Laws need to have more teeth to regulate direct selling

India’s largest direct selling company, Amway, is lobbying hard to make sure there are strict rules and regulation laid down for the industry. With multi-level marketing operations such as SpeakAsia,

GoldQuest and the latest Emu farming scheme coming unstuck, the need to tighten the noose around this industry is being felt more than ever before.

Richard Holwill, global vice-president-public policy, Amway, in an interview with Nupur Anand lays bare what it takes to tread cautiously.

Amway has been in India for 14 years now. So, in this journey what has worked in your favour and what has not?
We started in 1998 and that year we clocked a turnover of Rs99 crore and by the end of the last year, we have grown to Rs2,130 crore. In this journey, what has worked for us is we have had a large portfolio with 130 products in the kitty and we have not compromised ever on the quality front.

Also, as a direct selling company, we provide business opportunities to individuals who probably don’t have a huge capital. And the fact that we have a 100% money-back guarantee in terms of an unsatisfactory experience also lends us credibility. So, a combination of all this has worked in our favour.

What probably hasn’t worked for Amway is that many people don’t understand what we do and there is no regulatory framework in India.

On that note, the ministry of consumer affairs is finally talking about bringing direct selling companies under regulation, what’s your take?
The direct selling industry in India is more than Rs7,000 crore with about 18 big companies. And companies such as SpeakAsia, Nano Excel and bizarre forms of marketing have opened a can of worms and that has brought the focus back on MLM (multi-level marketing) schemes. Once any company cheats, then the whole industry’s reputation is spoilt, which doesn’t work in our favour at all. Regulation is something that the industry has been asking for more than 10 years. It is required to protect consumers and this can help weed out unethical companies that are doing business. And this can help the ethical ones keep the promise of direct selling.

What are the things that you expect to be a part of the law?
There should be laws on the time taken by a company to fix a complaint made by the consumer. The other thing is some companies make it a business from recruiting. The moment you start getting money from this, there is doubt on legitimacy. So, we would also want that there should not be any monetary dealings for recruitment, instead money and commission should be paid only on sales.

Generally, what are the problems, and complaints that consumers make?
There are many times when agents make misleading promises about what your money can earn. Dynamics between distributors can be different and this also leads to a problem. For instance, at times, a distributor may recruit someone who doesn’t want to sell, which complicates things. There are also complaints made about high-pressure sales. However, in case a complaint is made, we make sure we resolve it in no more than 10 days.

So, now about your business in India, Amway believed in a no promotion strategy and focussed on word of mouth. But the company has changed the gameplan and seems to be spending a lot on advertising and promotions…
We started with a no promotion strategy, but in the course of time, we realised it was a good idea to change and to spend on promotion. The word-of-mouth strategy has its own limitations in terms of fewer reach. But this, coupled with advertising and promotion, has helped the business grow multifold. We have also entered the e-commerce space and now that space is responsible for our 15% of the total turnover.

What are the new products that we can expect from Amway?
In India, we sell 130 products, globally we sell 450 and every year we try and introduce at least 6-8 products in the Indian market. Last year, there was a lot of focus on supplementation for children, this year the focus has been on supplements for healthy ageing. So, this year we have seen six products along those lines and two are left. We will also be entering the consumer durable space, but it is still premature to comment.