“According to Indian Direct Selling Association (IDSA), over 1.5 million Indians are involved in this industry. Direct Selling, thus, has potential for employment, and is living up to the same.”
MD & CEO of Amway India Enterprises
Direct selling: Work at leisure
Direct selling is a unique marketing strategy. Though it is not new to India, it has not been able to achieve the status of retail marketing. But now it is slowly catching up and becoming popular. The credit of popularizing this concept in India goes to Amway. Their marketing concept involving direct selling and multi-level marketing have helped in opening up new avenues of employment and revenue generation in India. William S. Pinckney, MD & CEO of Amway India Enterprises, traced the growth of Amway and the benefits and potential of Direct Selling in India in a talk with Sandhya Sharma and Himanshu Kumar Singh of Amity EduMedia. Here are the excerpts:
What are the strengths of Amway India Enterprises?
The greatest strength of Amway is its Distributors. In India, we have 450,000 active distributors who carry out business in all corners of the country, reaching as many as 2000 towns and cities. And if our growth is any indication - indeed, that of the direct selling industry – India holds tremendous potential.
Another pillar for the Amway family is the impeccable pedigree of the Amway products, each the result of over 500 dedicated scientists toiling to create world-class products. While we started with six products in '98, we now have over 70 products in India market, some that are unique to India. Worldwide we have over 450 products .
The ultimate winner, however, is the unique business model that requires no vast start-up costs. In the normal course, if one were to set up a business, one would require to invest a decent amount to hire a shop and staff, have a storage space etc. The Amway business does not make any such demand. Instead, it offers the flexibility to prioritize time spent on business as well as personal life. It offers resources to contribute towards causes that are reflective of your values. This business can be carried out part-time, or fulltime, depending on the commitment that one is willing to invest
Your company adopts direct selling as its marketing strategy. What are the benefits and drawbacks of direct selling as against retail marketing?
In most cases, the distributor representing a direct selling company demonstrates the usage of a product, something a retailer would not do. As direct selling companies like Amway do not have product advertisements, we rely on the distributor to inform potential customers and users the benefits of the product. Moreover, direct selling companies such as Amway offer a money-back guarantee on all its products. If a user is dissatisfied by a product, he may return the same to the distributor, even after he has opened the seal. Not sure which retailer would return 100% of your money, after the seal of a product is broken.
Most often, the distributor is also a user of the product. Hence his ability to convey proper usage, benefits to a potential user would be much higher than someone at a retail outlet, who anyway, sells products of rival companies. A retailer may not be in a position to recommend a product over another.
Retailers rarely explain alternate choices, or outline product guarantees and warranty papers without being asked. They may not explain the pitfalls of not getting a proper bill of sale. The vast multitude of retailers, owe no allegiance to a particular manufacturer and have no interest in ensuring that consumers get the full benefit promised by a brand. At times of a grievance, consumers hard pressed for time are made to run around in circles before they receive justice of any sorts.
With the direct sellers having a stake in the reputation of the brands they promote, they have an interest in ensuring that the consumer is fully satisfied with the products. This is more so, because the overwhelming majority of direct selling companies offer sizeable refunds on the products - from 70 per cent to 100 per cent - if the consumer is not satisfied with the product. Amway, the largest direct selling company, for example, offers 100 per cent refunds if its products do not meet total customer satisfaction and the product is returned within a month.
One drawback is that products of direct selling companies may not be easily available. If someone wants to purchase Amway products but does not know of any Amway distributors, he or she may find it difficult to get those products.
Direct selling is not a very old concept in India. Do you think you have made a dent into the mindset of Indian people who are more into retail buying? To what extent have you been successful?
If we let figures speak for themselves, Amway's turnover has grown from Rs 91 crores in its first year (98-99) to Rs 633 crores in 04-05. While we had six products in the year of launch, today that figure is over 70. From six offices at launch, we now have 49 offices.
According to the Indian Direct Selling Association, the direct selling industry in India is now a Rs 2700 crore industry, up from Rs 2300 crores in 03-04, and Rs. 1723 crore in '01-02. So quite clearly, the direct selling industry is growing at a healthy rate.
