Amway, art of direct selling

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Updated: August 22, 2018 1:17 PM

If you grew up in the ‘90s, an ‘aunty’ selling beauty products to your mother in professional looking packaging was a common site.

Anshu Budhraja, CEO, Amway India

If you grew up in the ‘90s, an ‘aunty’ selling beauty products to your mother in professional looking packaging was a common site. The era of such organised direct selling was marked by Amway, the US-based direct selling company, which entered India more than two decades back. It started in India with just six products out of its global portfolio; this now stands at more than 140 products in categories like nutrition, beauty, personal care, home care and consumer durables.

Amway India’s CEO Anshu Budhraja says, “As the company enters into its 20th year in India clocking a 20% CAGR over this period, we are bullish about this market.” The company invested around Rs 600 crore in a manufacturing facility in Madurai, Tamil Nadu in 2015, as part of its agenda to invest Rs 1,000 crore in India.

Amway is not alone. Players like Avon, Oriflame, Eureka Forbes, etc too have helped propagate direct selling. As per a study by ASSOCHAM, the direct selling market in India almost doubled between 2011 and 2016 to reach `12,620 crore two years ago. It is expected to grow at a CAGR of 4.8% to reach Rs 15,930 crore in 2021.

The brand has 5.5 lakh Amway Direct Sellers of which 60% are women. “Our unique business model which provides opportunities to the people with an entrepreneurial mindset led us to become the seventh largest market for Amway globally in terms of turnover,” says Budhraja.

Expansion on its mind
Amway aims to reach a turnover of Rs 1,800 crore in 2018 and Rs 6,000 crore by 2025. To achieve this, it plans to invest Rs 70 crore in R&D to bolster capabilities and support product innovations, Rs 10 crore in manufacturing for plant automation and power optimisation, and Rs 20-30 crore in digital initiatives. The digital leg is aimed at enhancing the experience of its customers and benefitting the sales force of direct sellers.

According to Euromonitor International, direct selling in India continues to be dominated by beauty and consumer health products with international players ruling the roost. In India, 50% of Amway’s business comes from Nutrilite, followed by beauty and personal care at 30%, and 20% from the home care and consumer durables segment. The company also expanded its nutrition range with the addition of Nutrilite Traditional Herbs. Moving forward, it will continue to expand the Nutrilite herbs range, Attitude skin care portfolio and consumer durables.

Amway has made significant progress towards a digital-first approach with e-commerce currently contributing almost 35% of its revenues. “We will continue to invest about Rs 20-33 crore in this regard over the next three-four years,” says Budhraja. Additionally, Amway changed its marketing strategy with a 100% digital-first approach this year. Its two latest campaigns — #AmWayofLife and #Don’tLimitMyAttitude — were both digital. It also launched a next generation digital store in Bengaluru in 2016 which leverages technologies such as AI, gamification, virtual makeover solutions, virtual cart, etc. Apart from this, the company plans to add 25 more XPP stores by the end of 2018. XPP’s format is similar to a mini shopping centre, which gives an opportunity to consumers and direct sellers to touch/feel and purchase products.

Climbing up the ladder
Like any other format, direct selling too has its own set of challenges. Today, e-tailers pose a serious challenge. Dhanraj Bhagat, partner, Grant Thornton India LLP, says, “Compared to a decade back, e-commerce has gained the trust of shoppers. This has happened through regulation, large and established players entering the field and actual customer experience.” Furthermore, most of the direct selling is limited to beauty and health products, and some home use products whereas online retailing offers a vast choice to shoppers.

Online isn’t the only challenge. According to a recent KPMG-FICCI study, counterfeit products also pose a serious threat to the Rs 7,500 crore direct selling industry in the country. Amway India is aware of various challenges and believes that it has consumer trust and expertise to win the game. “We sell daily use products similar to other FMCG companies with a difference in our distribution model. Our direct sellers make a personalised recommendation to address consumer demand which elevates satisfaction levels,” maintains Budhraja.

Currently, the Indian direct selling market as a percentage of GDP is less than half of the average of developed countries; thus, there is significant room to grow.  “We plan to bring India amongst the top three markets for Amway globally,” Budhraja says.

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