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Reinventing Yourself:  Taiwan:  The beautiful leaf-shaped island of Taiwan sits off the eastern coast of China. Officially known as the Republic of China, it has 13,891 square miles (35,980 sq. km.) of land and more than 23 million people. This makes Taiwan one of most densely populated nations in the world, with an average of 1,655 people per square mile (632 people per square kilometer). In cities, this figure climbs significantly. Seventy percent of Taiwanese live in large cities such as Keelung, Tainan, Taichung and Taipei, the island nation’s capital. Basically, there’s no elbow room, but this density works for direct selling. Neighbors live in high-rise apartment buildings and socialize frequently with each other. While Americans might greet each other from front porches or with a wave at their mailboxes, Taiwanese meet neighbors face-to-face in the hallways, elevators or lobbies. “In Taiwan, most people live in tall apartments,” says Sherman Ying, General Manager of USANA Taiwan. “They enjoy their social lives, they go to your home to talk to you, they have parties on the weekends, and they are always gathering together. In Taiwan, the home party is an important way to build a business.” Size also works in favor of corporations. “We’ve got the advantage of communicating with people very easily because this is not a big country,” says Joseph Hsueh, General Manager of Mary Kay Taiwan. “We can meet with customers or sales staff very easily.” The economy of Taiwan presents some challenges, however. It is stagnant overall, with political rivalries taking precedence over financial matters. A recession has hit, and the Taiwanese people feel it. Their buying power is lower, and the poorer people have far fewer resources. Credit card debt has hounded many people, particularly the younger crowd. The Republic of China government reported that in 2005, credit-card consumption accounted for 20.5 percent of all private purchases. One out of every five dollars spent by the Taiwanese population was on credit. When the bills come rolling in, people can’t pay their debts and begin racking up interest payments and late fees, cutting their spending power even more. All of this put together, however, has actually boosted the lure of direct selling. It’s an opportunity to increase income while socializing. More than 90 percent of Taiwanese direct sellers work their businesses part time, fitting right in with their busy lifestyles. A Culture of Hard Work Americans want to go home and relax, take their two weeks of vacation for a nice trip, and spend weekends away from work. In Taiwan, there is almost no such thing as downtime. Taiwanese want to have more money, be able to save and be productive. Every night and weekend they go to second jobs to take advantage of their “time off” from their primary jobs. “Taiwanese are very diligent and hardworking,” says John Chou, President of Nu Skin Taiwan, Vice President of Nu Skin Greater China and former TDSA president. “They’re famous for their hard work—working 16-20 hours a day.” Ying of USANA adds that many Taiwanese direct sellers work for several direct selling companies at the same time. While some of the larger industry players specifically prohibit this, enforcement is difficult. Many other companies, including USANA, allow their associates to work for other companies, particularly in ones that have different product sets. Taiwanese are entrepreneurs at heart. They want their own businesses and to be their own bosses. Direct selling gives people the chance to do this without significant risk. Hsueh of Mary Kay sums it up: “They prefer the head of the chicken to the tail of the ox.” In other words, better to be in charge of your own small business than to be an insignificant part of a big company. In Taiwan, a company’s image is important, and family ties are strong. While direct selling had some image problems early on, the larger companies and the Taiwanese Direct Selling Association have made great progress in improving the public’s perception. And families often support each other in building their direct selling business by ordering products and becoming representatives themselves. However, if a family member brings others into a no-win situation, they all will quickly abandon the effort. Direct Selling on the Beautiful Island Taiwan knows direct selling. The TDSA and the government work with consumers and companies to ensure that the industry continues to gain healthy approval. The strategy is sound, with more than 4.03 million Taiwanese working in direct sales in 2005. With sales of US$2.1 billion, Taiwan is the ninth-largest direct selling market in the world, according to the TDSA. More than 17.73 percent of the total population works in direct selling, and one in six families purchases products from direct selling companies. “We have a saying here that you can find at least one associate on every bus,” says USANA’s Ying. This is both good news and bad news for direct selling companies. People know about direct selling, and they understand the ins and outs of the industry. They are very experienced both as consumers and as salespeople. With this backdrop, more companies are continuously drawn to the market. But Taiwanese are quick to jump from one company to the next. “There is very little loyalty,” says Ying. “Of all the direct selling companies here, there are many chances. They can just pick up and try company B. If they don’t make money within a few months, there’s company C, new in the market. Retention is a major issue.” Part of this absence of loyalty may stem from the overall lack of training for direct sellers. It’s not that companies don’t offer it. It’s just that the Taiwanese direct sellers don’t want to spend any money and very little time getting it. Several companies have combated this by offering free training to build their leadership base. They’ve also learned to use Internet-based training and Web-based conferencing to hold live training sessions. This works because 63 percent of the population uses the Internet frequently. Keep in mind that this refers to the entire population—everyone from octogenarians to newborns—so the percentage for young and middle-aged adults is much higher. Taiwanese direct sellers also love the products available through these companies. Most are consumers first, then product sellers and occasionally recruiters. That’s a key difference that multinational companies have had to accommodate. Mary Kay has learned to