 Chief operating officer Huang Ban Chin. Photo: CompanyOn 1 July 2016, Best World International announced that it had been granted a direct-selling licence by China's Ministry of Commerce, about two years after it submitted an application. What next? Best World's chief operating officer, Huang Ban Chin, shared insights into this at a 1H2016 results briefing recently. Turns out that Best World is not going to incur much capex -- and will instead be able to unleash a growing sales force in as many cities of China as it cares to target. Best World, clearly, can scale up fast and the market is clearly massive: China is the No.2 largest direct-selling market in the world after the US. South Korea is No.3. |
| When | Activities |
| By end-2016 | ● Set up 9 service outlets in Hangzhou city ● Direct-selling licence activated. |
| 2017 | ● In phases, convert “export” model to “direct-selling” model in Hangzhou. ● Expand coverage of direct-selling licence to other cities of China. |
| 2018 | ● First full-year of 100% direct-selling model in China. ● Expand coverage of direct-selling licence to other cities of China. |
1. Before licence becomes effective: The licence granted to Best World is for doing business in Hangzhou city. Before the licence becomes effective, Best World needs to set up a service outlet in each of the nine districts of Hangzhou.
This is a simple matter and is not as capital-intensive as some investors might have worried over.
Best World already has customers using its skincare products who are owners of, for example, nail spas, beauty salons, lady spas and hair salons
Best World will select nine of their outlets and, with the owners' agreement, designate them its service outlets.
The authorities will inspect and audit these outlets before activating the licence. Best World is confident that this can be achieved by the end of this year, and it can then begin its direct-selling business.
Best World's distributors in Taiwan (photo) have made the market the No.1 for the company. Taiwan contributed S$55.3 m, or 64% of Best World's 1H16 revenue. Photo: Facebook2. Unleashing the sales force: In recent years, Best World has been getting the ground ready to unleash a surge in direct-selling of its products in China.
It has been reaching out to owners of, for example, nail spas, beauty salons, lady spas and hair salons. It has introduced and sold them Best World skin-care products, which they have in turn promoted and sold to their own customers.
This accounts for the $22.4 million revenue (up 165% y-o-y) in 1H2016 attributable to the China market.
Now that Best World has secured a direct-selling licence, these business owners are poised to become distributors whose customers can in turn also become direct sellers of Best World skin care products.
In direct-selling parlance, the business owners are the "upline" while their customers are the "downline".
| ♦ China-led growth for the next 5-8 years |
 "We believe in the potential of China’s large and growing market will lay the foundation for growth of the Group in the next 5 to 8 years and will continue to expand our footprint in the country." -- Dora Hoan, Co-Chairman, Best World International (Photo: Facebook)  Doreen Tan, Co-Chairman of Best World International. |
"There's now a huge difference. Instead of being the owner of one store selling to, say, 200 customers, now a hair salon owner, for example, has 200 downlines which effectively is like having 200 stores! These Chinese are quick to recognise this as they are very business savvy, and they have signed on with us," said Mr Huang.
Best World will convert such business owners into distributors in phases over 6-8 months.
3. Many cities in China eventually: It's not just Hangzhou where Best World has been preparing the ground for its direct-selling business. In various cities in various provinces of China, it has already made headway with business owners who will soon also become its distributors.
"We will expand the area of coverage of the licence. We do not need to apply for another licence all over again," said Mr Huang.
The only pre-requisite for Best World to expand geographically is the setting up of service outlets in the other cities.
And it looks like even that pre-requisite will be relaxed. Market talk is that the pre-requisite will become one service outlet only (instead one per district) in each city.
All told, it looks like Best World is set for strong growth in China.
The company's co-Chairman, Dora Hoan, said in a press release: "We believe in the potential of China’s large and growing market will lay the foundation for growth of the Group in the next 5 to 8 years and will continue to expand our footprint in the country."
