Amway plans ad blitz, brick & mortar presence

Direct selling major Amway plans a host of new initiatives as it celebrates its 50th year of business.

The privately held company will advertise such as it never has, use new media to reach out to customers and even increase its brick and mortar presence through what it calls the “experience centres,” Amway Corp chairman Steve Van Andel told visiting journalists at the company’s headquarters in Ada, Michigan.

That’s a break from tradition, knowing the company has mainly depended on its distributor network to push sales so far.

What gives?

“We would like to increase awareness about our products as of our business model,” Van Andel said. Also, up till now, growth has come from geographical expansion, but with hardly any new geography left to be tapped, it’s time for consolidation.

Business has been growing nicely so far. At $8.2 billion, 2008 net sales grew 15% year on year, and the company is hopeful of maintaining growth this year, despite the economic slowdown.

But, there are also headwinds, not entirely economic. The biggest concern is that after half a century of operations, a presence in as many as 80 countries, a basket of over 450 products and some 700 patents, an employee base of over 13,000 and well over 3 million distributors globally, it still faces questions about its business model and intent. In the US, it has long had to contend with criticism for being a “cult” marketer —- a pity considering Amway is acronym for the “American way.” Elsewhere, it is confused with the Ponzi schemes and pyramid schemes out to make a fast buck that either go bust or get busted every now and then.

Of particular concern is India, which has grown to be among Amway’s top 10 markets in around 11 years of operation, even though, at around $250 million, it contributes just 3-4% of its global turnover. Given its population and the growing buying power of people, India could well break into the top 5, Van Andel said.

For all this potential, however, India does not yet have a direct selling legislation to stand the good apart from the bad. Thus, when it comes to the law, Amway is clubbed with all kinds of players under the Prize Chits and Money Circulation Schemes (Banning) Act, 1978, company officials said. Andhra Pradesh, for one, had cracked down on the company under the provisions of the Act, based on allegations that it was a money circulation scheme. The case is still in the courts.

The company sure hopes its new initiatives will help earn legitimacy for its business model and grow its business, in India as elsewhere. Direct selling legislations clearly spelling out the dos and don’ts would help so much more.

Scale-up buzz in India
Amway is expanding its operations in India, William S Pinckney, managing director & CEO, Amway India Enterprises said.

According to him, the company is adding more lines at the facility in Baddi, Himachal Pradesh where it contract manufactures its products and plans to double its capacity.

A plant of its own is also under consideration and could come up somewhere in the south. The current basket of 109 products is set to swell too, and it even plans to tap salons with its beauty range.

But perhaps more urgently, its 127 distributor touch points across the country would morph into full-blown experience centres for customers. It’s another thing that the benefit of sales generated at these outlets would be passed on to its distributors, unknown to the customer. And it will spend on advertising like never before, said Pinckney.

The writer’s trip to the US was at Amway’s  invite and expense.