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In China, Mary Kay Has Women Thinking Pink



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The Dallas Morning News

(KRT)

SHANGHAI, China - Nervous and excited, Hao Xiaojuan flashes a warm smile as she enters a room full of young women, most wearing purple jackets and skirts and satiny pink blouses.

Everyone applauds as they survey her new black St. John suit with its high collar and gold and black bumblebee buttons.

The suit said it all. This slim 40-year-old woman with cropped brown hair had reached the pinnacle of Mary Kay Inc.'s sales force as its newest national sales distributor.

"You are now a role model, just like Mary Kay," she reads aloud from a congratulatory letter from Tom Whatley, president of global sales and marketing for the Addison, Texas-based company.

Four years after the death of Mary Kay Ash, nearly 350,000 Chinese women are emulating the icon, some earning big money selling TimeWise cleansers and facial whitening masks.

In every province, they're reading her books, which have been translated into Chinese, and singing her songs, like "That Mary Kay Enthusiasm," in Mandarin.

This fall, a few began driving her car, a pink Cadillac.

A decade after Mary Kay entered the country, China represents its second-largest market, even though a 1998 ban on direct sales threatened to ruin the venture. Within another 10 years, executives predict, this Asian giant could surpass the United States to be the No. 1 market.

The direct seller of skin care and cosmetics owes much of its success to an amazing marketing feat.

In a nation still coming to terms with memories of Mao Zedong and his Communist teachings, Mary Kay has gotten Chinese women to identify with a Caucasian cosmetics mogul with big hair.

Photos of the business legend are plastered everywhere - on the covers of books and marketing brochures and on the walls of the company's offices.

"I understand how Mary Kay felt when she was establishing her company," says 36-year-old Zhao Yinghong, a Mary Kay executive distributor in Zhengzhou, a city of 6 million northwest of Shanghai.

In 1998, she quit her job in the local tax bureau and ordered a Mary Kay training video from Texas. Using the video, she began practicing beauty classes at home.

Now, she's three months away from joining Hao as a national sales distributor, a level reached by only 30 other Chinese women.

Though Ash never visited China, thousands of Chinese women know the story of how she overcame poverty, a tough childhood, on-the-job gender discrimination, divorce and widowhood to build a nearly $2 billion company from an initial investment of only $5,000.

The women are even more impressed by the way she lived her life, from putting God and family ahead of her career to practicing the Golden Rule.

This kind of connection is helping Mary Kay rapidly expand its sales force. And it's transforming this army of Chinese women into entrepreneurs, in a country where private enterprise is a relatively recent phenomenon.

Some of these women have gained a level of financial independence and a lifestyle unheard of among their mothers' and grandmothers' generations.

Last year, Mary Kay China's top national sales distributor, Tang Ke, earned $665,446. But she isn't the only one benefiting from a six-figure income.

Six years ago, in the southern Chinese city of Guangzhou, Yang Fan gave up a promising career as an endocrinologist to pursue a Mary Kay career. By 2003, the former doctor was a national sales distributor.

Last year, thanks to her Mary Kay income, the petite 36-year-old bought a nearly 3,000-square-foot house, more than enough room for her husband, baby daughter and parents.

By next year, she expects to trade in her first car, a Buick Regal, for a pink Cadillac CTS sedan.

This past May, her husband left his job as a surgeon to open his own hospital. His wife's Mary Kay earnings - $24,691 a month - helped make his dream possible.

"I don't remember how many times I've read the Mary Kay book," Yang says, pulling out a copy of Mary Kay on People Management from her purse. "The women in China desire an opportunity like the one Mary Kay offers."

Like thousands of U.S. companies, Mary Kay is counting on China to drive its future sales growth. By 2009 or 2010, half of Mary Kay's total sales are expected to come from outside the United States, up from 35 percent today.

In China, the company's business is booming, with 50 percent annual sales growth over the last two years. Already, Mary Kay China boasts a sales force almost half the size of the one in the United States, where 700,000 women sell Mary Kay products.

China holds so much potential that executives at the private, family-owned company have set their sights on an ambitious goal: earning a billion dollars in annual sales. Today, it's almost halfway there.

Mary Kay has been making money in China since 2001, and the country ranks as one of its most profitable markets, says Paul Mak, Mary Kay China's president.

The 47-year-old chemical engineering major with glasses and thinning black hair seems a bit out of place amid the pink and gray cubicles at Mary Kay China's main office in Shanghai. But he understands why Chinese women can relate to Ash.

"She's a woman. She's gone through some struggles. She became successful," he says. "It's almost like a sisterhood."

Mary Kay entered China in 1995 with the goal of transferring its culture to a land where many older women, after years of restrictions under Communist rule, don't wear makeup.

A vibrant and unique blend of Christian values and enlightened management, the culture is intended to embody the spirit of Ash. Executives credit the culture, more than anything, for their success.

