporate culture of Mary Kay,” said Zhang Xiaoying, a 19-year-old woman from Guizhou, one of the country’s poorest regions, as she and several colleagues dabbed on makeup during a break in the event. “This company teaches you to aspire to a higher level.”
Ms. Zhang earns very little in her new job. But the promise of future rewards is what has persuaded her and about 200,000 other women to become “beauty consultants,” or independent sales agents, for Mary Kay in China.
Avon and Amway, two other American companies that use independent representatives, have even larger sales forces here. Avon says it recruits up to 50,000 women a month and now has one million agents.
Indeed, as China’s economic boom unfolds here, door-to-door sales and what is known as direct selling is sweeping the country, breathing new life into old American brands and creating hundreds of thousands of jobs, often for disadvantaged or poorly educated young women.
But that growth has not come without controversy. Many direct sellers in China have been accused of operating sophisticated pyramid schemes and other sales swindles. (In one widely publicized case a few years ago, people were conned into buying stakes in ant farms.)
Even American companies operating in China have been accused of manipulating and misleading sales recruits.
“Some of them recruit people in a deceptive way, like you can become super-rich in a month,” says Chen Defa, chairman of the Chinese Academy of Direct Selling Management.
Because of such concerns, China banned direct selling in 1998, saying that it was often used as a cover for “evil cults, secret societies and lawless and superstitious activities.”
Big direct-selling companies disputed those claims, saying regulators simply misunderstood their business model.
In 2006, after heavy lobbying from American companies, China lifted its ban. And since then, direct selling, with some modifications, has flourished in China, growing into an $8 billion industry that now markets products as diverse as health supplements, cosmetics, toothpaste and dishwashing liquid.
“Direct sellers see unlimited opportunities here,” says Kent Kedl, a Shanghai-based analyst at Technomics Asia, the market research firm. “They see the combination of entrepreneurial sellers and adventuresome consumers.”
Companies engaged in direct selling are succeeding in China by using many of the same techniques that worked elsewhere, analysts say. They often recruit young women and motivate them to sell aggressively, particularly to friends and family members. Companies also use multilevel marketing programs that reward workers for recruiting other agents.
Revenue in China for Mary Kay, which is based in Dallas, has doubled to $600 million in the last three years payday advance loan. “We’re going to grow another 20 percent this year,” despite the economic downturn, says Paul Mak, head of Mary Kay China, despite the global economic slowdown. “People haven’t stopped buying cosmetics.”
The company’s message of female empowerment and femininity seems to resonate in China, a country where young women have few opportunities to start their own businesses.
“The direct-selling industry has quite a low entrance threshold,” says Wang Yi, who teaches at the Beijing Business Management College.
Like other direct sellers, Mary Kay has expanded in China — one of the 35 countries where it operates, generating total revenue of $2.6 billion last year — by working hard to recruit new representatives.
The company operates with a kind of missionary zeal, analysts say, pushing sales agents to invite friends and family members to makeup classes and seminars that quickly evolve into small communities of women who follow the sales gospel of Mary Kay.
Many Mary Kay sales agents say that before joining the company they held low-paying jobs as secretaries, cashiers and rural schoolteachers. Many were also looking for a new focus of their lives. “Because my husband is a businessman, and he is busy, we talked less and less,” says Lu Laidi, a Mary Kay sales director. “I felt my life was boring. I stayed home and barely dressed up.”
While many Mary Kay sales representatives say they earn very little, those who follow the company’s sales and recruiting strategies can become wealthy.
One sales director, Jin Yan, said that after 12 years at Mary Kay, she earned nearly $400,000 last year.
She now drives a pink Cadillac, a reward from the company.
But not everyone succeeds. Shang Qun, a 28-year-old sales agent in eastern Jiangsu Province, said she was pressured to meet unrealistic sales goals and to deliver dozens of names of potential clients to the company during her first months of selling.
“Mary Kay has many direct-selling refugees,” she says. “They claim Mary Kay can make you big money, but their pockets are empty.”
Crayton Webb, a Mary Kay spokesman, defended the company. “Mary Kay is extremely careful in communicating to members of the independent sales force that their success is up to them,” he wrote in an e-mail message. “There are no guarantees and that they should invest in their business carefully.”
Many other agents interviewed in recent months agreed, saying Mary Kay had helped them earn a good living, and also transformed their lives.
Zhang Xiaoying, the 19-year-old woman at the September seminar, said that a year ago she was a cashier in the coastal boomtown of Shenzhen when a friend introduced her to Mary Kay.
Today, she is paid just $200 a month, not much more than she got as a cashier. But, she says, it’s a start.
“I love this company because they give us professional training,” she said.
Bao Beibei contributed research from Shanghai.
Direct Selling Flourishes in China