emphasize product sales and skincare classes for its consultants rather than expecting them to bring others in as consultants. It works so well that there are now many trademark pink cars driving through Taiwan. Sherman Ying of USANA notes that 70 to 80 percent of its direct selling business in Taiwan is through product orders only, so successful companies’ product lines are high-quality and attractive. Corporate Best Practices The most successful direct selling companies in Taiwan have learned much in the 20-plus years of the industry there. First, companies must have a long-term plan. “You can’t come in with a hit-and-run idea,” says Nu Skin’s Chou. “A long-term plan is important. You need to calculate your risks coming in because it’s such a strong, competitive market. You see a lot of companies come and go, including well-known multinational companies like Shaklee. Shaklee came into Taiwan three times and withdrew three times. Now they are back for a fourth time.” Second, consider meeting your competitors on their field. Many direct selling companies are setting up physical locations to compete with boutiques and large retailers. “Direct sellers are building bricks-and-mortar stores and generally becoming more professional,” says John Liu, Managing Director of the Taiwan Branch of Melaleuca Asia and Chairman of the TDSA. “Moving to bricks-and-mortar may seem a strange step for direct selling businesses, but in Taiwan it is just one of the steps such companies are taking to gain public trust and reach for a bigger piece of consumer pie.” Liu can tick off several examples. His own company, Melaleuca, set up stores in 2004 to enhance corporate visibility. It now runs 20 stores across the island and hopes to have 25 by the end of 2007. Amway, a 25-year veteran in the Taiwanese market, unveiled a “logistic center” in 2004 that includes opportunity kiosks, a store, coffee shop and the Hall of Amway History. The company also opened three stores and has plans eventually to operate five to seven stores. Nu Skin set up on the island in 1992 and opened a five-star, multimillion-dollar health club combining a gym, spa and showcase retail outlet in June of 2006. There is more to the retail stores than simply competition, though. They’re also part of an ongoing effort to reinforce the industry’s legitimacy. In the 1970s and ’80s, there were disreputable companies that quickly built illegal pyramids, bilked people, and left town. These companies are called “rat clubs” and left a lasting impression. The TDSA has worked with the government to set up the 1992 DSA Fair Trade Law and Fair Trade Council. It also established a Code of Ethics and well-known research partnerships with Taiwan universities, and it hopes for a certification process in the future. It’s working. “The general public perception of direct selling is improving,” says Chou of Nu Skin. “There used to be only about 10 percent acceptance, but I would say it’s now up to 48 percent, according to the polls by the World Federation of Direct Selling Associations.” The third-best practice is to make technology work for you. Because of the population density in Taiwan, traffic is a huge problem. With lots of Internet usage, companies are using online tools more often. According to Hsueh of Mary Kay, 70 to 80 percent of their business is conducted online. People sign up for the business via the Web and conduct all their business via computer. Fourth, be aware of the growing interest in health and nutrition. According to the TDSA, nutritional supplements have 43.65 percent of the market while personal care has 21.76 percent. Nu Skin is among those capitalizing on this wave. It has helped create demand for previously unknown products. “We have from time to time a nationwide program called Scan Taiwan,” says Chou. “We cover 15 cities with a unique service that helps scan people’s health, their antioxidant numbers.” Each scan is followed by information about how Nu Skin’s products can help improve the person’s scan results. Fifth, the payout to salespeople has to be good. Because the Taiwanese know so much about the industry, they can easily compare which companies have the most advantageous compensation plan. There are many approaches to compensation, but the most successful companies are those that create a self-supporting yet generous plan. For Mary Kay, this means ensuring not only a strong income potential but also the rewards and recognition that the company is famous for. In USANA, its simple binary plan has been very attractive to Taiwanese. It’s easy to understand, associates can see exactly how to earn income, and they look forward to weekly bonus payments with carryover points. Nu Skin has found success by sticking with its global, seamless marketing plan that has allowed some distributors to have downlines that encompass 20 countries. The Chinese Connection Taiwan has had a long, simmering, political dispute with mainland China, but the cultural tie is undeniable. The language and basic mindset are the same. Many Taiwanese even call themselves Chinese. “We have a difference of opinion here in Taiwan,” says Hsueh of Mary Kay. “Some people say we’re Chinese, some people say Taiwanese.” Whatever the semantics involved, being in business in Taiwan is a good way to learn about doing business with Chinese people, whether in China, Malaysia, Singapore, Thailand, Indonesia, etc. With more than 10 percent of Taiwanese nationals living in China, and many Chinese living all over Southeast Asia, it’s a good plan to know the target audience. Says Ying of USANA, “If you want to be in business in Asia, you have to know the Chinese people. Taiwan is a great place to learn this.” It’s also a great place to find capable people to lead in China. “Many companies are using Taiwan as their talent pool,” says Hsueh of Mary Kay. “It’s still a very controlled industry in China, so while waiting to get a license [in China], some big companies are coming to Taiwan to develop talent to run a company.” Ying notes that USANA’s Singapore market launch was helped significantly by the company’s existing Taiwanese leadership, who went to Singapore to support the expansion. Chou adds that field leaders from Taiwan can be helpful in launches in China, demonstrating that the concept will work and giving personal stories behind the corporate images. The bottom line: If a company wants to do business in Asia, Taiwan should top the list. Its advantages far outweigh the disadvantages, and the island still offers many opportunities. Jump to: |
