Best World

[Boon]

I like the approach that many here take the Positive and direct approach of discussing with the company, compared to speculating what could have happened. I think over the long term. This approach help our invested companies to growth and avoid risk. The approach bw took in taking feedback open and positively also ensure sure improvement over time.

Just want to shared my similar experience. I have some business network so I explore with BE on distributing their business there, as well as in singapore. They explained that because of the regulatory constrains, the compensation models are completely different for china and it really looks more like export than DS. Hope this gives those vested some peace

"WE are NOT in compliant with the rules and regulations of business operations under China’s laws."  

Do you expect to get such a NAIVE reply from them? Ha-ha! 

[Boon]

I like the approach that many here take the Positive and direct approach of discussing with the company, compared to speculating what could have happened. I think over the long term. This approach help our invested companies to growth and avoid risk. The approach bw took in taking feedback open and positively also ensure sure improvement over time.

Just want to shared my similar experience. I have some business network so I explore with BE on distributing their business there, as well as in singapore. They explained that because of the regulatory constrains, the compensation models are completely different for china and it really looks more like export than DS. Hope this gives those vested some peace

"WE are NOT in compliant with the rules and regulations of business operations under China’s laws."  

Do you expect to get such a NAIVE reply from them? Ha-ha! 

Speculation = the forming of a theory or conjecture without firm evidence.
 
The representation made by the CEO of the Company that “your hard work in building up a strong network team entitle you to earn a passive income and this passive income can even extend to become a lifelong income with sustainable earnings for your family even after death." constitutes a piece of evidence which shows BWL’s business practices in China is NOT in complaint with the 禁止传销条例

[Boon]

This is one of the question I asked BW IR:

Question: I am concerned Best World under attack by short seller/s. It was reported in Reuters that Nuskin and other direct selling companies have come under increased scrutiny because short sellers and other critics have accused them of running illegal schemes. How can Best World navigate such accusations? As a result of increased publicity, the risk of short seller attack has also risen.

Answer: Thank you for giving us your feedback. Best World adheres to strong principles of legal business, transparency and corporate governance and is fully compliant with the rules and regulations of business operations under China’s laws.

Above is the response from BW IR.

Additionally, just to share since I have some exposure in the MLM industry. Most direct selling companies (whether single level or multi level) often have claims against them on over exaggerated promises and/or illegal practices. Besides Nuskin, Amway was sued before too. This is common in this industry. Despite it was normally the conduct the of the IBOs, the company, to a certain degree has to take responsibility. Hence if one invest in a direct selling company, one should be prepared to such attacks.

I have no doubt, since day 1 of my posting in BW thread that there could be some unofficial practices. Whether BW is aware or not, I do not know (you may refer to my earlier postings). I have given my 2 cents worth about how some independent business owner (IBO)...the black sheep tried to outsell others by not following company practices. It is difficult for the company to exercise  control especially when the membership explodes. Hence I would rather spend quality time to figure out what is the true value of BW..with China DS license and without. What should be the fair value if China DS is out of the equation...not sure if Mr Boon can use his knowledge and skill to advise on that, which is in my opinion, more meaningful. 

Also, how much will the export revenue in China be affected if there is no DS license. According to BW IR, currently all DRs Secret product is sold freely in ALL of China by Drs Secret outlets/workshops, and is not through DS model, so how much will the business be affected, would be good if someone can offer their insights .

Please do your own diligence.

(Vested)

Nu Skin:
 
7. the Company’s growth in Mainland China was achieved in compliance with China’s laws and regulations. 
 
In the end, what happened ? what is the truth?
 
NHT:
 
7. Defendants claimed that NHT did not violate Chinese law. 
 
In the end, what happened ? What is the truth?  
 
BWI:
 
Best World adheres to strong principles of legal business, transparency and corporate governance and is fully compliant with the rules and regulations of business operations under China’s laws. 
 
In the end, what will happen ? What will be the truth?

