Retail News Update

A 1700 crore brand, Amway India’s direct selling business journey involves thinking and acting like an FMCG company

FOR A company that’s built on a model of minimal mass media advertising and maximum direct selling, resorting to above the line communication sure does raises eyebrows. But William S Pinckney, CEO of Amway India knows that to drive the company further into the Indian market, using advertising to increase brand awareness is important. So from a corporate ad that projected Amway more as a FMCG company and less as a direct marketing business, Pinckney says the company will now start with category advertising soon to “to educate customers about the brand as many people don’t know us.”

Pinckney’s worry may be the unfamiliarity of the brand in India, but looking at the numbers Amway has notched up, it seems to be spreading the right message. Amway will be closing the financial year with a turnover of 1700 crore, clocking a CAGR of 20%. With over a decade’s presence in India, Amway today sells around 115 SKUs — from products in beauty to home and personal care. While beauty (10%) and HPC (30%) are important categories for Amway, 60% of its sales in India come from nutrition products and its brand Nutrilite, according to Pinckney, is among the Top 5 in the world in its category. Pinckney accepts that the company‘s growth has revved up only in the past few years thanks to key changes initiated in the overall business model.

The changes however do not mean that Amway has moved from its multi level marketing model that is the USP of the company. Products are still sold through a network of Amway Business Owners (ABOs) across the country with emphasis on bottomline margins. Pinckney says one of the thrust areas has been a faster delivery of the product range to end users. Using a network of seven contract manufacturing facilities, the SKUs move to a central warehouse and from there to regional warehouses across the four main metros — Delhi, Kolkata, Mumbai and Bangalore. Amway today has a network of 130 offices, 55 warehouses that reach around 4000 cities and towns across India.

Taking a leaf out of the FMCG sector, Amway has introduced smaller SKUs like single use sachets to generate trials among customers and get them interested. Further, to get customers to ‘touch and feel’ the products, the company has ‘brand experience centres’. These centres situated within shopping malls and high streets allow customers to look at the product range. Pinckney says that the centres are manned by consultants who provide information on the products on display. However, these centres don’t sell as he is clear that selling happens through ABOs. “The retail format is not a point of sale as we don’t want it to cannibalise our core business operation.

Customers can try our products at the experience centres and we will help them get in touch with the ABO in the area they live to buy the products,” says Pinckney. However like any FMCG company, Pinckney says providing a retail experience is important even for Amway and therefore the company plans to have a footprint across the country with over 30 brand experience centres.

Amway may have notched up some serious numbers in a short span of time, but there are challenges as it looks to scale up the ladder. Foremost is the beauty and personal care category that’s witnessing an aggressive play off between established FMCG players. Market observers believe for Amway to make an impact, it will have to project each product as a brand with its own character and personality. “A lot of brands in these category are imagery driven. Any premium that a brand charges depends on the brand message it sends across,” says one market observer. That’s precisely the reason why Amway is now looking at above the line communication for individual brands. On the other side of the spectrum is the price war that one comes across in home and personal care. With well known FMCG companies playing the price card regularly, Amway for its offering has to be in sync with the market when it comes to pricing, say market observers. Pinckney knows that in terms of marketing and communication, he doesn’t have the muscle to match the FMCG behemoths in the market. But Amway’s trying to overcome the perception and familiarity issue through training. Amway provides free training to its ABOs and so far it has conducted 29,000 training sessions for more than 1.5 million people. “As this is a one-to-one marketing business, it is important that ABOs know about the product they are selling,” says Pinckney.

Amway has acquired some traction in the multi level marketing business, but to keep the chain going, the company will need to think more like a consumer goods company and less like a direct seller.