Amway is a direct selling company and manufacturer that uses network marketing to sell a variety of products, primarily in the health, beauty, and home care markets. Amway was founded in 1959 by Jay Van Andel and Richard DeVos. Based in Ada, Michigan, the company and family of companies under Alticor reported sales growth of 9.5%, reaching US$9.2 billion for the year ending December 31, 2010. Its product lines include home care products, personal care products, jewelry, electronics, Nutrilite dietary supplements, water purifiers, air purifiers, insurance and cosmetics. In 2004, Health & Beauty products accounted for nearly 60% of worldwide sales. Amway conducts business through a number of affiliated companies in more than a hundred countries and territories around the world. Amway was ranked No.114 among the largest global retailers by Deloitte in 2006, and No.32 among the largest private companies in the U.S. by Forbes in 2010.
Headquarter in Ada, Michigan
Founding
Amway Vietnam (Hồ Chí Minh since 2008).
Amway Japan Head Office
Jay Van Andel and Richard DeVos, friends since school days, had been business partners in various endeavors including a hamburger stand, air charter service, and a sailing business. In 1949 they were introduced by Neil Maaskant
(Van
Andel's
second
cousin)
to
the Nutrilite
Products Corporation. Nutrilitewas Nutrilitewas a California-based direct sales company
founded by Dr. Carl Rhenborg, developer of the firstmultivitamin firstmultivitamin marketed in the United States. In August 1949, after a night-long talk, DeVos and Van Andel signed up to become distributors for Nutrilite food supplements. They sold their first box the next day for $19.50, but lost interest for the next two weeks. Shortly thereafter, at the urging of Maaskant, who had become their sponsor , they traveled to Chicago to attend a Nutrilite seminar. The meeting was at a downtown hotel, with over a hundred people in attendance. After seeing promotional filmstrips and listening to talks by company representatives and successful distributors, they decided to pursue the Nutrilite business opportunity with enthusiasm. They sold their second box of supplements on their return trip to Michigan, and rapidly proceeded to develop their new business further. In 1949, DeVos and Van Andel had formed Ja-Ri Corporation (abbreviated from their respective first names) for importing wooden goods from South American
countries.
After
their
trip
to
the
Nutrilite
seminar,
they
dropped this business and Ja-Ri became their Nutrilite distributorship. In 2
addition to profits on each product sold, Nutrilite also offered commission on the sales of products by new distributors introduced to the company by existing
distributors—a
system
today
known
as multi-level
marketing or network marketing. By 1958, DeVos and Van Andel had built an organization of over 5,000 distributors. However, following concerns about the stability of Nutrilite, in April 1959 they and some of their top distributors
formed The
American
Way
Association to
represent
the
distributors and look for additional products to market. Their
first
product
was
called Frisk ,
a
concentrated
organic
cleaner
developed by a scientist in Ohio. DeVos and Van Andel bought the rights to manufacture and distribute Frisk, and later changed the name to LOC (Liquid Organic
Concentrate). They
subsequently
formed Amway
Sales
Corporation to procure and inventory products and to handle the sales and
marketing plan, and Amway Services Corporation to handle insurance and other benefits for distributors (Amway being an abbreviation of "American Way"). In
1960 they purchased a 50% share in Atco Manufacturing
Company in Detroit, the original manufacturers of LOC, and changed its
name to Amway Manufacturing Corporation. In 1964 the Amway Sales Corporation, Amway Services Corporation, and Amway Manufacturing Corporation merged to form a single entity, Amway Corporation. Amway bought control of Nutrilite in 1972 and full ownership in 1994. International expansion Amway expanded overseas to Australia in 1971, to Europe in 1973, to parts of Asia in 1974, to Japan in 1979, to Latin America in 1985, to China in 1995, to Africa in 1997, to India and Scandinavia in 1998, to Russia in 2005, and to Vietnam in 2008. Quixtar In 1999 the founders of the Amway corporation established a new holding company, named Alticor, and launched three new companies: a sister (and separate) Internet-focused company named Quixtar, Access Business Group, and Pyxis Innovations. Pyxis, later replaced by Fulton Innovation, pursued research
and
development
and Access
Business
Group handled
manufacturing and logistics for Amway, Quixtar, and third party clients.
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The main difference was that all "Independent Business Owners" (IBO) could order directly from Amway on the internet, rather than from their up line "direct distributor", and have products shipped directly to their home. The Amway name continued being used in the rest of the world. After virtually all Amway distributors in North America switched to Quixtar, Alticor elected to close Amway North America after 2001. In June 2007 it was announced that the Quixtar brand would be phased out over an 18 to 24 month period in favor of a unified Amway brand (Amway Global) worldwide. In 2006, Quixtar published The Quixtar Independent Business Owner Compensation Plan, in which the company reported that the average
monthly gross income for "Active" IBOs was $115.
