Direct sales and pyramid schemes are only one step away!
On December 26, Jincai Internet's share price closed at 7.65 yuan / share, compared with the previous trading day, fell 3.16%.
The largest shareholder of Jincai Connect is Jiangsu Quanjian Dongrun Investment Co., Ltd., with a shareholding ratio of 19.75%. Quan Jian was widely concerned by public opinion because of an article published by Dr. Lilac. According to the article, behind Quangli’s tens of billions of health empire, participants not only caught up with money, but also burned, maimed, and even lost their lives.
What kind of company is Quan Jian, and what is the direct selling industry?
The sales team was sentenced several times for pyramid schemes
Quanjian Group said in its official website that the company is located in Wuqing District, Tianjin, and was founded in 2004. It is a group-based national enterprise based on the health industry, spanning medical , Chinese herbal medicine, health care products, Chinese medicine cosmetics and many other fields. There are medical institutions and medicinal materials companies.
Quanjian's industries also include Quanjian Natural Medicine Technology Development Company and Quanjian Beverage Sales Company. Quanjian Group said that since 2015, Quanjian has been ranked first among domestic-funded enterprises in the list of China's direct selling companies for three consecutive years.
From the perspective of financial reports, the development of Quanjian Group is indeed extremely rapid. According to Guohai Securities Research Report, in August 2013, Quanjian Group obtained the direct sales license issued by the Ministry of Commerce of China. After obtaining the direct sales license, the performance of Quanjian Group rose rapidly, from 550 million in 2012 to 50 in 2013. In 2014, it increased to 13.5 billion, and in 2015 it reached 23 billion, becoming the performance king of domestic direct sales companies. The following picture shows a screenshot of Caianshe’s research report on Guohai Securities:
However, Quan Jian’s direct sales team has been sentenced several times for pyramid schemes. According to a verdict from the China Judgment Document Network, in July 2015, the defendant Yu Mingbao introduced the right to join the Quanjian Natural Medicine Technology Development Company. After the promotion, organization of field trips, guidance, training and other activities to purchase 1100 Yuanjian, 7700 yuan, 9900 yuan, 15400 yuan, 23,000 yuan of Quanjian company products as a member of the company to join the conditions, and induce others to continue to develop members, according to the level, the number of development members to obtain the corresponding rewards, etc., to defraud property, Its behavior has constituted the crime of organizing and leading pyramid schemes. The following picture shows a screenshot of the referee's paperwork by the Associated Press:
In fact, the sales team of Quanjian Group was repeatedly sued for pyramid schemes. In 2011, due to suspected organization and leadership of pyramid schemes, Dai Moumou, Meng Moumou, Xu Mou, etc. were arrested; these people were members of the Renjian Natural Medicine Development Co., Ltd. Renren System. The following picture shows a screenshot of the referee's paperwork by the Associated Press:
The direct selling industry has a big bottom: nearly 10 million direct sales personnel in China
In 1990, the establishment of Avon Guangzhou Company in the United States marked the official entry of the international pyramid scheme into the mainland market. In 1992, Amway entered China. Due to the huge profits in the pyramid scheme industry, many people carried out illegal activities in the industry, which had a bad impact on social stability.
In 1998, the Chinese government issued a notice of the State Council on prohibiting pyramid schemes. In June of the same year, the State Administration for Industry and Commerce issued a notice on the issue of changing the sales method of foreign-invested pyramid schemes. The notice stipulates that foreign-invested pyramid schemes must be converted to The mode of operation of the store hiring staff. In September 2005, the Direct Selling Regulations and the Prohibition of Pyramid Regulations were officially promulgated. The article stipulated that direct sales can only be a single level, and the bonus cannot exceed 30%. However, until 2013, the issuance of direct sales licenses was still very small.
During this period, the state is cracking down on illegal pyramid schemes, but MLM activities are still prevalent. In the research report, Guohai Securities bluntly stated that although the state strictly prohibited pyramid schemes during the transition period, many overseas companies still sneaked into China through Hong Kong.
