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Selling to "Neighbours"-Tres European
Market America Expands Into Taiwan
Nu Skin Names Manager for RUSSIAN OPERATIONS
USANA to Enter CHINA

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Selling to "Neighbours"-
Tres European

Where words like "colour," "produits," and "residuale" mingle, you will find direct sellers successfully building business and carving niches. Throughout the cobblestone streets of Western European cities, and into their newer suburbs, diverse cultures are benefiting from the entrepreneurial lift of direct selling. Nationalist sentiments, language differences and regulatory barriers still challenge the mettle of those seeking a place in this Old World, but those who succeed say the reward is well worth the risk.

It Fits
The direct selling industry is a good fit for Western Europe. It offers a means of independence, brings consumers convenience, and melds well with the cultures. Richard Berry, Director of the Direct Selling Association-UK, says that governments are keen to build the direct selling idea because it offers income potential beyond old market ways, such as manufacturing and subsidized industries. "Future prosperity depends on new small businesses and self employment," says Berry. "Direct selling is a 'nursery' of sorts for young entrepreneurship. This is where people can learn the basics of business and eventually start companies of their own."

Direct selling is a method of self-employment that is accessible to everyone, a notion that gained public support from British Prime Minister Tony Blair in a 2004 message to the DSA.

Unemployment is relatively high, and general economic instability is driving people to take advantage of opportunities in direct selling. There is growing doubt about job security and certainly about the likelihood of a lifetime salaried position followed by a pension. All these aspects are encouraging people to assess direct selling as a potential income source.

Convenience for consumers is an additional incentive. "Time is a factor for these consumers just as much as in America. Customers love to find a set of products they know and like and then have those items delivered to them after a phone call or Internet order," says Ric Hobby, Vice President of Government and Industry Affairs for the European branch of nutritional and weight management product company Herbalife International. Herbalife has had a presence in Europe since 1984 and has more than 400,000 distributors there.

Numbers and close living ensure direct sellers will find customers and prospects. The population density of most European cities means that people interact regularly with others and form bonds that lead to business. "Quarters are tighter in Europe compared to the United States," says Natasha Pearson, Senior Marketing Manager for ACNEurope, a seller of telecommunications and utility services. "European cultures tend to focus a lot more on the social aspects of life. The circles of friends and family are larger and the frequency of contact is a lot higher, which makes it very good ground for face-to-face, relationship marketing to flourish."

EU: United, but Separate
Formation of the European Union and large scale adoption of the euro have made business dealings much easier than before the historic 190s transformation. Having one currency for much of the continent makes transactions simple, and customs and border controls were largely eliminated between member states. It is tempting for foreigners to believe that commerce between EU members would be as easy as interstate commerce in the United States. Not so, however.

Successful direct sellers say that companies must not delude themselves into believing that Western Europe can be addressed as one entity. Language differences are the most obvious factor, with at least 15 separate mother tongues and a plethora of dialects added to the mix. This leads to translation demands and may even call for hiring corporate employees within each country to respond to customer and field needs. "Cultural and linguistic uniqueness of each European country presents a challenge not to be taken lightly," advises Pearson of ACN, which has $300 million in projected 2005 revenues from its European presence. "Your salesforce holds you accountable for knowing and anticipating these differences."

"There are different cultures and histories to address as well," says Sindy Staessen, Senior Manager of Herbalife Europe's Government and Industry Affairs. "Some have strong patriotic feelings and do not want to be completely 'one with their neighbor.'" Such sentiments are part of the reason that the UK, Denmark and Sweden have not adopted the euro. With consumers loyal to their own countries, companies may find incentive to tailor their marketing and customer service to each country.

Supporting services also vary from country to country. Delivery and postal companies are diverse, technological compatibility can be an issue, and even internal security considerations are complex. Direct selling companies have to master these intricacies to properly and profitably operate. For ACN, the telecommunications infrastructure is a key consideration when determining which countries to enter. Fifteen countries have met the standards for fixed telephone services so far, and the long-term strategy is to diversify into other telecommunications and energy services within each country. The key, according to direct sellers, is to know your market.

Regulations not Regular
All laws are not the same in the region, despite the EU's lofty goals. "VAT (Value Added Tax) rates, tax laws, forms, labeling requirements, employment regulations . are all different," says Hobby. Herbalife Europe, which has net sales of $141.8 million in the second quarter of 2005, has mastered a key lesson: "You just adapt to the different rules," says Hobby. "You get used to it. We have set up separate businesses in each country. Larger markets have their own corporate support, and those markets also serve nearby smaller markets. For example, our German operations take care of Austria, too."

Southern European countries are more stringent than others with their employment laws. Italy, France and Spain are among those that require self-employed distributors or consultants to pay social security when their income reaches a certain level. There is continuing debate on how to differentiate between independent business owner status and employee status in several countries, which could potentially shake up the way direct sellers operate.

Labeling laws have been a special challenge for nutritional and food product companies. Each country's requirements for labels on these products are different, and it takes a dedicated team or in country experts to monitor and meet the stipulations. Herbalife and other nutritional food product sellers dedicate themselves to meeting governments' expectations.