AFFILIATIONS Amway is a prominent and active member of the regional and national direct selling associations worldwide. Doug DeVos is vice-chairman of the World Federation of Direct Selling Associations (WFDSA), and serves on the WFDSA CEO Council. He is also past chairman of the board of directors for the U.S. Direct Selling Association. Globally, direct selling is an industry with more than $113 billion in estimated retail sales and more than 66 million sales people. COMMUNITY SERVICES Amway has a long history of sharing with the communities where it does business, both through volunteer efforts and charitable contributions. In 2003, Amway launched the One by One Campaign for Children to focus its philanthropic efforts on children. Today, in every country and every community where Amway operates, thousands of employee and distributor volunteers support hundreds of charitable organizations to offer children the resources they need to live, achieve, learn, and play.
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Type
Private
Industry
Direct selling
Founded
1959
Founder(s)
Rich DeVos Jay Van Andel
Headquarters Ada, Michigan, United States
Area served
Worldwide
Key people
Steve Van Andel (Chairman) Doug DeVos (President) Al Koop (Chief Operating Officer) Russ Evans (Executive Vice President and Chief Financial Officer)
Revenue
US$ 9.2 billion (2010)
Employees
13,000
Parent
Alticor
Website
Amway.com
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COUNTRY’S NO 1 DIRECT SELLING COMPANY
Amway India is the country‘s leading direct selling FMCG-company which
manufactures and sells world-class consumer products. Its business opportunity and all its products are covered 100 per cent Money Back Guarantee'. If not completely satisfied with the product, the consumer can return it for a refund.
CORPORATE CREDENTIALS
Amway India is a wholly owned subsidiary of US $ 8.4 billion Amway Corporation, Ada, Michigan, USA. Amway Corporation is one of the largest Direct Selling companies in the world. It has a presence in 88 countries & territories.
Established in 1995, Amway India commenced commercial operations in May 1998 and has emerged as the largest Direct Selling FMCG Company. The Company has its headquarters in the National Capital Region of India - New Delhi.
Amway has invested in excess of US $ 35 million (Rs. 151 crore) in India of this; US $ 6 million (Rs. 26 crore) is in the form of direct foreign investment.
Amway India has 450 full time employees and has generated indirect employment for 1,650 persons at all the contract manufacturer locations.
The Company has provided income-generating opportunities to over 550,000 active independent Amway Business Owners.
Amway India provides free and unlimited training to all its distributors to help them grow their business. Amway India conducts over 29,000 training sessions during an average 12-month period with an attendance of over 1.5 million Amway Business Owners and prospects.
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Amway India recorded a sales turnover of over Rs. 1407 crore during JanDec 09.
Amway India is a member of the Confederation of Indian Industries I ndustries (CII) and Federation of Indian Chambers of Commerce (FICCI).
The World Blind Union presented an award and citation to Amway India in 2003, for its peerless work for the blind child.
NATIONAL PRESENCE
In twelve years of commercial operation, Amway India has established a nation-wide presence of over 130 offices and 55 city warehouses and four regional mother warehouses warehouses.. The distribution and home delivery network set up with the support of independent logistics partners is spread across over 4000 locations.
MANUFACTURING
Almost all Amway India products are manufactured in the country through seven third party contract manufacturers. To bring the identified contract manufacturers‘ production facilities and skills to international standard,
Amway has invested in excess of US$ 4 million (approx. Rs 17 crore*). The transfer of this state-of-the-art, world-class technology, has been free of cost.
PRODUCTS
At present, Amway India offers over 115 products in five categories. They are Personal care category, Home Care category, Nutrition & Wellness category, Cosmetics and Great Value Products.
With the exception of Cosmetics range (Artistry*) and some products in Nutrition and Wellness category, all Amway India products and bottles are manufactured in India.
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The products match Amway‘s global quality standards. They carry a tamperproof seal and a ‗100 per cent Money Back Guarantee'. If not completely
satisfied with the product, the consumer consumer can return it for a refund. Amway products are environment friendly, and are not tested on animals. Amway encourages the return of its used product bottles for re-cycling and to prevent their misuse.
PROMOTING FREE ENTERPRISE AND SELF-EMPLOYMENT
Amway distributors follow a Code of Ethics and Rules of Conduct consistent with the World Federation of Direct Selling Associations (WFDSA), (WF DSA), which defines the goals, principles and responsibilities in building and operating an Amway business.
Amway India is a member of the Indian Direct Selling Association (IDSA). The IDSA is an industry regulatory body, with several reputed international and Indian Direct Selling companies as members.
Vision Inspiring people to live better lives. Mission To provide the best business opportunity. To deliver exceptional quality products to urban and semi urban homes in the areas of nutrition and wellness, cosmetics, personal care, home care, home tech and insurance. Values Amway has established some simple shared values that unite the entire company, and all of the Business Owners that are associated with Amway. We believe that these values guide our actions and help us to achieve everything we are capable of without compromise or harm. Integrity We will uphold the highest personal and professional integrity which demonstrates honestly, loyalty, respect and high ethical standards in all our responsibilities, obligations and other activities. We are committed to behave at all times in accordance with the ethical practices of the organization. 8
Trust Building reliability and dependability for self by displaying commitment, honesty, confidentiality and consistency in all actions. Transparency We will promote a culture of openness and mutual trust by interacting objectively and without underlying personal interests. Service Orientation We are committed to serve our customers to fulfill their needs by focusing efforts on discovering and thereby meeting stated and unstated requirements. Partnership We will collaborate across boundaries and find common ground by sharing ideas and resources, with a wide range of stakeholders. We will develop networks and build long term alliances with internal and external customers. Recognition We are committed to honor, encourage and support individuals and teams who contribute, through their behavior and actions, to the success of the organization.