“your hard work in building up a strong network team entitle you to earn a passive income and this passive income can even extend to become a lifelong income with sustainable earnings for your family even after death." is in complaint with 禁止传销条例?
___________________________________________________________________________________________________________

1)  Your question to the IR is too general – lack of specific and not probing enough – general question gets general reply.
2)  “The representation made by the CEO of the Company that “your hard work in building up a strong network team entitle you to earn a passive income and this passive income can even extend to become a lifelong income with sustainable earnings for your family even after death." constitutes a piece of evidence which shows BWL’s business practices in China is NOT in complaint with the 禁止传销条例, should be your follow-up question.
3)   The IR claims that “Best World adheres to strong principles of legal business, transparency and corporate governance and is fully compliant with the rules and regulations of business operations under China’s laws – but based on 2) this is not true.
4)  We are not talking about misconduct or wrong doings on the part of IBOs here, which I agree investors have to take into considerations. 
5)  But we are talking about the illegal practices of multi-level-commission – a company wide policy which is set by the Company and not by the IBOs.
6)  Is it meaningful to work out the true value of the company without sorting out first its true modus operandi in China?

[Boon]

[Image: iStock_000018587110Small-300x168.jpg]


MLM COMMISSION PLAN QUALIFICATIONS AND RANK ADVANCEMENTS
Article by: Mark Rawlins | Founder & CEO, InfoTrax
May 19, 2010 
http://mlm.com/mlm-commission-plan-quali...k-rawlins/

Rules define the requirements a distributor must meet in an MLM company in order to be paid commissions on downline activity. They also specify the criteria for earning awards or benefits from the company. For example, how much must a distributor sell each month to remain qualified at the current rank? And, does the company require a distributor to take certain training classes before moving up in rank?
A network marketing company’s commission plan will almost certainly have to include the following two categories of rules: 1) commission qualification rules, and 2) rank advancement rules.A company has to attribute qualifications and rank advancement to the act of work.
Distributors want to be able to depend on a clearly defined set of rules that tell them what they have to do to be paid each month, and what they have to do to advance in rank. Basically, a company builds its qualification rules to set the distributors on the path the company wants them to follow, and then puts in a system of commissions that reward them for following that path.
There are two kinds of qualification rules: those that qualify distributors for rank advancement, and those that qualify distributors to receive commissions each month. This is where the issue of having ranks and lots of commission types creates a challenge for a company. The more ranks a company has, the more rules are required to advance from rank to rank and to qualify to earn each of the commissions associated with each rank. This means the commission plan description becomes more complex. The more complex the commission plan becomes: 1) the harder it is to explain, and the more time you need to explain it, 2) the more confused people are, and 3) the more distributor service people the company has to employ. You see the problem.
Companies can help alleviate this situation by having a consistent method of advancing from rank to rank. The advancement rules should set up a logical, consistent manner for: 1) commission payout for each rank, 2) achieving a rank in the first place, and 3) maintaining qualifications. In general, a company should make the rules as simple as is feasible to achieve the desired results.
In most companies, the distributors advance in rank by building their organizations and increasing their downline sales volume. A company always needs to keep the top rank in mind as it defines the rules for the other ranks.
Another thing to remember is that once distributors reach the highest rank, it’s tempting for them to quit building their organization and “retire.” When a company defines the top rank, it needs to make sure that when people do achieve that rank, their earnings are in line with the respect the company wants the rank to command. For example, if a 4-Star Diamond Rank is the top rank, and some distributors at that rank that are earning only $2,000 a month, it won’t command much respect. This is especially problematic if some 4-Star Diamonds are earning $2,000 a month and others, $100,000 a month.
Once a company decides what qualifications to use, it’s important to build consistency as a distributor moves from rank to rank. A distributor shouldn’t have to build one way to become a sales leader and then change methods to get to the next rank. A company shouldn’t, for example, encourage distributors to build their downline deep, and then switch to having them build their downline wide in order to advance to the top rank. Once a company decides which qualifiers to use, the next question it must consider is if distributors must reach the qualification to achieve a rank within a month, several months, or if they have forever to achieve it.
Caution: Make sure your commission plan isn’t rewarding non-producers. Examine what happens with your plan if distributors fail to produce. Do they continue receiving compensation at the level of their performance? If not, you’re rewarding nonperformance at the expense of performers. What one man receives without working, another man works for without receiving.
In conclusion, if you want to understand a commission plan, you must understand its qualifications and rank advancement rules. If you do not understand these, you cannot understand the plan.
______
Source: Understanding Multi-Level Commissions and Their Role in a Successful Company, Mark Rawlins.

