A Texan beauty company's products are not the first thing that most people would suspect to find in Chinese women's cosmetics bags, but it is a little-known fact that Mary Kay was the top-selling beauty brand manufactured on the mainland last year, according to the National Bureau of Statistics.
The direct-selling beauty giant, which awards pink cars to its top salespeople, recently celebrated its 50th anniversary and 18 years of doing business on the mainland. It has 3,500 sales consultants in Hong Kong and more than 850,000 on the mainland.
China chief executive K.K. Chua, whose office is decorated in bold red lip prints (and a lip-shaped sofa), shares with the South China Morning Post how the traditional business model of going door-to-door can survive in the digital age, why it pays to have been the one to teach women how to take care of their skin and how the East now sets the cosmetics trends for the West.
What were the challenges to entering the mainland market?
When I first arrived in China, it was a country at a little bit of a crossroads. It has just come out of the Cultural Revolution in 1976 and now is on to the concept that to get rich is glorious. Do we enter the market by product or by opportunity or by technology or pricing? I chose market entry by culture.
If you look at China as a society as a whole, there really was a vacuum in the value system. People were looking for a value system to guide them what is right and what is wrong. Mary Kay's culture is very strong, very ethical. I decided that I would use the culture as our arrowhead. Once you're able to establish who you are, the culture represents you. The culture represents the brand. If the culture is good and ethical, the brand becomes good and ethical. You don't have to flash it on the billboard 10,000 times for people to know what you do.
At the time, there was also the blurring of regulation. Starting in January 1997, the government restricted direct-selling activities. The following year, there was a complete ban so Mary Kay China had to close, but a few months later we were authorised to shift our business model to shop sales, and hiring salesmen, we reopened the business.
In this age of social media and the internet, how do you compete with your traditional direct-selling model?
We are on social media - Facebook, Twitter and those sorts of things, but the way we sell is through a skin-care class. In other words, we teach women how to use a cleanser, what the mask is for and what you do with the supplementary products. We have a five-step regimen of cleanser, mask, moisturiser, toner and foundation. So we have a teaching medium in our selling tool.
It doesn't sound so powerful now, but in 1963, when Mary Kay started, she was a visionary. In 1963, even in the United States, women were only washing their faces with soap.
Our representatives are running a mobile retail shop and because it's mobile, I am able to get into the Chinese tier three, four and even five cities a lot easier than the retail brands. We're strong in tier three and four now.
Our strength is personalised service. It's not about you buying from a department store and walking back again in seven days and the girl doesn't know who you are. The beauty consultant actually represents the brand. We are able to have a more intimate brand connection through what we're doing. The main purpose is I want to make you feel like the most beautiful woman in the world. That consumer will feel the difference and will say "Hey, you guys are different. Why are you different?" They start talking about the culture of Mary Kay and women love it. They may not join Mary Kay but they will say "Your products are great, it makes me feel great and look great". That's how we grew.
The company is famous for awarding pink Cadillacs to its top salespeople in the US. What kind of cars do you give out in Hong Kong and on the mainland?
On the mainland and in Hong Kong, we award our top salespeople with pink Mercedes-Benz. I am not sure how many cars were given out last year but I can tell you there are more than 3,000 Mary Kay pink cars on the road. Not all of them are Mercedes as only national sales directors get one. We have 73 national sales directors in Greater China at the moment.
What are the differences between Mary Kay and other direct-sellers like Avon and Amway?
I think each direct-selling company has its own strengths and positioning. At Mary Kay, we focus on our corporate culture as the foundation for the business. Everything is built around the culture: our product, our career path, training, sales force, recognition and more. We are, however, very much a beauty company utilising direct selling as a channel of distribution. We therefore behave very much like a cosmetics company focusing on brand building, product, service and the development of people.
What are your fastest-growing markets?
Brazil, followed by China. China is growing fast and it's big. In China, from 1998 to 2012, we have grown 41 times. I think that's pretty impressive. We do more than a billion US dollars in China right now.
What differences do you see between your customers in Asia and around the world?
Asians, perhaps because we were brought up by the Confucian system, love knowledge and to regurgitate information. We love to understand what is behind the technology. In the West, people say "Oh, this makes me feel really good!" and that's it. In Asia, it is "Oh, this makes me feel really good. What do you have in there?" They will memorise all the chemical names. All these scientific terms that the West says "don't clutter my mind up". That's the difference.
In the past, it used to be the West developed the products and the East used it. Now it's the other way round. Now the East makes the products and sells it globally. There's the BB cream and the CC cream. The world then takes it on.
Asian women are also the highest-spending globally in skin care. It is Japan first, then Korea, then China. A Brazilian woman spends a lot on fragrance. Even a child 10 years old will start using fragrances. They will say "Today I'm wearing a pink dress so I want a pink perfume". For them, it's to match that fragrance or that feeling. They'll say "This one is for the beach. This one is after I shower" and so on. It's much more lifestyle-based. For American women, lipstick is still the top.
How have your Chinese customers evolved over the past few decades?
They were very shy about using colour cosmetics - either they didn't know how to use it or society was telling them that using obvious make-up was not a good look. But more and more, we see lots of young women using them. When we're doing our consumer research, meeting our customers in small cities in China, they ask: "When are you going to launch colour mascara?"
I think things have changed. You see colour not being a part of fashion trends but a part of skin care because you've got colour with SPF 50 and all that sort of thing. They've become more demanding, vocal and confident in what they want in the past five years. Growth is single digit for skin care but the double digit is coming from colour. Fragrance and men's products, too - it's a small base but fast-growing.
The customers in China have also become a lot more discerning. The internet did a lot to bring global knowledge to them. We then have to go into a more detailed explanation when we launch a product. They're very particular about chemicals. Everything has to be natural. They want ethical, natural and safe. They've become very discerning in a very short time.