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Gift Catalogue 2011 (Coreline) Gift Catalogue 2011 (Non-Coreline): In order to ensure that maximum number of ABOs are able to buy the Catalogue products, we have decided to ―limit‖ the quantity of each Non Coreline Item that an ABO can order. Nutrilite: NUTRILITE® is the world‘s leading brand of vitamin, mineral, and dietary supplements, grown harvested, and processed on its own certified organic farms. Artistry: ARTISTRY® is one of the world‘s top five largest -selling prestige brands of facial skin care and colour c olour cosmetics. Attitude: All products of Attitude contains Skin Vitalising Complex that synergistically combine to cleanse, Replenish & Moisturise the skin making it soft & supple. Dynamite: Dynamite's range of male grooming products, formulated internationally is designed to deliver the ultimate grooming experience.
Glister: Glister Toothpaste is a revolutionary Multi-Action Toothpaste with Sylodent that offers seven benefits. Persona: Persona Premium 3 in 1 Soap is a complete soap for the entire family promises refreshing confidence. Satinique: Satinique Advanced Range with unique Ceramide Infusion System uses nature's own renewing technology to rejuvenate, strengthen and protect your hair. SA8: SA8 Gelzyme is India's only 3-in-1 laundry detergent which pretreats, cleans and softens. G & H: G&H Range enriched with the goodness of Glycerine and Honey, deeply nourishes and hydrates the skin for a healthy glow. LOC High Suds: LOC High Suds is a multipurpose household liquid cleaner. Dish Drops: Dish Drops is a concentrated hand dishwashing liquid with a powerful "Triadic Detergency System". Great Value Products: Great Value Product Range offers you Great Quality, Great Performance, Great Price and a Money Back Guarantee! BSM (Business Support Material)
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Are you working towards a better life for you and your family? Are you in control of your future? Are you getting the rewards your hard work deserves? Your life doesn't have to be a trade-off between making the money you need and having the flexibility and time to live your life to the fullest. The Amway Sales and Marketing Plan puts you in control, allowing you the flexibility to work where and when you want, giving you time for family and friends as well as the opportunity to earn a good income. It adapts easily to your needs and ambitions, and grows with them, offering you all the personal support and assistance you require to become the Business Owner you want to be. With Amway you are Connected to the global leader in multilevel marketing, with over 40 years of experience, Supported by great products and people who will help you succeed, and finally In Control of your life. Amway is a business with a proven track record and the ability to help you get the best out of your hard work. With Amway, you are on your own but are never alone.50 years of global experience and 10 years of experience in India , we are there to help and guide you. We W e know the pitfalls of running a business and are there to help you avoid them, and to reward you when you do well. At the heart of your business are Amway‘s market -leading products, each tailored to the needs of individual market and culture. Amway‘s pr oducts are recognized all over the world for their high quality, value and performance, all supported by the Amway Satisfaction Guarantee.
Our role supporting your business extends into product and business training, helping to ensure that you are able to reach your personal potential. At Amway we believe that to sell a quality product you need to understand it and use it with confidence. We spend lakhs of rupees helping our Business Owners become product and brand ambassadors, enabling them to sell AMWAY products with conviction and run their businesses effectively.
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Amway really does enable you to be in control of your own life. With the Amway business opportunity, you work for yourself, not for Amway or your sponsor. It‘s entirely up to you how much time and effort you put into your business. Like anything else in life, the amount you achieve reflects the amount you put in. People all over the world value the freedom of choice and flexibility that Amway offers. In 2007-08 there were more than 4.5 lakh Business Owners in India . Each one of these is an independent business, busi ness, connected to a worldwide network of support and advice that is available as and when it‘s needed.
The Amway Sales and Marketing Plan is a low risk, business opportunity that is open to everyone. It allows you to build your business through retailing products and sponsoring other people who, in turn, can retail products and offer the business opportunity to others. By passing your sales and marketing knowledge to your developing team, you not only build your own business network but also enable others to build one of their own. The Amway Sales and Marketing Plan has been operating for over 51 years and is available in over 80 countries and territories around the globe. The core of the Amway Sales and Marketing Plan's income opportunity is the sale of quality AMWAY products to retail customers. As your Amway business grows, the rewards you earn grow in proportion. The Amway Sales and Marketing Plan do not compensate anybody for simply recruiting others as Amway Business Owners.