The business started in China with seven employees, crammed into a small room in the business center of Shanghai's Portman Ritz-Carlton Hotel, recalled K.K. Chua, Mary Kay China's first president, who now oversees the Asia Pacific region.

Any skin care or cosmetics products sold in China must be made in the country. So Mary Kay leased two floors of a six-story factory in an industrial park in Hangzhou, a two-hour drive southwest of Shanghai.

Then it advertised openings for beauty consultants, Mary Kay's entry-level sales position. The company received 2,000 applications. It narrowed the list to 800 women, then 200 and finally hired 22.

After three weeks of training, the new consultants went out into the streets of Shanghai. Mary Kay repeated the process in Hangzhou and Beijing.

One of the new recruits that year was Hao. At the time, she worked for a lamp company in Shanghai, after having held jobs as an English teacher and a foreign trade clerk. Though she had never heard of Mary Kay, she accepted a colleague's invitation to one of the company's beauty classes. Perhaps it could help with her acne, she thought.

In China, these skin care and makeup sessions are held in offices, rather than private homes. Most Chinese live in small houses or apartments and don't feel comfortable inviting in strangers.

At the class, Hao learned about the company's culture. She became captivated by the Horatio Alger-like story of the American woman who looked like a kind grandmother.

Even though she was earning only $123 a month, Hao was single at the time and had saved enough to spend $556 on her first order of Mary Kay products. She began holding 10 beauty classes a week in her spare time. When she went to work full time for Mary Kay, she increased her schedule to 15 to 18 classes a week.

A year later, she rose to the sales director position. But she missed her parents, who lived north of Shanghai in Dalian, a seaport with 5.2 million people on the southern end of Liaodong Peninsula. So she returned there in 1997, even though Dalian didn't have a Mary Kay branch office or a distribution center at the time.

A few times a month, she rode a bus six hours each way to Shenyang, north of Dalian, to pick up the cleansers, moisturizers and masks she had ordered. Slowly and steadily, Hao built a network of customers and recruits.

Then, in March 1998, she suddenly seemed in danger of losing it all.

That month, the Chinese government banned direct selling, in response to fly-by-night companies that had set up pyramid schemes and other scams, cheating unsuspecting victims of their life savings.

Mary Kay China's business skidded to a halt. At the time, the company had 200 employees and a sales force of 11,000 women.

Determined to stay the course, Mak, who had been Mary Kay China's president for only two months, asked executives in Texas for two things: a letter expressing the company's commitment to the market and a large amount of cash. He worried that most beauty consultants would return their products and ask for their money back.

That never happened. And executives in Texas didn't lose faith in China, sending both the letter and the cash.

For the next six months, Mary Kay China suspended its operations. Although it had bought land near its factory to build a new plant, those plans were put on hold.

Meanwhile, nearly all of Hao's colleagues on the Mary Kay sales force had left. Her parents urged her to leave too. She agonized over the decision for three days.

"That was truly a difficult time for me," she recalls. "I thought about whether Mary Kay was a good company or not."

But deep down, she believed Mary Kay would survive. If its culture stayed the same, then she needn't worry about temporary obstacles, she told herself.

Without any model to follow, a team of Mary Kay China employees took three months to come up with a new business plan, a kind of hybrid between a direct sales operation and a traditional distributorship.

In September, Mary Kay China reopened its doors, having obtained government approval and licensing. Though the company needed to rebuild its salesforce, none of its employees had left.

In Dalian, Hao restarted her business in a rented office in the city's downtown. Under the new rules, she became a distributor, not a director. Instead of earning a commission based on a percentage of her recruits' sales, she would now earn a fee from Mary Kay based on the sales at the beauty classes in her workshop.

The beauty consultants she recruited became sales promoters, not independent sales agents. They receive commissions based on their sales. But unlike in the United States, they don't own the products.

The changes also brought a new Mary Kay branch office to Dalian. Hao no longer had to travel six hours to Shenyang. The government now required branch offices wherever the company's products were sold.

However, not long afterward, the Industrial and Commercial Bureau, a government agency, told Hao that she couldn't work with Mary Kay's beauty consultants anymore. Once again, many of her colleagues left.

With her business in jeopardy, she met with the agency's representatives, explaining to them that she wasn't violating the ban on direct selling.

After more meetings, they finally agreed with her and she reopened her workshop.

Hao went on to prosper despite the ban, and so did Mary Kay.

Next spring, the company plans to open an $18 million factory on the land it bought eight years ago. It's running out of room at its current plant, which seven days a week, 24 hours a day churns out millions of tubes and bottles of TimeWise Day Solution, Silk Plus Eye Cream and Formula 1 Moisture Rich Mask.

