We often hear of U.S.-based network marketing companies expanding into international markets, including Asia. Rarely do we see Asian companies opening up in North America, so when we heard of Hui Chen, a Chinese billionaire and network marketing company owner, coming to Canada and the United States to grow his business, we were curious to get his perspective on the network marketing business model and how he envisions its future in China and internationally.
Chairman Hui Chen is a renowned business leader in China, a global expert in the field of mycology, and a world leader in the industry of edible and medicinal mushrooms.
In October 2002, Chen founded his network marketing company in the Jiangsu Nantong Economic and Technological Development region, specializing in functional health food exploration, new innovations in wellness products, and environmental health technologies.
Hui Chen's company is one of the few Chinese companies to have obtained the Direct Selling License of the People's Republic of China since 2008. In 2010, Hui Chen's company's annual sales volume reached $100 million USD. Its recent inroads into new markets in North America, Japan, and Thailand are shaping the company's long-term objectives of opening new markets in twenty to thirty countries within the next five years.
We recently visited Chairman Chen at his company's international expansion headquarters in Vancouver, Canada and asked him why he chose network marketing as distribution model for his company. — J.M.G.
Tingzhang Chen shows how to grow mushrooms.
Four Sages of Chinese medicine on the company campus.
Chairman Chen recognizing top leaders at company event.
Chinese Lingzhi Cultural Museum.
Company training hall can host up to 1,000 people.
Company campus and headquarters in Nantong.
How did you become an expert in the field of mycology?
I grew up in a family that has cultivated mushrooms for many decades. My father is the true founder of our company.
In the 1950s, when the people of Nantong had just started to become educated about the edible and medicinal mushrooms, my father took the initiative in testing these unknown waters. He conducted all the best scientific research on several species of mushrooms and converted that knowledge into a viable industry.
During that time there were several famous individuals regarded as the kings of their industries. The first was Wang Peiheng, known as The King of One-Thousand-Year-Old Eggs, who became wealthy by breeding ducks on a large scale, and researching and developing the famous "thousand-year-old" eggs. My father, Chen Tingzhang, became known as The King of the White Mushrooms.
My father always pursued his dreams and goals, and was very bold and creative with innovative ideas. This was the kind of rich environment in which I was raised. Nantong is my native soil, only one hour away from Shanghai. Education here is considered the best in the country.
Deep in my heart I believe that in order to achieve something great, we must make ourselves into the right person first. I'm the ninth and youngest child in my family, but I was not spoiled. Thanks to my rigorous education, I always set high standards for myself.
Why did you start a network marketing company, even though your father's company was doing very well?
When I took over my father's company, I did not choose network marketing right away. Instead, I came to it through a kind of natural selection.
After achieving a certain level of recognition and a reputation for reliability, we became the supplier in edible mushrooms for an entire list of network marketing companies from Malaysia, Singapore, and Taiwan.
Throughout the vetting process of what I saw as an American model, I came to the conclusion that it was a very effective method to promote products through the exchange and interaction between people.
An important factor to keep in mind is that a high quality product is the fundamental element. It is only when we have a unique product that we can successfully use the direct selling method to promote it. This is because usually people recommend the products to their closest friends and family first, and everyone wants to give the best to their loved ones.
Distribution through direct selling is just one of the many things our company does, as we continue to focus on manufacturing, research and development. The direct selling arm is definitely an important part of our business, as it has a sentimental meaning and purpose to help others.
When joining the World Trade Organization, China promised to make the direct selling business model legal, so this was when I adopted it myself. Network marketing makes our business all the more meaningful, as we are changing people's lives.
Can you give us a little overview of the history of network marketing in China?
Direct selling was introduced in China around 1992, but at the time there was no regulation or supervision, and many problems arose. As a
result, the Chinese government banned direct selling in 1998. From 1998 to 2001, the whole direct selling sector in China was in a terrible mess.
Any new business model represents a challenge, and with that comes motivation and improvement. Only those who are daring and courageous enough to take on the challenge succeed. At the same time, there is less competition, which comes with obvious advantages. Those who start the trend are one step ahead of others.
I believe that in the future, when China has a more mature and stabilized economy, there will be a lot more direct selling companies, and that's when there will be a lot more competition. However, those who started early in this business will have more opportunities to grow and learn about the market response, and will be more experienced in this field.