Amway is one of the global leaders in direct marketing. The name Amway derived from the words "American Way " . Amway was established in 1959 by Jay Van Andel and Richard Devos. Amway global now have a presence in over 88 countries and has a $6.5 Billion turnover. Amway was established in India in 1995 and commenced operation in 1998. Currently the company have 80 products in 4 categories. Amway operates in
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the following categories: Personal Care Home Care Nutrition and Wellness Cosmetics Amway is often used as an example of a direct marketing company. The company sells its products using direct distributors called Amway Business Owners ( ABO). The model works on a business networking model . The ABOs can build a team by recruiting a team of ABOs under him. The ABO earns commission on the products sold . Further , the ABO also gets commission for the sales done by other ABOs recruited by him. The payout is decided by the point system. The Amway business model also divides the ABOs into different categories based on the sales performance of the team. The payout varies with different levels. Amway India in now a 800 crore company with its operation spanning across India. It has more than 4.5 lakh independent distributors and 117 offices across the country. Considering the nascent stage of Direct Marketing Industry in India, Amway India has been reasonably successful. According to Business Line, the direct marketing Industry in India is estimated to be Rs 3150 crore. The success of Amway products is predominantly driven by the quality of the products. Amway India's products are mostly sourced from manufacturing units from India. It has outsourcing contracts with 5 major units in India. The products are sourced after strict quality checks. Amway is a 100 % direct marketing company . That means the consumers con sumers will not get any Amway products from shops. The products can be bought through ABO's. Hence the sales are driven by the efforts of ABOs. Since the company does not advertise its brands, the only communication channel is through ABOs who visits households and make presentations. There are two
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tasks of a typical ABO : the first task is to sell Amway products and second task is to appoint new ABOs . Typically direct marketing firms faces issues of reach and cost. Since the sales depend entirely on the independant distributors , the company has to pay huge commission. This results in the increased cost of the product. Hence the products become expensive resulting in lower sales. Amways also faces this issue. The products of Amway are excellent but very expensive. For example, the Persona brand of soaps cost Rs 30 which is almost double the rate of an ordinary soap. Persona is one of the best soaps in terms of quality but price is definitely a dampener. Another example is the range of cosmetics under the brands Attitude and Artistery . Artistery is targeted at the premium class and Attitude at the middleclass. But the price of these brands make the consumer think twice before buying it. Hence the ABOs have a tough time convincing the value proposition. In a value conscious country like India, the expensive tag of Amway products is the singular reason for the lack of popularity of its products. Understanding this issue, Amway launched its first corporate branding initiative in India . The brand came out with a Television campaign highlighting the customer-centric approach .
Amway uses the slogan " We are listening " . The idea revolves round the theme that Amway understands understands the Indian consumers and the products are derived from this understanding . The purpose of the campaign is twofold: a. The company wants to build equity around the corporate brand which will enable the ABOs to tide over the initial customer resistance. b. The enhanced corporate image will also attract people to join Amway as
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independent business owners. Along with this, the company is also rationalising the pricing strategies. The company is launching a new range of value products like coconut oil , shaving creams. But here again the company will face certain issues is sues . For lower priced products, the commission payout will be less and hence the ABO will have to sell more volume to get higher commission. Amway had introduced sachets for most of the products, but the low commission payout for sachets has prompted ABOs to try and sell high value items. Another significant change that the company made was rationalising the entry cost for new ABOs. Earlier, a person had to shell out Rs 5000 to join the firm. The cost was to buy the Amway business kit which consists of various Amway products and brochures. The ABO can recover the money by selling these products. Now the company has introduced i ntroduced a starter pack for Rs 995 which does not have Amway products but brochures . This will be a big relief for the existing ABO since the higher joining costs turned away most of the potential ABOs.
Among the 80 products, one of the best seller for Amway is the Nutrilite brand. Nutrilite is a nutraceautical supplement and this brand contributes around 50% of Amway's turnover. The brand virtually faces no competition so far. The Indian nutraceauticals market is estimated to be around Rs 1500 crore and is rapidly growing. Many Indian companies are eying this segment and has serious plans to enter this segment. Amway has understood that doing business in India will require a new business model. The company has started to take steps in the right direction. It had tried to rationalise prices pric es and bring in new n ew value products. But to balance the price , cost, quality and higher commission is no easy task.
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Strategic mistakes I made in India ? Where do I begin? Seriously, though, a lot of our India strategy is based on our trial-and-error experiences here. Like other multinationals, we've also been guilty of misjudging the Indian market at times. I came to India in February 1998 and we launched Amway India with six products in May that year. Initially, we set up a distribution system that was parallel to what Amway uses in other countries. That means essentially home delivery of products that are ordered by customers either through the Internet or on telephone. The products are reached to the customers' doorsteps within 24 to 48 hours of the order being placed. We were fairly confident that the same organisational set-up would work in India as well. Accordingly, we began with just five offices, in the main metros. We assumed these would work as pick-up centres, with just a few consumers coming in to pick up products. In fact, we had factored that just 20 per cent of our sales would be through counter sales and 80 per cent would be through the home delivery route. It took just a couple of weeks to prove how wrong we were in our assumptions. We discovered that people wanted to come into the stores, see the products, pick up and touch them before they purchased anything. Home delivery [ Images ] just didn't interest them. We now have 48 pick-up centres and close to 30 local ordering centres, which are located in smaller towns. We've realised the importance customers place on having contact with people from the company. The other learning from that and subsequent experiences is that a 'one-sizefits-all' strategy won't be successful in India. We have a portfolio of 450 products that are all available in one size each. Except in India, that is. We realised from our early experiences in India that customers want to experience the products before they make a purchase decision -- hence the need for more stores.
