Expanding into a new country means adapting your commissions and operations to suit the market. Sometimes the adaptations you’ll need to make are small; sometimes they’re big. Entering China means big changes, but their direct selling market is on the rise, so let’s break down their business landscape.
China has a long history of conflict with the direct sales and multilevel marketing industry. In 1998, China banned direct selling. They lifted the ban in 2005, with a few stringent regulations. The most influential of these regulation prevent companies from paying commissions on more than one level and set the legal, single-level commission at 30%. This is lower than the usual overall payout of US companies (approximately 40%), but much higher than the individual commissions distributor’s make on volume generated in their organizations.
Restricting multilevel commissions takes a pretty big bite out of the motivation that we usually see driving distributors. Getting paid for multiple levels means having the ability to steadily grow your income by changing your efforts toward leadership rather than constantly upping the amount of time you put into personally making sales. Chinese distributors admittedly get a bigger chunk of each sale they make, but they have to make each of those sales personally. Furthermore, if we look at this equation from a corporate perspective, a company’s ability to craft compensation strategies which incentivize specific, desired distributor behaviors, is nil under these restrictions.