Sales practices

The old days when products were produced and allocated according to government plans have gone. Companies will have to rely on their own sales or marketing teams to get their products to the market. They now face multiple choices of ways to market their products, including direct and indirect marketing.

Direct marketing can include such practices as soliciting direct orders from customers, setting up a retail outlet, door-to-door sales, telemarketing, TV sales, direct mail sales and internet marketing. Direct selling as a way of direct marketing used to be exercised by both domestic and foreign firms in China, the most notable being Amway and Avon. Unfortunately, criminals have also exploited direct selling systems and abuses such as price frauds, scams, sales of inferior/fake and smuggled products, seeking exorbitant wind-fall profits and tax evasions have been rife. All of these seriously impaired the interests of the consumers and derailed the normal economic order and so the Chinese government issued a ban on direct selling. Other direct marketing tools such as telemarketing, TV sales and Internet marketing are relatively new to Chinese consumers and there have been reports that these tools have not been very successful.

Indirect marketing channels as described in marketing textbooks are all used in China for marketing consumer products. There are over 1.36 million wholesalers and nearly 14 million retailers of consumer products in China. Manufacturing enterprises are using diversified channels of distribution to get their products to the consumers. Many set up regional branches to perform the function of wholesaler or distributor. To establish direct communication with consumers, an increasing number of manufacturing enterprises rent sales counters at retail outlets such as department stores and employ their own sales clerks. It is not rare to see special counters in department stores which are promoted as a factory outlet.

As a part of the sales effort, the old rule of 'goods sold are non-returnable' no longer holds and many marketers offer goods on a returnable basis if not satisfied. Warranties are also offered for durable goods. It has become common for heavy items to be delivered to the consumer's home free of charge.

As the government is allowing consumer credit to play a role in stimulating the consumption of valuable items, many enterprises and retailers are offering consumer credit either on its own or in cooperation with banks to consumers. Some marketers have begun to offer interest-free credit packages. According to an estimate, 10 per cent of urban households can afford consumer credit of over RMB100,000, 30 per cent between RMB50 “100,000 and 20 per cent below RMB50,000.

It is worth noting that an increasing number of supermarkets, hypermarkets and chain stores have emerged in recent years , challenging conventional modes of retailing . They offer greater channel reach for manufacturers of consumer products. However, getting into supermarket chains is a costly exercise (see Figure 4.9.2).

Source: Beijing Evening Newspaper, 30 July 2002

Figure 4.9.2: The cost of entering the Carrefour chain