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Similarly, Indians don't like to economy-size packs until they've tried the product earlier. Accordingly, we launched our cleaning and personal care products in various sizes -- big, medium, small and even sachets. That's a first for Amway worldwide, but the different price points encourage different types of users. We've also been more aggressive promotionally in India than in other countries. All of which are unlike our strategies in other markets across the world. As a 50-year-old company, it is easy to become set in your ways. You end up trying to duplicate your other successes in new markets as well. But to believe that old successes will drive new ones and to not change your ways -- an attitude that says "this is how we will do it because this is how we've always done it" -- is wrong. We have realised that you need to adapt to the market -- the market won't adapt to you. But perhaps one of the biggest mistakes I made in my career was in significantly underestimating the partnership between the corporation and Amway independent business owners (those who directly sell the company's products). In the corporate sense, we do everything a business does -- we manufacture products and sell them. But the reality is that these products are sold by independent distributors. And we were making too many important decisions without considering the viewpoints of these people. We were trying to do what we thought would be good for them, without taking into consideration what they knew would be good for them. And if a decision is not entrepreneurially right, it cannot be right for the business. If you can't get your partners to buy into your vision, you're doomed. We learnt this the hard way about five years ago when Amway announced a promotional offer where we reduced the price on one of our cleaning products. The promotion was hugely successful, but after it ended there were some negative repercussions. What happened was this: we reduced the price and even printed the lower price on the package. But nowhere did we mention that this was a limitedperiod promotional offer. Existing buyers would, naturally, be aware of the change in prices.
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But after the promotion, when the distributors approached first-time buyers to resell the cleaning product, they thought we'd hiked prices! If we had taken feedback from the distributors before launching the product, we would have realised the need to emphasise the promotional nature of the lowered prices in a way that would be clearly known and remembered. We realised that we hadn't looked at the promotion from the point of view of the person who actually sells the product.
"Our biggest challenge is not how to expand the market in India, but how to convince the indifferent Indian consumers about the world-class quality of Amway Products. The quality of the product is Amway's strength."
- Sudershan Banerjee, CEO & MD, Amway India in 1999. A Dream Gone Awry In the late 1990s, the global direct selling giant Amway had to contend with increasing doubts regarding its survival in India. The company that had become synonymous with network marketing or multi-level marketing (MLM) (MLM)1 the worldover was beset with problems. Media reports were quick to point out Amway's failure to sell the basic concept of direct selling to the Indians. Though the company managed to rope in a substantial number of distributors, the attrition rate was at an alarming high of 60-65%. Most of the products that the distributors bought, they consumed themselves. Estimates put the percentage of selfconsumption at almost 50-60% of the total volume. (There were rumors that some distributors enrolled just to take advantage of the distributor's margin of 18-30%). In the initial stages, when trials were the only criterion, this worked well. However, this self-consumption did not translate into repeat purchases. This was because the percentage of 'active' distributors at any given point of time remained at a low level of 35-40%. Many people who joined in the initial frenzy returned the product kits within the first month. Company sources claimed that the returns constituted just
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1% of the total strength, but rivals and ex-employees put the figure at over 5%. Of the total distributors, only about 10% showed reasonably high levels of activity. To top it all, Amway was burdened with an image that had little basis in fact. Its products began to be perceived as being very expensive and meant only for the premium segment. This was identified as the single biggest reason for the high attrition rate. What was overlooked was the fact that almost all Amway products were concentrates. When used in the proper diluted form, the cost per use of each product worked out to be at par with (and in some cases, even lower than) the nearest competitor's products. For instance, the product named LOC (priced above Rs 320 for a 1-liter pack), when diluted gave around 165 bottles. The cost per usage was thus very low. Either the distributors were themselves not aware of this fact, or they were unable to communicate this to the customers. Since the distributors themselves were unsure about the price-value equation of the products they were selling, they could not effectively convince the consumers either. Amway also had to contend with customers complaining of poor customer service on the part of the company. Analysts commented that as long as the volume of products that moved through the network was high, network market such as Amway were satisfied. Even though customers complained of the lack of services, the company deemed it more beneficial to go for higher salesforce motivation programs rather than undertake customer service initiatives. This was largely due to the fact that the company was almost never involved directly with the end-consumers and the sales volumes were the end of all discussions. Making of the Dream Privately held by the DeVos and Van Andel families of US, Amway, short for American Way, was set up in 1959. Amway and its publicly traded sister companies supported 53 affiliate operations worldwide. About 70% of Amway's sales were outside North America. With over 12,000 employees around the world, Amway was renowned for its strong R&D centre in Michigan, which had 24 laboratories. Amway was present in over 80 countries and its manufacturing plants were located in US, Hungary, Korea, China and India. The company had over 3 million distributors across the world. Besides its direct selling sell ing portfolio of 450 products, Amway promoted around 3,000 products through catalogue sales 2
