Opportunities & Challenges for Direct Selling Operations in China

2. Opportunities & Challenges for Direct Selling Operations in China 在中國經營直銷的機會和挑戰 Corey Lindley Executive Vice President & President of Greater China Nu Skin Enterprises, Inc. 如新企業集團執行副總裁暨大中華區總裁

3. Nu Skin’s History in China 如新公司在中國發展歷史 1993 - Investigative trips to China 1993 - 開始對中國市場調研 1998 - Established Shanghai Nu Skin 1998 - 成立上海如新 1999 - Revised strategic plan based on Government regulations 1999 - 根據政府規定修改策略計劃 2000 - Started limited retail operations 2000 - 開始有限的零售業務 2001 - Nu Skin manufacturing plant completed 2001 - 建成如新公司在中國的生産設施 2002 - Expansion plans announced 2002 - 宣佈拓展計劃 - Total investment through 2002 is US $80 million - 截至2002年年底在中國縂投資額達8000万美元 2003 - Opened over 100 retail stores and launched Nu Skin Premium Products 2003 - 100多家零售店開業並推出如新高檔產品系列

4. Government Regulations and Requirement 政府規定和要求 • “Chuanxiao” is banned, without a “chuanxiao” definition • 禁止“傳銷”活動，沒有“傳銷”定義 • Levels of Commissions • 銷售獎金層數 • No Sign Up Fees • 不得有入門費 • No Networks • 不得有銷售網絡 • No Meetings • 不得擅自舉行會議 • No sales away from fixed locations • 不得在固定地點以外銷售產品 • Products must be manufactured in China by the company • 產品必須為公司在中國自己生産

5. Nu Skin’s Modified Operations 如新公司修改的營運模式 • Sales representatives are employees of the company 銷售代表為公司員工 • Sales must occur at fixed retail locations through employee sales representatives 產品必須在固定地點零售店由銷售員工銷售 • Product and sales training meetings are held with only formally hired Nu Skin employees 產品和銷售培訓會議只有正式員工參加 • Remuneration is minimum base pay plus commissions for personal sales only 薪酬為底薪加上只根據個人銷售業積計算的獎金 • All Nu Skin products sold in China are manufactured at the Shanghai facility 所有在中國銷售的如新產品都是在上海加工廠生産的

6. Shanghai Manufacturing Facility 如新公司上海生産設施

7. Nu Skin Retail Store 如新零售店

8. Nu Skin Retail Presence in China 如新公司在中國零售地區 Shanghai 上海 Jiangsu 江蘇 Zhejiang浙江 Fujian 福建 Guangdong 廣東

9. Advantages and Challenges of the Modified Operations 修改營運模式的優勢和挑戰 • Advantages: 優勢 • Establish retail presence in China • 在中國建立起零售業務 • Build brand awareness through stores • 利用零售店增強品牌認知度 • Controlled training • 對培訓活動進行控制

10. Advantages and Challenges of the Modified Operations 修改營運模式的優勢和挑戰 • Challenges: 挑戰 • Retail model - Increased overhead and employee costs • 零售模式使固定费用和员工费用上涨 • Employee sales force benefits • 銷售員工的福利費用 • Hiring and training new employees • 聘用和培訓新員工

11. Future Opportunities and Challenges 未來機會和挑戰 • Opportunities: 機會 • Sustained China economic growth - up to 10% per year • predicted by the International Monetary Fund • 中國經濟持續增長-國際貨幣基金組織預測年增長率可達10% • Desire for International Brands, particularly in personal care • and nutrition • 對國際品牌特別是個人保養品和營養保健品的需求 • Growing entrepreneurialism • 日益弘揚的企業家精神 • Chance to be a dominant distribution industry • 有望成爲一個主要流通行業

12. Future Opportunities and Challenges 未來機會和挑戰 • Challenges:挑戰 • 1. “Chuanxiao” misunderstanding • 誤為“傳銷” • Public misperception - complaint calls • 大衆的誤解 - 投訴電話 • Local Government misunderstanding - selective interpretation • 地方政府的誤解 - 有選擇性的解釋

13. Challenges:挑戰 • 2. China Economic Development • 中國經濟發展狀況 • Distribution challenges and the need for fixed locations • 分銷的種種挑戰及建立固定地點零售店的必要 • Employee skill Development • 員工的技能發展 • Education disparity - cities and country • 城鄉間教育水平的差異 • Economic disparity from city to city • 城市間經濟狀況的差異

14. Challenges:挑戰 • 3. China Regulatory Environment • 中國法規環境 • WTO impact - thousands of new regulations • 世貿組織的影響 - 成千上万條新法規 • Direct Selling concerns • 對直銷業法規關心的問題： • 1. “Chuanxiao” definition 傳銷定義 • 2. Single Level vs. MLM 單層或多層 • 3. Training of Sales People 推銷員培訓 • 4. Cross City transactions城市交易 • Taxation • 稅務法規 • Product support material registration • 產品促銷資料的登記

15. Summary: 總結 • 1. Risk/Reward Theory • 風險/回報原理 • 2. Focus on Long Term Potential • 重點放在長期發展的潛力 • 3. Appreciate Short Term Progress • 為近期取得的進步而高興