Privacy laws, too, vary among nations. Telephone Preference Service laws exist and are similar to the U.S. no-call lists, which usually are more relevant to direct marketing companies but can cause problems for overeager direct sellers. Luxembourg, where "direct selling is viewed as an intrusion," according to Hobby, has taken privacy regulations to such extremes that Herbalife and other companies do not do business there. A "cooling off period" across the EU gives all companies another element to consider. The various countries' laws give consumers at least seven working days after delivery to withdraw their purchase, and some countries even require a cooling off period that allows salespeople to terminate their contracts.

Addressing the Differences
The many challenges of Western Europe haven't discouraged businesses, and for good reason. The market can be quite profitable, and existing factors make it a prime location for direct sellers. Corporate and industrial efforts are making it even better for direct selling companies.

"One of the goals of the Federation of European Direct Selling Associations is to harmonize legislation through European Parliament," says Berry. "We are trying to make it as easy to trade between European countries as it is between states in the U.S. We still all work within each country's DSA. All the DSAs have minimum standards but some have more."

Companies have developed their own ways to manage the inconsistencies. Herbalife's strategy is to set up separate businesses, as they entered the market before formation of the EU. They have found success also by unifying their marketing plan across the world, making it a seamless system. ACN has established regional operations in Amsterdam and Scandinavia to serve its markets, and it has closely linked its marketing and legal functions so that it adheres to all legal requirements. Both Herbalife and ACN say that it is imperative to communicate with the salesforce. The distributors/representatives need to hear the corporate vision and mindset, and the corporation must hear feedback from those actually selling the products.

The concluding lesson from companies who are working in Western Europe: The rewards will come, but not without work. "It is not easy or simple, and there are no instant returns," says Hobby. "It will take time, but the payback will be immense." With more than 420 million sophisticated consumers in Western Europe, more companies are building their profits in the Old World.

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UNICITY Plans Expansion
into China

In the wake of the recent announcement that new government regulations will soon be released that will re-open China for direct selling, executives at Unicity International affirm the company's plans to expand into that market. The release of the regulations will be good news for thousands of potential independent business owners who have eagerly anticipated the chance to operate in that area, which hosts the largest population in the world.

As a global health and wellness company committed to the advancement of nutritional science, research, and education, Unicity partners with medical professionals, nutritional scientists, researchers and experts to develop its nutritional and personal care products. A full range of more than 100 exclusive products are then distributed through a network of independent associates currently operating in more than 14 markets. Unicity executives express cautious excitement over China's long-awaited news. "We honor and support the measures the Chinese government is taking in its transition to recognize and accept direct selling as a legitimate business model," said Aaron Webber, Co-CEO. "This has been a long and careful process to ensure that domestic and foreign companies alike exercise responsibility toward Chinese history and culture while introducing this rewarding tool back into the economy."

As a board member of the Direct Selling Association and a member of the CEO council of the World Federation of Direct Selling Associations, Webber has been closely involved with government officials in preparing China for direct selling. The country has been closed to most direct selling activities since 1998.

"The pending regulations will represent a new model for our company and will require us to make some adjustments," says Stephen Ko, Managing Director of Hong Kong and Taiwan. "When we enter China, we want to be in a position to be number one in the marketplace."

Webber also acknowledges that Unicity will enter China methodically. "As with all of our markets, we want to do the right thing at the right time."

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Nu Skin Names Manager for RUSSIAN OPERATIONS

Nu Skin Enterprises recently announced the appointment of Mikael Linder as general manager for Nu Skin Russia, which is scheduled to open as the company's 42nd market during the first half of 2006. Calling upon more than 10 years of executive management experience in the direct selling industry, Linder will establish sales, support and service infrastructures for the company's Russian operations. "

Mikael has done a tremendous job for Nu Skin Enterprises in Scandinavia, where his management has directly influenced significant growth in the region," said President and CEO Truman Hunt. "I am confident his leadership will help establish Nu Skin Enterprises as a leading direct selling company in Russia."

Before accepting the appointment, Linder served as general manager for Nu Skin Enterprises' Scandinavian market, a position in which he increased annual revenue by 100 percent over four years. Under his leadership, Scandinavian operations grew to account for nearly 50 percent of the company's total business in Europe.

Prior to joining Nu Skin Enterprises in 2001, Linder worked in executive management capacities for Oriflame International, a publicly traded Swedish direct selling skin care and cosmetics company with operations in 60 countries. While at Oriflame, Linder oversaw the company's international expansion efforts in Asia, North Africa and Europe. He also served as the company's managing director in Sri Lanka and helped establish operations in India.

Linder holds a Master of Law degree from the University of Stockholm and is pursuing additional graduate studies in commercial and corporate law at the London School of Economics.

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USANA to Enter CHINA

USANA Health Sciences Inc. announced that it has purchased for cash a personal care manufacturing facility in China. The experienced local management team will remain in place and the facility features expansion capability. The terms of the transaction were not disclosed.

"This marks a significant first step for our long-term plan of developing the Chinese market," said USANA President Dave Wentz. "The recent release of the new regulations that will govern direct selling in China allows us to actively prepare for entry into one of the world's largest direct selling markets."

The regulations indicate that the new direct selling laws will go into effect on Dec. 1, 2005. USANA's timeline for receiving a direct selling license and obtaining product approvals is uncertain, but could take as long as 12 months.

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