The new factory will be four times larger than the current plant. It will feature a second-floor walkway so the thousands of beauty consultants expected to tour the facility each year can easily peer down at the production lines below.

The building will also contain a small museum with some Mary Kay memorabilia from Texas and an "On Silver Wings" statue like the one in the lobby of the company's Addison headquarters. "On Silver Wings" is the poem that Ash often used to conclude her speeches.

Although Mary Kay works diligently to instill its culture among its China employees, the company has made some adjustments.

In a country lacking religious freedom, Ash's mantra - "God first, family second and career third" - became "Faith first, family second and career third." "Principle" is often used instead of "faith". And unlike in the United States, prayers are absent from large company gatherings.

The company also discovered it needed to broaden the appeal of its culture. In addition to Ash's principles, such as her belief in the beautiful potential inside each and every human being, it added Stephen Covey's "The 7 Habits of Highly Effective People" to its employee training seminars starting in 2000.

But one of its biggest challenges involved something much more mundane: where to hold its annual seminar.

The seminar, modeled after the one held every summer in Dallas, brings together the company's managers and thousands of its sales force members for award ceremonies, executive speeches and educational sessions. The event helps motivate Mary Kay's sales force each year.

Two years ago, the Chinese government, which is suspicious of large gatherings, told Mary Kay it couldn't hold its seminar. It wanted the company to conduct smaller meetings around the country. But that would have defeated the seminar's purpose.

So Mary Kay moved the event last year to Hong Kong. This past August, attendance reached 16,000.

But Hong Kong isn't an ideal location, Mak says. It's difficult for many Chinese to obtain visas to travel there. And Hong Kong is more expensive to visit than cities on the mainland, a crucial factor since most sales force members must foot the bill themselves.

Mary Kay has managed to keep one of its key cultural emblems largely intact: the pink Cadillacs.

Last month, China's first pink Cadillac CTS sedans wound their way through the crowded streets of Shanghai. For the first time, six top-performing national sales distributors in China won the company's ultimate status symbol.

Winning a car means even more in China than in the United States. In Shanghai, China's most cosmopolitan city, the streets and sidewalks are still jammed with bicycle riders. Cars have only recently become affordable for middle-class Chinese.

Among the Mary Kay faithful, a car ranks alongside a diamond bumblebee pin, a symbol of overcoming adversity, as the most coveted prizes.

Becoming a national sales distributor means Hao is only weeks away from getting behind the wheel of her own Buick Excelle, a midsize car made and sold here that's also part of the Mary Kay stable.

"I will drive it soon," she says excitedly.

The Excelle's arrival will signal the start of a new phase of her Mary Kay career. It will also coincide with an important change in government policy: the lifting of China's seven-year ban against direct sales.

The end of the ban doesn't mean Mary Kay will be able to operate in China the same way it does in the United States In fact, the new rules, which go into effect this month, could make it more difficult for Mary Kay and other direct sellers to expand their sales force.

No longer can distributors like Hao train beauty consultants. Instead, only Mary Kay employees can perform this task. In addition, beauty consultants will have to pass examinations to become certified. And starting next year, teachers, doctors, students and military and government workers can't do direct selling part time.

"That is going to be a concern for us," Mak says. "It makes it a little harder."

But the new rules won't dramatically alter Hao's life. Beauty classes will still go on as normal in her two-room workshop in downtown Dalian. She will continue helping over 100 beauty consultants and more than 200 distributors.

The day Hao officially debuts as a national sales distributor is filled with ceremony.

Twenty-one lower-level Mary Kay distributors, women Hao helps, form a circle around her. The lights go out. And the smell of melting candle wax begins to fill the air.

With her husband and 7-year-old daughter looking on, Hao calls out the name of each distributor. She gives each a hug, a personal note and a candle in the shape of a small ball of pink roses.

A few distributors silently cry. Others dab at their eyes. Gradually, a glowing circle of pink lights appears in the middle of the room.

Then, Hao picks up a tall pink candle and places it at the bottom of a giant heart-shaped candleholder. Her distributors follow her, setting their lit candle balls in the slots around the pink heart.

Everyone gathers around the now burning symbol of love, clasps hands and silently makes a wish. Together, the women blow out the candles and clap.

Later, they gather for lunch in a large banquet room at Jade Garden, a Chinese restaurant in Shanghai.

Mak stands at the front of the room and presents Hao with a sparkly pink book containing memorable quotes from Ash and a plaque commemorating her achievement.

"Everything was beyond my expectations," she says. "I'm very touched."

After thanking everyone, she hands the microphone back to Mak. He gently reminds the audience that getting to this point hasn't been easy. There were challenges and obstacles, but also joy and laughter.

"We can see today that she's a role model," he proudly announces. "Today, I told her that she is Mary Kay's daughter."

---

(c) 2005, The Dallas Morning News. Distributed by Knight Ridder/Tribune News Service.

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