[Boon]

Amway China FY2016 revenue:
USD 2.57 billion (RMB 17.7 billion)
Number of agents = 166,000
Average sales per agent = USD 15,482 per agent
Average commission earned per agent ( assuming 30% max allowable by the Chines DS law ) = 30% x USD 15,482 = USD 4,645 per agent

Compare to DMJ/CGL 's at least SGD 500,000 income per year (Top 10 Earners 2016)
________________________________________________________________________________________________________________________________

Struggling in China, Amway bets on technology for turnaround
Matthew Miller
MARCH 22, 2017 

http://www.reuters.com/article/us-china-...SKBN16T0Z5

BEIJING (Reuters) - Global direct-selling company Amway Inc is looking to rebuild its business in China with the help of improvements such as an online ordering platform for its agents and experience centers, as sales in the country have fallen over the past three years. 

Two decades after entering China, the country remains the biggest global market for the Michigan-based firm, representing about 30 percent of its $8.8 billion in total sales last year. But China revenue has contracted from nearly $4 billion in 2013, to reach 17.7 billion yuan ($2.57 billion) in 2016. 

"We're struggling a bit here now," Doug DeVos, Amway's president, told Reuters in an interview late Tuesday in Beijing. 

DeVos said the China business was suffering from "a direct selling cycle" and faced growing competition, with more than 90 direct selling companies now operating in the country. 

China's direct sales market has doubled in size over the last five years, with the retail sales value, excluding sales tax, reaching 135.8 billion yuan in 2016, according to market researcher Euromonitor. 

Amway's active sales force has contracted by about half over the past three years to 160,000 agents, while its permanent workforce has declined slightly to 8,000. It operates 250 stores nationwide, fewer than earlier. 

To revive its business, Amway is turning to the Internet to make improvements for its sales force in China, DeVos said. The company is allowing agents to use an online platform to order and re-order products, while converting stores into so-called "experience centers" designed as both showrooms and clubhouses. 

About 50 percent of all China sales are now made online, compared with around 10 percent five years ago, said Amway Greater China president Gan Chee Eng. 

Last month, Amway said its total revenue in 2016 was down 7 percent from a year ago. Asia-Pacific, which also includes Japan and South Korea, remains the company's most important region, representing about two-thirds of total sales. The privately-held company does not disclose its profitability. 

China is expected to remain the company's biggest market for some time, DeVos said. 

"China is going to have new markets (internally) for some time," said DeVos. "We're going to work through the current situation, because we have some history with it, and we're going to find our way back." 
Reporting By Matthew Miller; Editing by Himani Sarkar

[Boon]

 
Very interesting document indeed – class action against Nu Skin (illegal MLM practices in China)
 
Much to learn from it………………….
_______________________________________________________________________________________
 
http://securities.stanford.edu/filings-d...V00033.pdf
 
 
I. NATURE OF THE ACTION
This is a federal securities class action on behalf of a class consisting of all persons other than Defendants and certain affiliated persons who purchased or otherwise acquired Nu Skin securities including options between May 4, 2011 and January 17, 2014, inclusive (the “Class Period”), seeking to recover damages caused by Defendants’ violations of the federal securities laws and to pursue remedies under the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 promulgated thereunder.
 
2. Nu Skin is a global multi-level marketing company that distributes personal skin care products and nutritional supplements in the Americas, Europe, and the Asia Pacific region. Multi-level marketing (“MLM”) is a marketing strategy often used by companies making sales directly to consumers where the salespersons are compensated not only for products they sell, but also for the sales of other salespersons whom they recruit.
 
3. Prior to the start of the Class Period, growth in Nu Skin’s business in some of its larger, more developed markets including Japan and the United States was on the decline.
 
