What a F Day

• The focus of the majority of direct selling players in China during 2010 continued to be on mid-priced to premium products, rather than relying on price cutting strategies. Leading players such as Amway, Mary Kay and Herbalife offered their products at higher prices than retail brands such as Yangshengtang and Centrum in vitamins and dietary supplements and L'Oréal White Perfect in beauty and personal care products.

• The focus of the majority of direct selling players in China during 2010 continued to be on mid-priced to premium products, rather than relying on price cutting strategies. Leading players such as Amway, Mary Kay and Herbalife offered their products at higher prices than retail brands such as Yangshengtang and Centrum in vitamins and dietary supplements and L'Oréal White Perfect in beauty and personal care products.

• As the direct selling licence from the Ministry of Commerce is issued for specific provinces and regions of China, not all the direct selling players are assured of wide coverage, especially those which have only recently obtained a licence. The leading player Amway has wide regional coverage and is active not only in first tier cities such as Shanghai and Guangzhou, but also in lower tier cities such as Yan Cheng in Jiangsu province and Luo He in Henan province.

• International and domestic players focused on different aspects of their businesses over the review period. International players such as Amway, Avon and Mary Kay put their efforts into brand building, while local players such as Infinitus and Tianjin Tianshi concentrated more on the quality and range of their products such as Infinitus's well known practise of relying on traditional Chinese medicine in order to enhance the acceptance of its products.

• The healthy growth and lucrative profit margins on offer to those engaged in direct selling in China have already attracted many traditional manufacturers to apply for licences to develop their businesses into direct selling, especially players involved in vitamins and dietary supplements as well as other beauty and personal care subcategories. For example, between late 2008 and early 2009, Harbin Pharmaceutical Group, Jiangsu Longliqi Group Co Ltd and Kelti (China) Daily Necessities Co Ltd all successfully obtained licences to operate via direct selling. These recent entries will be likely to gain share from existing players such as Avon and Tianjing Tiens through gradually penetrating into their traditional product areas.

• Direct selling is expected to continue increasing in value over the forecast period as the affinity of Chinese consumers towards direct selling is not expected to abate. Direct selling was unaffected by the global economic downturn, as increasing unemployment often leads to more laid-off workers joining the direct selling sales force, strengthening sales network and increasing value sales.

• Growth in direct selling in China will be stimulated over the forecast period by the increasing numbers of companies obtaining direct selling licences. However, the growth rate is unlikely to vary much from the growth registered over the review period as these new licence holders will mainly be limited to regional distribution licences initially. Meanwhile, leading direct selling players such as Amway, which accounted for 43% of total direct selling value sales in 2010, will be limited by the value growth of these new entrants.

• Coming from a relatively small base, housewares and home furnishing direct selling is likely to continue to record dynamic growth over the forecast period. As housewares and home furnishing direct selling is currently rather consolidated, growth will be led by top player Amway over forecast period through its Queen brand in cooking utensils.

• Consumer appliances direct selling will post lower than average growth in direct selling during the forecast period due to the nature of the products on offer not being entirely suitable for direct selling. Vorwerk China Household Appliances Co Ltd is the only direct selling player offering vacuum cleansers in China. According to trade sources, the performance of Vorwerk in China was not very strong during the review period as Vorwerk's vacuum cleaners are very expensive and few Chinese consumers would want to purchase such an expensive vacuum cleaner, particularly when the penetration of vacuum cleaners remains relatively low in China compared with other consumer appliances categories such as washing machines, fridge freezers and air conditioners. Direct sales of vacuum cleaners are unlikely to take off during the forecast period, the result of the relatively low demand for vacuum cleaners and the extremely high prices of Vorwerk products.

• Average unit prices in direct selling are unlikely to follow the trends recorded during the review period. Leading players such as Amway and