Amway readies for new rules

Shanghai Daily/October 28, 2005

Amway Corp said yesterday its sales may fluctuate between a 10 percent drop or rise this year as its business model faces a tough transition with China forbidding payment based on team sales starting next month.

From Tuesday, all Amway China sales representatives will draw commissions directly from the company based on their individual sales performance, said Vincent Hwang, general manager of Amway China East.

Sales teams, in which authorized agents can generate additional commission from sales representatives they recruit, will no longer exist as payment based on team sales is illegal under new regulations released in September this year.

The US-based door-to-door seller of household products said it will pay at least 200 million yuan (US$24.7 million) to compensate its 40,000 authorized agents who will suffer a sharp drop in revenues due to the regulation change.

Amway reported sales of 17 billion yuan last year, a 70 percent rise over 2003 in China, its largest global market.

However, the company has been facing increasing competition from domestic rivals and foreign counterparts which have expanded their sales efforts rapidly by offering higher commission incentives.

The company reacted on Sunday by increasing its sales commission to between 9 and 30 percent, up from 3 and 21 percent earlier.