4. To offset the slowdown in growth in Nu Skin’s major, more developed markets, Defendants orchestrated a plan to substantially expand Nu Skin’s presence in the People’s Republic of China (“PRC” or “Mainland China”). The decision to focus the Company’s resources on growing business in the PRC was made despite stringent regulations in China prohibiting the very type of multi-level marketing and multi-level compensation employed by Nu Skin in all of its other markets and despite the limited success Nu Skin had achieved in penetrating the Chinese market as a result of those stringent regulations.
 
5. In early 2011, Defendants took what was already a modest, but illegal multi-level marketing business model and multi-level compensation plan in Mainland China, and essentially put it on steroids, easing some of the restrictions they had put in place, rapidly recruiting new distributors who received inadequate, if any training, authorizing the rapid expansion of downlines, and permitting the direct sale of products outside Nu Skin’s brick and mortar stores that were not licensed for direct selling.
 
6. Defendants also encouraged Nu Skin’s existing sales distributors around the world, including its Chinese-speaking distributors in Hong Kong, Taiwan, and Southeast Asia, to recruit sales promoters and distributors in Mainland China in much the same way they recruited distributors around the rest of the world. This included signing up sales distributors in Mainland China, paying them strictly on commission, and requiring the new recruits to sell specified minimum monthly sales levels of Nu Skin products while promising to reward them handsomely not only for selling Nu Skin products but also for recruiting additional new sales distributors from whom they could share their sales commissions. Defendants masterminded this massive expansion in China knowing that Nu Skin’s form of multi-level compensation violated many of China’s regulations on direct selling and prohibitions on pyramid schemes.
7. During the Class Period, Defendants repeatedly and misleadingly misrepresented how Nu Skin was operating its business in the PRC in order to create the appearance that the Company’s growth in Mainland China was achieved in compliance with China’s laws and regulations. Defendants told investors that Nu Skin developed a “hybrid” system of marketing the Company’s products in the PRC, creating “teams” that marketed Nu Skin products and shared in commissions.
 
8. In reality, Nu Skin was operating the very same MLM system in Mainland China that it was operating everywhere else. Confidential witnesses, and internal documents used to train new employees confirm that Nu Skin was not complying with China’s direct selling and anti-pyramid selling regulations. In fact, quite the opposite - Defendants were permitting the establishment of downlines in China in direct violation of China’s rules prohibiting multi-level marketing. Moreover, Defendants knowingly failed to put in place a system of internal controls that would have ensured that new sales representatives and direct sellers were trained in a way that complied with Chinese law. The training that did exist was lax and inconsistent and not at all enforced – another violation of China’s regulations on direct selling.
 
9. Quarter after quarter, Defendants continuously touted astounding growth in Mainland China attributing it to enthusiasm for Nu Skin’s anti-aging products and general business momentum all the while failing to acknowledge how that growth was really achieved in China – through multi-level marketing, vast networks of downlines, and poorly trained sales representatives who sold products not authorized for direct sales in Mainland China.
 
10. Nu Skin sales materials shared with potential recruits in China in early 2013 detail Nu Skin’s strategy to encourage its direct sellers and sales representatives in China to create at least six “generations” or layers of recruits underneath them to maximize their compensation. In these documents, Nu Skin calls the downlines of its sales representatives - sales “teams” - and calls its multi-level compensation “team rewards” or “team awards” – in an attempt to skirt the Chinese regulations prohibiting multi-level compensation and MLM. However, there is a flat- out prohibition against multi-level compensation in China and Defendants knew their “team rewards” system and “payment by team” was in direct contravention of that prohibition.
 
11. Nu Skin became increasingly dependent on Mainland China for a disproportionate share of its gross revenues and all of its growth. In 2010, revenue from sales in Mainland China was $91.4 million or 6% of Nu Skin’s overall revenue. By the end of 2013, those numbers skyrocketed – to over $1 billion in revenue and 32% of the Company’s revenue – a growth rate for Mainland China of 292% (year-over-year).
 