Since 2013, the state has relaxed its direct selling policy and the speed of issuing licenses has accelerated significantly. According to Guohai Securities Research Report, from 2006 to 2012, the government issued a total of 35 direct sales licenses. From 2013 to 2017, the number of direct sales licenses issued by the government has reached 42.
At the same time, the regulations on the scope of direct selling products have also been expanded. In March 2016, the Ministry of Commerce and the State Administration for Industry and Commerce issued an announcement to announce the scope of new direct sales products. On the basis of five types of direct sales products such as cosmetics, cleaning products, health foods, health care equipment and small kitchen utensils, new households were added. Electrical appliances.
As of the end of 2015, China registered 2.8 million direct sellers. However, Guohai Securities Research reported that 2.8 million is only the number of registered direct sellers, and the actual number of direct sales personnel should be between 8 million and 10 million.
In this context, China's direct selling industry has experienced rapid development. In 2015, sales in China's direct sales market reached 220.7 billion, making it the second-largest direct market in the United States. Currently, 33% of sales in the health care industry come from direct sales, and 20% in the cosmetics industry.
On the verge of breaking the law: direct selling companies are repeatedly illegally detained, pyramid schemes
The direct selling industry has introduced an acquaintance recommendation mechanism, which is mainly based on customer marketing. However, this model is very easy to develop into a pyramid scheme.
Direct sales are divided into single-level direct sales and multi-level direct sales, single-level direct sales model, production enterprise-direct seller-consumer; and multi-level direct sales model, direct sellers can convert consumers into new salesmen by selling products, new The salesman constitutes a new branch of the sales network. At present, most domestic direct selling companies use multi-level distribution.
Behind the multi-level distribution business model is the direct seller compensation incentive mechanism. Taking the new era as an example, the new era is mainly for selling green health foods and nutritious foods. It is a leading company in China's direct selling industry. Its compensation system is divided into sales commission and brand promotion fees.
Guohai Securities Research Report stated that “the sales commission of the new era is the salary that the direct sellers deserve when the performance has not accumulated to 60,000. The brand promotion fee is the second part of the salesperson’s accumulated performance has reached 60,000. Salary. The calculation method of brand promotion fee is based on the sales of the current month, and the salary is calculated according to the weight of the direct seller's performance in the total performance of the company.†The following picture shows the screenshot of the research report of Guohai Securities by Cailian:
The World Direct Marketing Research Center released the “2016 China Direct Selling Enterprise Word of Mouth Listâ€, which included the favorable rate of 77 licensed companies, among which 60 companies received more than 70%, and 27 companies outperformed. 80%. The picture below shows the top 15 companies in the list of favorable rates:
In the list, the sun god's favorable rate is as high as 91.14%. However, the sales staff of the Sun God were prosecuted for several suspected illegal detentions. According to the China Judgment Document Network, in the Guangdong Sunshine Direct Selling Company dormitory where the defendant Liang Qiuhong worked, the defendant Dong Forest was the director of the company, asking the victim to listen to the class, memorize the relevant situation of the company, brainwash the victim, and lock the dormitory door. Prevent the victim from escaping. In fact, on the referee's paper, there are many lawsuits involving the sun god involved in illegal detention, and even the death of the victim. The following picture shows a screenshot of the referee's paperwork by the Associated Press:
In fact, not only the sun god, the referee paper network also shows that in the new era and other direct selling companies, their related personnel also have pyramid schemes and other illegal activities.
At present, among the listed companies of A-shares, many of them are involved in the direct selling industry. Kangmei Pharmaceutical obtained the direct sales license in 2013. In 2015, Kangmei Pharmaceutical's direct sales revenue reached 1 billion; Dong'e Ejiao also obtained in 2016. Direct sales license. In addition, Xiangxue Pharmaceuticals also holds direct sales licenses.
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