But yes, some rules had to be re-written for the Indian consumer, who has a touch-and-feel approach while purchasing a product. This was one impelling factor for opening up so many offices. But now that the consumer has a fair idea of what the product is all about, they have started placing orders either by internet, by SMS, or even by phone. In fact 40% of our sales are via home delivery.
All told, it would not be incorrect to state that the direct selling industry has made a significant impact and is here to stay.
Some doubts have surfaced in the minds of the people regarding the concept of direct selling due to emergence and existence of some bogus pyramid companies and money circulating enterprises. What measures do you suggest to counter this challenge?
There is a clear thumb-rule in identifying a genuine MLM (Multi Level Marketing) and a possible imposter. If the MLM has a money-back guarantee policy and a refund policy (on the initial investment), it is above board. Indeed, many fly-by-night operators might not even have any products.
Distributors or direct sellers or independent business owners undergo rigorous training in dealing with consumers before they become operational. Their professional behavior vis-a-vis the customer, is governed by explicitly laid out rules of conduct, which are explained to them at the outset.
We have seen and read about many such scams in the name of direct selling. Unfortunately no concrete steps have been taken to stop such scams from being perpetrated on the gullible public. Often, pyramid operators pose as legitimate direct sellers. These schemes offer quick returns and people get to know the true picture only after losing their hard-earned money. These incidents harm the reputation of the direct selling industry. This is a cause of concern for genuine direct selling companies.
The menace of fraudulent direct selling company is not exclusive to India, but is a global affliction. To curb this, many developed markets like the US, the UK, Canada, Korea and Japan have separate laws to deal with the direct selling industry. Any violation is dealt accordingly. In India too, reputed direct selling companies joined hands to form Indian Direct Selling Association (IDSA), which is a self-regulatory body. As the apex body, IDSA is involved in separating the sheep from the wolves. The most significant initiative of IDSA has been in preparing and submitting a draft legislation, which is aimed at differentiating between the good and the bad. Ultimately, this will enable the government to effectively deal with industry issues.
In drawing up the draft legislation, IDSA has taken clues from international legislation, especially from countries like the US, UK and Malaysia, who nave developed direct selling industries.
IDSA has also outlined the Code of Ethics for its members. Consumers are protected against illegal or unethical practices through the enforcement of the code. The fact that in over five years since the Ombudsman's office was set up, only two complainants have actually brought grievances to his attention is evidence of the effectiveness of the direct selling companies' own consumer relations mechanisms. The IDSA regularly liaises and periodically meets with consumer organizations to address problems raised by the latter, and also brainstorm on means to improve consumer protection.
Have you ever tried Internet as a medium for large scale selling? What is the potential of Internet marketing in India?
Yes, Amway products can be ordered on the internet. As pointed out earlier, home deliveries - which emanate form orders' sent either via the internet, by SMS or a phone order, account for 40% of Amway's business. So quite clearly, we are witness to a preference shift. And that is desirable. We would rather that the distributor spends time prospecting new customers or servicing old ones, than spending time traveling to the Amway offices to pick up products.
The model followed in a country like the US is heavily in favor of technology such as the internet. There is basically one centrally located Mother Warehouse from where products are dispatched to reach the distributor within a given time frame. Ideally we would like to replicate that model here in India as well. But this is still some way off essentially as with the existing delivery infrastructure, we may not result in the desired delivery time. But we certainly look forward to the day when the maximum orders have to be home-delivered.
Do you think that India is potentially a great market? If yes, why don't you make India as a full scale manufacturing base rather than resorting to contract manufacturing?
India is definitely has a great potential as a market. With a population 1 / 10 th that of India, the direct selling industry in Mexico is more than six times that of India. Additionally, as direct selling offers an employment possibility, potential for the industry is indeed vast.
Amway was permitted to carry out business in India by the FIPB, so long as there was transfer of technology to small or medium scale industry. This was done to ensure that though foreign firms opened shop in India, Indian businesses and indeed, employment would not be compromised or threatened. These medium scale industries - our vendors - have since grown both in size as well as capacity, and it would make little sense to cease relationship with them by setting up our own production capacities.