12. As they were touting the Company’s performance and prospects in Mainland China, the Individual Defendants unloaded huge amounts of Nu Skin stock for proceeds of more than $40 million, at a time when they knew that the Company’s stock price was inflated by the
false statements they were making about the reasons for the Company’s extraordinary growth in China .
 
13. Defendants’ scheme began to unravel in August, 2012, when Citron Research, a short seller, published the results of its private investigation showing that Nu Skin’s operations in Mainland China were being conducted no differently than they were in the rest of the world, through a multi-level marketing, pyramid scheme. Nu Skin’s stock dropped on the day this report was issued. Defendants responded to the report almost immediately, denying Citron’s claims and continuing to misrepresent the nature of Nu Skin’s business in the PRC. Defendants successfully convinced analysts and investors following the Company that Citron’s report was not credible, and Nu Skin’s stock rebounded in response while investors remained deceived. For the next year and a half, Defendants continued to tout the Company’s growth in the PRC, which, they claimed, was achieved while operating in compliance with Chinese law.
 
14. Defendants’ scheme completely fell apart on January 15, 2014 when a leading Chinese newspaper reported that Nu Skin was operating an illegal pyramid scheme in China, and employing unlawful business practices in violation of PRC law. The next day, Nu Skin reported that its business practices were under investigation by Chinese authorities.
 
15. The full truth was finally revealed on Tuesday, January 21, 2014 when Nu Skin filed a Report on Form 8-K releasing a letter to its customers in China (in English and Chinese / Mandarin) admitting to violations of Mainland China’s regulations on direct selling.
 
16. Between January 15, 2014 and January 21, 2014, Nu Skin’s stock price plummeted over 43% - falling from a market close on January 14, 2014 of $136.47 per share to a market close on January 21, 2014 of $77.39 on unusually high volume during those four trading days.
 
17. Ultimately, Nu Skin was fined by one branch of the Chinese government, forced to retrain its sales representatives in China and required to shutter certain “working studios” improperly used by the Company’s sales representatives in China to recruit new distributors and direct sellers. Further, based upon information and belief, at least one investigation by
Chinese authorities regarding Nu Skin’s business is ongoing as of June 2014 .
 
18. Defendants’ actions have negatively affected and continue to negatively affect Nu Skin’s revenues and growth rate in Mainland China. During the Class Period, growth in Mainland China reached almost 300% year-over-year. Now the Company cannot even predict if and when its business in Mainland China, previously one of its largest markets, will recover.
 
19. As a result of Defendants’ wrongful acts and omissions, and the precipitous decline in the market value of the Company’s securities, Plaintiffs and other Class members have suffered significant losses.

5. In early 2011, Defendants took what was already a modest, but illegal multi-level marketing business model and multi-level compensation plan in Mainland China, and essentially put it on steroids, easing some of the restrictions they had put in place, rapidly recruiting new distributors who received inadequate, if any training, authorizing the rapid expansion of downlines, and permitting the direct sale of products outside Nu Skin’s brick and mortar stores that were not licensed for direct selling. 

From the convention videos of BWI, it is obvious that they were glorifying the rapid expansion of Cao Yue Ti Xi downlines - 4 PD lines were created during second half of 2016 - hence the first SDA was borne - passive income of CGL rocketed - both DMJ/CGL became the Top 10 Earners....................Who is there to prevent the DS of products outside of DRs Secret retail outlets that were not licensed for direct selling?

It doesn't appears to me there is much difference between Nu Skin and BWI's illegal practices - may be it is the intention of BWI to go on "steroids" all the way until being caught - who knows? Ha-ha!

How could those teams hooked on steroids (multi-level-commission) survive without them?

[Boon]

There is one major difference though between Nu Skin and BWI  – i.e. the ways in which the retail outlets are being run.
 
Nu Skin operates most (if not all) of their outlets themselves, I believe.
 
Whereas, “All DR’s Secret service outlets/workshops in China are operationally independent and do not have any contractual agreement with Best World and any of its subsidiaries.” – according to reply from the IR.
 