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as well. Amway had received permission from the Foreign Investment Promotion Board (FIPB) in 1994, to invest $15 million in the Indian operations and to source products from India. The company began with identifying small and medium-scale companies to source its products from. Commercial operations began in May 1998 with a partnership arrangement with Network 21, a company, which acted as a support system and assisted in organizing training, seminars and meetings. Besides its extensive internal research efforts before entering India, Amway also conducted market research through agencies such as Pathfinders and ORG-MARG. Though prior to its entry into India, Amway did recognize the need for a special India-specific pricing strategy and eventually there were just a few marginal cuts in the prices, which were still almost 20% higher than those of the competing FMCG products. The company began with appointing distributors in the country by adopting the 'NRI sponsored' by getting NRIs to rope in their friends/relatives in India into Amway distributorship. These distributors were duly provided with starter business kits containing products, training material, and sales literature. The company's introductory product range comprised four home care and two personal care products, made available to distributors at the Amway Distribution Centers (ADCs) or through tele-service. A significant portion of Amway's investment was on transferring state-of-the-art technology and processes to third-party manufacturers from the small and medium-scale sectors for the indigenous production of its product range. (A sales catalog refers to a list of products/services provided by companies. These are sent to selected addresses. The consumers then place the orders based on the information provided in the catalog. The global catalog sales market stood at $ 87 billion in 1998) Amway assisted its three manufacturing partners, the ISO 9001-certified Jejuplast at Pune, Naisa Industries at Daman, and the Hyderabad-based Sarvotham Care, to achieve benchmarking levels of product development, engineering and quality. These facilities were equipped with advanced machinery and world class technologies for production, packaging, and water filtration. Amway scientists and engineers at the India Technical Centre provided assistance in the processes of technology transfer and quality control. The company supported its independent distributors with five full service ADCs at New Delhi, Bangalore, Chennai, Calcutta and Mumbai. ADCs
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operated as product selection centers for Amway's entire product range and as training centers for distributors. Amway appointed Sembawang Shriram Integrated Logistics, and Mumbai-based First Flight Couriers as its total logistics partners for home delivery of Amway products across 151 cities in the country. Amway's domestic operations fell into five areas - personal care, homecare, nutrition, cosmetics and home tech. The company introduced India-specific products, in pursuance of its go 'glocal' philosophy. Also, for the first time in its history, Amway utilized media advertising to promote its products. In the beginning, Amway had to deal with the negative attitude of many Indians to direct selling. Direct selling was typically seen as unwelcome, an intrusion into one's privacy. This was true to a certain extent. Sales people often used a 'hardsell', the product quality was sometimes poor and most importantly, the salespeople were poorly trained and lacking in motivation. However, Amway changed all this radically and a significant change was brought in the field. Amway was able to break the time tested and traditional distribution set-up of manufacturer-distributor-retailer-consumer. Within 11 months, Amway became the country's largest direct selling company and after two years of the commercial launch, Amway's distributor base crossed the 200,000 mark. Its strengths were clearly manifested in the aggressive product launch plans, its products which claimed to exceed consumer expectations, the 'money back' policy, and a distribution network spread across 26 cities servicing more than 306 locations. In 1999, Amway reported a sales figure of Rs 100 crore. Reacting to reports stating this as a 'below-expectations' figure, company sources commented that the concept of network marketing had not been a constraint for Amway. The then CEO & MD Bill Pinckney commented, "The direct selling model is not new to India. What's new is the structure. And while it's true that consumers do not rush in to buy an Amway product, network marketing works as a low-key approach and evolves over time." However, the problems like distributor attrition, a false 'premium' image and customer dissatisfaction soon began surfacing. Amway could not sit back and let competitors like Oriflame, Avon and Modicare take advantage of its weaknesses.
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Picking up the Pieces Amway soon woke up to the reality that it had to take steps to put its MLM machinery back to the track. For this, it had to first identify where it had gone wrong. Amway realized that like most direct marketing networks, it had hoped to leverage the global promise of the lucrative business opportunity for its distributors. Though this made sense in the developed consumer markets of the West, in India, distributors also needed to know the value of the products they were selling, this aspect was overlooked by the company. One of the first 'corrective' measures it took was putting stickers on its products, which clearly indicated the number of usages very clearly. For instance, it introduced stickers on the packs of its car-wash solution to emphasize the number of washes that a consumer could get per bottle. The idea was to firmly establish the fact of Amway's products being highly concentrated and with very low per usage cost. This practice was later expanded to other products as well. Amway realized that a complicated market such as India needed a focused approach for each of the product categories. To strengthen its product focus, Amway set up strategic business units. Thus, though Amway had centralized marketing of all products worldwide, its Indian arm appointed category managers for individual product categories. Amway also decided to focus on the market in the smaller towns. Quick expansion of the distribution network to smaller towns was identified as a major tool to offset the impact of attrition. The gameplan was to reach consumer homes all over directly by making the current distribution system more effective and decentralized. In early 1999, Amway realized that servicing distributors in 160 cities through its 13 locations was curbing growth due to unavailability of critical infrastructure like networked banks, toll-free phones and multi-service courier companies. The cost of making long-distance calls, the courier companies' refusal to accept cash and the time taken to deliver products were the three major hurdles that Amway faced. The typical direct selling system comprised a central warehouse located close to the manufacturing locations, which sent the products to regional hubs like the metros and then on to the branch offices. As opposed to the traditional FMCG delivery setup, where the distributors or retailers carried inventory, here it was taken care of by the company warehouses and their region-specific distribution centers.