Even though it has been here for nearly a decade, network marketing in China is still in its infancy. The majority of multilevel marketing corporations in China are not fully developed. Because of that, the government is closely watching every move they make. Company management at any organization needs to be aware of the potential pitfalls that come with this kind of scrutiny. At the same time, they need to recognize that change and revision are a necessary part of the process.
In 2005, the government of China set out to develop and standardize a set of laws and regulations to govern the network marketing sector. Although much progress has been made, some of those laws are not yet official. Until they become solidified and the boundaries clearly defined, I feel it has been wise for my company to keep a low profile, especially in our early years of development. This has been very beneficial to us for a number of reasons.
As has been the case in many new markets, countless new companies in China that received business permits early on have already had their licenses revoked due to questionable manufacturing practices, false advertising, and over-promising and under-delivering.
Our company has made sure it can be looked upon as a model of business ethics and manufacturing integrity. It has taken all the steps necessary to become vertically integrated and highly effective in all areas. Because of that, we have been fully licensed to do business—first as a manufacturer and product formulator, then as a respected emerging force in the field of network marketing.
Once a company gets licensed in China and develops a solid reputation, there are unlimited opportunities for growth, since we have such a large population and pool of resources.
What does the Chinese government typically look for when evaluating new companies?
Many network marketing companies tend to take what is often referred to as a "gunslinger" approach to building their business. You may hear them claim boldly, "We will surpass Amway in three years!" The truth is that 90 percent of all new network marketing companies fail within the first eighteen months. Most are victims of that kind of brash approach to "empire building."
Companies that try to force markets often become casualties of their own reckless behavior. That has particularly been the case with network marketing, especially in Asia. Some network marketing practices in global markets have been characterized by elaborate promises and failed expectations that have resulted in restrictions in many nations. China is no exception.
During our formative years, from 2002 to 2011, we developed a well-directed work ethic and mature understanding of our market potential. We now feel comfortable accelerating our growth and approach to the global marketplace.
Internally, we have been able to cultivate a talented and dedicated team of distributors and leaders. As we continue to strengthen our company's core ability to compete, we like to say, "For the last decade we have grown our wings; now we are ready to soar."
Despite the challenges, our government does recognize the benefits of growing the network marketing sector for the economy, especially the job market. There currently are at least three network marketing companies in China that exceed $700 million in annual sales. Without any doubt, this emerging profession will be able to give many people the opportunity to earn a living.
In our company, we see the unemployed as treasures. What better business than to bring health to people, while at the same time bringing wealth to those who are working hard to promote it?
In China the jobless are easily ostracized. Many people are going through despair because of being unemployed, and thanks to our business they can regain their confidence and self-worth.
Education has always been a strong value in your culture. How does that translate into the way you train your field force?
Education is essential in every area of life. I believe that if you have lots of education, you will make huge progress, and if you have little education, your development will be small. With no education, you will have no development.
As important as education is, the method used to educate people is just as crucial. If we can grasp the right way to educate people, an approach where it becomes very simple and duplicable, then we have succeeded.
Chinese children arrive at school at 7 a.m. and leave at 6 p.m. One day of schooling in Asia translates to three days of schooling in the West. We are extremely dedicated to education, especially in my hometown Nantong.
To provide the best support to our member-partners (distributors), we help them expand their business through training sessions, classes, meetings, and career-development conferences, which take place mostly on our own campus.
We have a four-star hotel with more than twenty conference rooms, 200 guest rooms, and restaurants and entertainment to match. We can arrange for more than 600 guests to stay and 1,300 guests to dine in our dining hall. Our member-partners can invite a large number of guests to visit our headquarters, plantations, research centers, production facilities, office buildings, and our Lingzhi Cultural Museum of China.
When people visit our campus, we first teach them the importance of joining the right company. When choosing a company, look at the origin of its product. Will it be able to help a lot of people? Does the company work to protect the environment at the same time? The next thing is to see if this company has its own social responsibilities to serve the public. Making the right choice is crucial, and it requires careful consideration and analysis.
Our distributors come from all walks of life and a variety of circumstances. Some had reached a critical point where they had to make some serious decisions about their career and family. Others were facing some major financial crisis, and that became their defining moment where they saw a new beginning was possible.
There is a fine line between success and failure, which is determined by each individual's attitude and spirit. As long as you keep up the strong spirit (symbolized in our culture by the Lingzhi mushroom) you will be able to break through any barriers, turn your life around, and realize your dreams.