Regardless who manufacturers Amway products the fact remains that more than 80% of our products are now manufactured in India. That in itself, translates into jobs and opportunities created.
What is the potential for employment in direct selling system? What kind of qualities and qualifications should one possess to become an efficient direct seller?
Amway has 450,000 active distributors - this is in eight years. According to IDSA, over 1.5 million Indians are involved in this industry. Direct Selling, thus, has potential for employment, and is living up to the same. Worldwide, there are over 42 million direct sales persons involved in 165 countries. Every week, about 220,000 people join the industry worldwide.
Direct selling offers career opportunities in two ways - one, direct employment for professionally qualified people with the company and two, as Independent Business Owners or Distributors. It offers great avenues to individuals to own an independent business, which is low in investment, low risk and high potential business opportunity. People can earn varying incomes based on skills/efforts invested in the direct selling business.
Generally, people start direct selling on a part time basis without giving up their regular job/work. Depending on the success of their foray into direct selling, they decide the future course of action. There are numerous examples of people leaving their high position and high salaried jobs to pursue direct selling full-time. Direct selling is all hard work but very rewarding.
What is your brand promotion strategy in India? What is the reason behind product-specific promotion of brands rather than umbrella branding?
Worldwide, Amway is known as a health and beauty company. The approach in India is no different - we would like to be known as the best Health and Beauty Company in India. Cumulatively, these two products amount to over 60% of Amway's business. Thus, our strategy is to offer a varied bouquet of health and beauty products.
We are amidst an ambitious ‘a-product-a-month launch’ plan, wherein an interesting array of products has been lined up. Amway's recent foray into premium skin care segment (with the launch of Attitude) and male grooming segment (with the launch of Dynamite), has given us an added dimension.
Essentially, ours is a twin-track strategy. On the one hand, the objective is to increase the penetration of Amway Business Opportunity and its acceptability among the cross section of society. On the other hand, we plan to launch more products and cover more cities and towns through our home delivery network. Currently, Amway India offers over 75 products in five categories Personal care, Home Care, Nutrition and Well ness, Cosmetics and Gift Catalogue category, which are available in 2000 cities, which we hope to increase by another 500 in the coming 24-months.
What is your growth target for the year 2006-2007? What are the new products you are going to introduce in the near future?
We are confident at finishing '06 at Rs 700 crores - which would represent a double-digit growth. The twin-track strategy, just explained, will help us achieve this desired goal.
Most products in the current launch are in the health and beauty categories, with a weight management program - Positrim - the most eagerly awaited product. Our forays into male grooming as well as the premium category cosmetic range are the prime products in our arsenal.
FMCG Companies like Procter & Gamble and Hindustan Lever Limited, have large bases in India. How difficult it has been for Amway to make a niche in the Indian market in the presence of these companies?
If one examines the growth of the direct selling industry, one does get a sense of the growth, which - as outlined earlier, today stands at Rs 2700 crores. Having said that, it has not been an easy trek - the route has taken us through troughs as well as peaks. We have had to adapt and change the approach to suit the Indian mind-set. We have had to introduce economy-size product packs: launch a cosmetic range that is unique only to India: open more offices and pick-up centres so that the Indian customer could 'touch and feel' the products. This list goes on.
As regards the potential as an industry, more and more consumer product companies seem to be embracing direct selling. The revolution has, just begun in India and is an emerging phenomenon. Even the established FMCG major Hindustan Lever Ltd has made the move into direct selling, with the launch of Hindustan Lever Network. Others may follow suit. As competition stiffens companies will look at more personalized, specialized and focused communication and so direct selling will improve and provide more avenues.
The future is very bright and encouraging. Direct Selling is here to stay. It offers the consumer the advantages of convenience, personalized attention, a good selection of unique products, and the ability to examine/try products over a period of time under the 100% Product Satisfaction Guarantee. By virtue of its intrinsic impetus to entrepreneurship, Direct Selling encourages self-employment. The industry has made a unique contribution in transforming individuals from diverse strata of society into successful entrepreneurs. Women, traditionally confined to a life of staid domesticity, have benefited the most. Over 70% of Distributors engaged in Direct Selling in India are women.