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Long distance calls and courier companies took care of distribution in cities where the company had no presence. However, with these facilities not being upto the mark, Amway decided that it had to effectively handle these issues and rapidly expand its offices in order to capture the growing direct selling clientele in the country. The company also decided to give incentives to cost and freight agents (C&FAs) who could deliver parcels in the same city within 48 hours outside, in about 72 hours. Amway then planned to tap unemployed youth in smaller towns by subsidizing the entry fee for the starters' sales kit. Amway also offered to finance the sales kits through interest-free loans. It even gave free kits to visually impaired youth in Rajasthan. But media reports were skeptical about Amway's strategy to use localized strategies for its global products. This 'gamble' as Amway's biggest test case the world over, they remarked. In a bid to make its products more affordable, Amway introduced value-for-money 'chhota (small) packs' in December 1999. The sachets significantly boosted sales. Sachets had two advantages – they helped Amway shake-off the 'superpremium-products-only' tag, and with their lower prices invited consumers from lower income levels to try the products. This was expected to brand penetration. The most significant of Amway's Indian initiatives were its 'Indianisation' efforts. The company started printing Hindi slogan 'Hamara apna business' (our own business) on its stationery. The company's first product line, Persona, was created specially for the Indian consumers. Amway even named its expansion drives as 'Operation Gaadi' and 'Operation Ghar.' Operation Gaadi was launched in east-Uttar Pradesh where a store was mounted on a truck and made trips to different regions on different days. The project was later extended to West Bengal as well. Operation Ghar was primarily designed to provide better service to the customers as well as to its large family of distributors. Involving an outlay of Rs 15 crore in its Phase I, Operation Ghar eventually covered 19 state capitals. Operation Ghar was designed to provide five Es - ease of ordering, ease of paying, ease of receiving, ease of returning and ease of information/operations. Amway also utilized the Internet and electronic kiosks to hook up with its distributors and give them information.
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'Networking its Way into the Future ’ By 2004, Amway planned to become a Rs 1000 crore company with a physical presence in 198 centers across India. The company also revealed that by 2002, it would be selling all the 450 Amway products that were available abroad, in India. As part of its plans to tap unexplored markets, Amway announced an ambitious expansion of its distribution infrastructure in Andhra Pradesh, which included setting up a warehouse. Once the marketing business in urban areas was strengthened, Amway planned to turn tis attention to untapped rural areas as well. Even as Amway was establishing its roots in India, it was already facing troubles abroad. The very concept of network marketing was being threatened by the growing popularity of e-commerce and the Internet. Through the World Wide Web, manufacturers had the opportunity of engaging in one-on-one direct selling in an even simpler way. This posed a major threat to multilevel marketers. However, the real threat seemed to be the merging of telecom networks with the cable television operators. This brought the customer directly in touch with the company through telemarketing tools. This would naturally make the salesperson obsolete. Ofcourse, given the pace of developments on the Indian telecommunications front, network marketers could take it easy for least some more years. However, Amway prepared to meet these challenges by taking initiatives to further strengthen its online presence. With Internet usage levels increasing and little spare time for shopping, Amway believed that the Indians would gradually move to online shopping. But it thought the process would take time, as het pleasure of windowshopping and the actual shopping experience could not be replaced very easily. Amway provided graphics and three-dimensional views in the product display sections on its website. The company also planned to have portals in various Indian languages to ensure wide coverage.