Most importantly, we teach our distributors to have a balanced and positive attitude toward everything they undertake.
What was it like coming to North America?
Although our business is successful in China, we anticipated many challenges when we opened our market globally. The key to overcoming these challenges is adjustment.
Coming to North America, we have to learn and comply with local laws and regulations. As the birth country of network marketing, the U.S. is much more mature in this field. We hope to integrate our business into Western culture; we want to understand our differences and address local needs. Our goal is to bring the best of Eastern culture, but we also want to learn from your abundant and valuable experiences in this business sector in the West.
Our products are based on thousands of years of traditional Chinese medical wisdom, and we realize it will take time for people to understand and accept the Chinese tradition.
Network marketing came to you from the West. What can Westerners learn from the Chinese?
If Westerners can learn about the old Eastern culture and traditions, including the philosophy of the five elements—wood, fire, earth, metal, and water—I would be very happy. If they can apply it to their own lives, whether by taking better care of their bodies or applying those philosophies to life and work, I believe they will benefit greatly from this knowledge.
From a business point of view, I believe they can learn from our integrity and persistence. Our number one rule for business is to work hard, never give up, and dedicate our lives and soul to it. We also are accepting and forgiving of others. For instance, if members are leaving us for other companies, we should not antagonize them, but instead wish them the best of luck and start addressing the weaknesses in our own company that caused them to leave.
For many of us, work is an enjoyable process. While we may work many hours a day, it makes us happy and thus, it does not feel like work at all. Enjoying your work will bring a healthy balance to your life. When you enjoy working it brings you happiness and that in turn will bring you health and longevity.
This is exactly how I feel. I enjoy every moment while I'm working because I can share precious information with many others. That's why I will never tire from it.
We've noticed you surround yourself with powerful women, for example Barbara Liang, your global CEO. How do you see the role of women in business?
I believe the capabilities of a woman are no less than those of a man. Nonetheless, this stereotype of women being less capable is still very common in Chinese culture. The team I have built includes those who have the heart to follow me in creating a long-term, sustainable business. I know we share the same values and beliefs as we stand together on this platform. This is simply about recruiting outstanding leaders to represent our company and its mission.
There are many outstanding women, and it is a shame they have not been placed on the right platform and given the opportunity to shine. As long as the right person is placed in the right position, the results will certainly be no less for women than for men.
We have two excellent examples: the CEOs of two very successful companies in China, Amway and Avon, are women. The CEO of Amway China is doing a better job than many male CEOs of direct selling companies in China, which shows that both genders are equally capable of achieving excellence. Research has shown that in countries where the president or prime minister is female, more harmony is achieved within society and at home as well.
Not only do I give women an equal opportunity, I actually put them in my front line of consideration. I have always believed that what a man is capable of, a woman is equally capable. We have to be understanding and tolerant of both men's and women's weaknesses, and integrate the characteristics of both in order to have a healthy balance.
Here in China, 65 percent of our distributors are female; among the top earners, 80 percent are female.
How do you envision the future?
Network marketing has made great strides in China over the past twenty years. It is on the right track and seems to be taking the moral high ground. The attitude of speculation and gambling to become rich overnight in this business is already something of the past. Lies and false hopes may temporarily blind consumers and distributors, but it will never lead one to true success.
Thriving in impossible terrain and flourishing in peril, the Lingzhi mushroom has over the years come to symbolize all the best aspects of human nature. More than just an herb or grass, it has become a symbol of the invincibility of spirit the Chinese people have shown for more than 5,000 years. I believe the Lingzhi spirit is needed by the entire network marketing profession. I have had the privilege of witnessing many mainstream people succeed—attain wealth, gain stature in their communities, and improve their quality of life. By letting their financial struggles fuel their desire for education and entrepreneurial opportunity, they show the same spirit of "turning trash into treasure."
I believe network marketing companies should be generous and willing to give. Philanthropy should be the responsibility and basic requirement of every company and person. In 2003 our company sponsored children from low-income families who could not afford tuition to attend school. When SARS hit China that same year, we donated $180,000 worth of products and supplies. We also donate spores and specimens to mushroom farmers.
Network marketing brings many entrepreneurial opportunities into any society, and this is something that traditional companies cannot do. Being able to achieve success and at the same time help millions of people to grow and prosper are the two things that combined make me the happiest person alive.