This looks like a more “shophiscated” and clever set up designed to insulate BWI from any possible potential liability  - the mentality of “No contract – No liability”
 
But would it work? Does no contractual relationship means no relationship?
  
"An agency relationship is created by the consent of both the agent and the principal ; no one can unwittingly become an agent for another. Although a principal-agent relationship can be created by a contract between the parties, a contract is not necessary if it is clear that the parties intend to act as principal and agent.
The intent of the parties can be expressed by their words or implied by their conduct."
 
Their conducts at the convention serve to prove that they {Principal (BWI/BWL) and agents (DMJ/CGL)} have been engaging in multi-level commision based business activities in China.

[Boon]

6 of the TOP 10 Earners are from Taiwan.

Who are the other 4 ?

Where are they from ?

Where are the TOP 10 Earners video and photo now?

[Boon]

This is one of the question I asked BW IR:

Question: I am concerned Best World under attack by short seller/s. It was reported in Reuters that Nuskin and other direct selling companies have come under increased scrutiny because short sellers and other critics have accused them of running illegal schemes. How can Best World navigate such accusations? As a result of increased publicity, the risk of short seller attack has also risen.

Answer: Thank you for giving us your feedback. Best World adheres to strong principles of legal business, transparency and corporate governance and is fully compliant with the rules and regulations of business operations under China’s laws.

Above is the response from BW IR.

Additionally, just to share since I have some exposure in the MLM industry. Most direct selling companies (whether single level or multi level) often have claims against them on over exaggerated promises and/or illegal practices. Besides Nuskin, Amway was sued before too. This is common in this industry. Despite it was normally the conduct the of the IBOs, the company, to a certain degree has to take responsibility. Hence if one invest in a direct selling company, one should be prepared to such attacks.

I have no doubt, since day 1 of my posting in BW thread that there could be some unofficial practices. Whether BW is aware or not, I do not know (you may refer to my earlier postings). I have given my 2 cents worth about how some independent business owner (IBO)...the black sheep tried to outsell others by not following company practices. It is difficult for the company to exercise  control especially when the membership explodes. Hence I would rather spend quality time to figure out what is the true value of BW..with China DS license and without. What should be the fair value if China DS is out of the equation...not sure if Mr Boon can use his knowledge and skill to advise on that, which is in my opinion, more meaningful. 

Also, how much will the export revenue in China be affected if there is no DS license. According to BW IR, currently all DRs Secret product is sold freely in ALL of China by Drs Secret outlets/workshops, and is not through DS model, so how much will the business be affected, would be good if someone can offer their insights .

Please do your own diligence.

(Vested)

“According to BW IR, currently all DRs Secret product is sold freely in ALL of China by Drs Secret outlets/workshops, and is not through DS model, so how much will the business be affected, would be good if someone can offer their insights.”
__________________________________________________ 

But through the representation made by the CEO of the Company that “your hard work in building up a strong network team entitle you to earn a passive income and this passive income can even extend to become a lifelong income with sustainable earnings for your family even after death.", it implies that the company is practising DS with multi-level-compensation structure in China, which is considered illegal in China.
 
On one hand, the IR (& the Company) is saying the business model for Drs Secret in China is based on a "Export/Retail" model. 

But on the other hand, according to the CEO, it is a DS model with Multi-level-compensation structure.

So, what is the truth? 
 
Which do you belileve is the truth?
 
Don’t you think the Company owes investors the truth?
 
Don’t you think this is a meaningful exercise to pursue?
 
Don’t you think time spent in this pursuit is quality time well spent? 

[Boon]

6 of the TOP 10 Earners are from Taiwan.

Who are the other 4 ?

Where are they from ?

Where are the TOP 10 Earners video and photo now?

@ millionfaith

Multi-level-commission is legal in Taiwan.

The 2016 minimum income for EACH of  the 6 Taiwanese top earner is TWD 10,000,000 (~ SGD 500,000).

Questions:
1) What are these income consist of ? Commission from own sales + passive income (commission from sales of downlines) + ?????????
2) How do IBO's ensure that they are accurately compensated by the Company?
3) How do IBO's ensure that their rights and entitlement to passive income are protected?