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The Indian MLM Journey MLM was the fastest growing sector of the direct selling industry worldwide. In 1988, the total revenue generated by MLM was $ 12 billion, which doubled to $ 24 billion by 1998. The direct-marketing industry in India was about Rs 6 billion in i n 1999. This was a growth of 62% over the previous year. In the pre-liberalization era, network marketing in India was usually in the form of various chit fund companies like Sahara India. These had a system of agents, who simultaneously mobilized deposits and appointed sub-agents for further deposit mobilization. Companies such as Eureka Forbes and Cease-Fire pioneered the direct selling system in the country with a sales force that was trained to make direct house-to-house sales. s ales. Oriflame International was the first international major to begin network marketing operations in India in 1995. This was followed by the entry of Avon India in late 1996. Tupperware, with a product portfolio comprising plastic food storage and serving containers, also entered India in 1996. Later, Avon's decision to opt out of the MLM setup came as a major setback to the industry. (Avon was the world's largest seller of beauty products operating in 135 countries. The company opted for MLM in India while worldwide it was known for its door-to-door direct selling success. Avon's decision to adopt MLM was led by the belief that in India, I ndia, door-to-door salespeople were treated with a strange indifference. However, this led to Avon losing its focus on its stronghold of having a strong end-user focus. Besides, the company could not make the shift in mindset that multi-level selling required, as MLM required a strong distribution push mentality, which was very different from the hard selling to the end users that Avon was good at. Avon had also significantly lowered its advertising expenditures. Avon's Managing Director, David F Gosling said, "It was a mistake to adopt multi-level system when we weren't good at it. We soon realized that we should stick to what we knew best." He claimed that MLM had simply turned into a recruiting machine and it was difficult to ensure that the distributor down the chain was not thriving on the performance of his recruits without actually performing (selling) himself. Also, Avon held back the much-needed distribution push as the company gradually lost faith in the system. Within two years, Avon switched back to door-to-door selling, putting in place a three-tier network of beauty representatives (BR), beauty advisors (BA) and
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independent sales managers, which established clearer relationships between the distributor and the company)
The first homegrown MLM major was Modicare, started by the house of Modis in 1996. Modicare's network was spread across northern and western India. Commenting on the Indian MLM experience, S.K.Gupta, COO said, "The concept is especially relevant for India because of the highly fragmented retail structure, high brand proliferation which limits shelf-space and massive brand wars both at the trade and advertising level." The direct selling industry in India was in its initial stages even in early 2001. Besides Amway, Oriflame Avon and Tupperware, other players included Lotus Learning, LB Publishers and DK Learning, all selling books. All the direct selling companies were members of the Indian Direct Sellers' Association (IDSA), and were bound by its code of conduct. conduct. 4 While in international markets, a wide range of products was successfully sold directly to homes, this was not the case in India. In the mature economies, customers were fully aware of the competing products available, whereas in developing economies such as India, awareness levels were comparatively low. Industry observers commented, "The way the market is booming, no direct sale company can meet all its customers only through its own sales force." However, MLM companies opted for direct selling as against the high visibility retail set up for competitive cosmetics players such as Revlon, aiming to get an image of exclusivity. There was some resistance to the network-marketing concept in India, as Indians preferred the security of a job. Being a salesperson sale sperson in an MLM setup did not provide this security. This hampered the company's ability to attract competent personnel. The problem was aggravated by the fact that companies treated direct selling as 'just another' promotional tool, while it was mainly about motivation. One positive aspect of network selling was that it was very convenient for women as the job could be done part-time and at hours of their convenience. Also, the products sold also usually targeted at women, and this made it easier for the Indian women to accept the distributorships. Most Indian direct selling failures stemmed from the fact that they did not understand the concept thoroughly. Companies who opted for advertising in the media soon found that it had a negative impact. Advertising created a
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suspicion in the mind of the salesperson that the company was taking direct orders and thus, reducing commissions. In some cases, it also negated the impact of demonstrations. Eureka Forbes handled this carefully, when it advertised not its product, but the salesperson as a friend of the customer. Advertising went hand in hand with retail, as people ought to be told where to go and get the product. In an MLM setup, advertising was not the best way to spend money. Though this did sometimes result in inadequate product exposure, the money which would have been spent on advertising was usually diverted into training and motivating the salesperson to contact as many customers as possible. Though Oriflame and Avon did advertise, it was mainly attributed to their being prima-facie into cosmetics and personal care, thereby involving an image factor. Amway, which was into home care products in a big way, had decided not to go in for advertising on a scale as large as adopted by Oriflame and Avon. Competition was intensifying in the industry in the early 21st century. Amway seemed to be faring better than competitors like Modicare - a fact attributed mainly to its premium brand image. Both Amway and Modicare were not the typical door-to-door selling companies, as they sold only to customers known to their distributors. While Amway targeted only the upper section customers, Modicare targeted the middle and the upper middle class customers. Some of Modicare's products were priced at one-fourth of the price of Amway's products. Modicare sources said this was because its products were priced for the Indian market, while Amway's pricing was more in tune with its global counterpart. Modicare was even willing to reduce its margins in certain cases. Also, Modicare offered 100% refund even when the product had been used, unlike the 75% refund offered by Amway. This could turn out to be a cause for concern for Amway in the long run. Amway India’s Target Market & Customers:
The Range of consumers group is very large which is from Babies to Elders. Women are the main consumers.
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Research Methodology:
In completing the project of “Distribution strategies of Amway India”, I have used the Secondary Data Collection Method.
It is part of a descriptive research, in which we came to know the distribution strategies of Amway in Indian Scenario, the problems that they are facing & also with some good alternatives to tackle with those problems.
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Findings & Conclusion:
Amway set up a distribution system that is parallel to what Amway uses in other countries. Home delivery within 24 hours of products that are ordered by customers either through the Internet or on telephone. Amway India‘s success is through the use of an elaborate pyramid-like distribution system in which independent distributors of Amway products received a percentage of the merchandise they sold and also a percentage of the merchandise sold by recruited distributors.
A lot of Amway strategy in India is based on the trial-anderror experiences. Like other multinationals, Amway also been guilty of misjudging the Indian market at times. Even after misjudging the Indian market, Amway India has become a successful brand in India.
References: 29
www.amwayindia.com www.rediff.com www.wikipedia.com www.ipowerblogger.com www.OPPpapers.com
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“ Thank You” 30
