Q&A: Mary Kay is not a cult, and China loves direct sellers

How frustrated are you with so many people saying direct selling is a cult? How much time do you spend in your job trying to tackle this perception?

People are ignorant, and think direct sellers are cults because we're able to motivate people so well, you know. If you are able to mobilise your salesforce to become loyal distributors because they identify so much with your company, what is wrong with that? If an FMCG retailer can get everyone totally committed to them, they will die for that to happen. Just because a direct selling company is able to do that, calling it a cult is a little bit shallow.

There is another misconception about direct selling in that it is just a channel. We do function and behave like a normal cosmetics company. We do research and development, we do brand enhancement etc. The only difference is the medium of distribution. Instead of a storefront in a department store, we have what we call 'mobile retail shops'. And our productivity is a lot higher. Counter salesgirls at typical storefronts will not remember who you are 31 days later, but our salesforce knows its customers.

I once had a conversation with the boss of Procter & Gamble, discussing our plans for next year. I told him I was planning to grow 20 per cent. He asked how can you do that? Double-digit growth is huge to him. P&G has to fight for every bit of available shelf space in retail shops. We don't. We just bring in more people, train them, and they become 'mobile retail shops'. So direct selling is a very powerful medium.

The only problem is there are many direct-selling companies that don't really sell products; instead they allow their salesforce to sell greed. 'Come join me, get rich quick, be on top of the pile before everybody comes in', that kind of thing. I think this is so wrong. Direct selling is just another way of selling. We train our people so that they are knowledgeable about the products, ethical in their approach, organised in inventory management. That's how we became successful in China.

Your office in Hong Kong’s Times Square at Causeway Bay happens to be next to L'Oréal. Do you think they want to get their grubby mitts on the double-digit growth of direct selling too?

Well, there are FMCG companies who already have direct-selling arms. But you cannot do retail and direct selling at the same time. You're then competing with your salesforce. You have to decide: one or the other. Otherwise your people will feel the company is undercutting them.

I heard a saying: this business is about getting more people to sell your stuff rather then getting customers.

Yes... But at Mary Kay we are very particular about people selling rather than just recruiting, because when you recruit, you don't really sell. But we have trained them to sell.

We not only train to sell, but also train our top sellers to become beauty consultants. The image of a beauty consultant now is more sophisticated than one of a 'country bumpkin' it used to be in China. They are well-groomed and better at beauty techniques. Their performance in tier-one and -two cities will determine the respectability of our brand in tier-three and -four cities in China. On a yearly basis, we spend not more than a single-digit percentage of sales on advertising in China (our agency is Ogilvy), because we believe in giving back to the salesforce. They are our brand ambassadors, so we invest in them and they spread the word for us.

The pink Mercedes-Benz that you award your top salespeople must be one of the ways they spread the word for Mary Kay?

Yes... We do use celebrities as well, like Ivy Chen Yi Han and Judy Lin Ye Ting. Will we continue to use them? I don't know. We felt that our own people, with stories of their own, are actually better spokespersons. Another way we publicise our brand is through our ‘One Woman Can’ beauty pageant. I got the idea from my youngest daughter, who queued up for six hours for a K-Pop audition! And Cinderella stories are a lot more real than celebrity stories.

How does one differentiate between legitimate direct selling and multi-level pyramid schemes?

Very simple: is there a product change in hand? Is there a product being used and consumed? Ponzi schemes, selling magical herbal beansprout seeds and boxes that 'grow' ants for use in medicinal wine—I kid you not—will fail the test. If my products are similar to those in department stores, if my packaging is comparable, if my promotion is as savvy, if my pricing is competitive, what is wrong with the place of sale taking place in offices or at home? The threshold of entry for legitimate direct-selling firms is not low. It's quite expensive actually.

Chinese law states that you need to have a service centre in every district that you operate in. In China, we have more than 3300 service centres. It will be illegal to operate without these. These are not fly-by-night but bricks-and-mortar investments. The Chinese government trusts us, and loves us too. The last time we had our salesforce seminar for our 200,000 beauty consultants in Hangzhou, the governor was there too. We brought so much to the city in terms of tourism those few days.

Direct selling has challenges as we don't have the legitimacy of a retail space. How do we overcome this? Through our beauty positioning, which we communicate much clearer than before. Our slogan when we first started our brand-building exercise was 美丽不止一刻，心动不止一面, what we call multi-dimensional beauty. The general concept of beauty of just how you look, but we expanded it to mannerisms like how you treat other people, the whole works. The second message was 美丽到家: Mary Kay comes to you. We can bring the services to you, rather than having you come. In so doing, a personal relationship flourishes with this service-oriented medium of sale with our target audience of 18- to 40-year-olds.

It's also about the culture of the founder Mary Kay Ash that strikes a resonance with women who want to have confidence, be able to look after themselves. All these women who commit themselves to Mary Kay is because they've become better persons and had better opportunities. I can tell you hundreds and thousands of stories of how women's lives are being changed, single mothers and all.

What is your market share in China?

We hold a 6.2 per cent share of the beauty category, after L'Oreal (19 per cent), Shiseido (9.3 per cent), and P&G (7.6 per cent), according to Euromonitor data for 2012.

Is there a beauty category you are not into, and why?

We are not in haircare. We cannot compete with the mass brands and would rather leave hair to P&G and Unilever. Hair products are bulky, so we don't want our salesforce to develop muscular arms. And also the returns per hour spent are low, if you compare a shampoo sold for 20 bucks and a skincare serum for 250. We gotta work smart.

What strategies are you employing to compete with the growth of internet retailing and e-commerce in China?

We will never bypass our beauty consultants in terms of shipping and delivery. Customers could still order directly from the company but we will still appoint a beauty consultant to serve them. It may be more costly but also more personal.

So what is the next big thing in Greater China?

If I knew that, I'd change my surname to Li, and my name to Ka-Shing. [Laughs.] But for Mary Kay, there are four building projects—one of them is a nutrition plant. It will be the first time Mary Kay is going into the nutrition category, which will launch in 2015.