Amway's Indian Network Marketing Experience

‘NETWORK'ING ITS WAY INTO THE FUTURE

By 2004, Amway planned to become a Rs 1000 crore company with a physical presence in 198 centers across India. The company also revealed that by 2002, it would be selling all the 450 Amway products that were available abroad, in India. As part of its plans to tap unexplored markets, Amway announced an ambitious expansion of its distribution infrastructure in Andhra Pradesh, which included setting up a warehouse. Once the marketing business in urban areas was strengthened, Amway planned to turn tis attention to untapped rural areas as well.

Even as Amway was establishing its roots in India, it was already facing troubles abroad. The very concept of network marketing was being threatened by the growing popularity of e-commerce and the Internet. Through the World Wide Web, manufacturers had the opportunity of engaging in one-on-one direct selling in an even simpler way. This posed a major threat to multilevel marketers. However, the real threat seemed to be the merging of telecom networks with the cable television operators. This brought the customer directly in touch with the company through telemarketing tools. This would naturally make the salesperson obsolete. Ofcourse, given the pace of developments on the Indian telecommunications front, network marketers could take it easy for least some more years.

However, Amway prepared to meet these challenges by taking initiatives to further strengthen its online presence. With Internet usage levels increasing and little spare time for shopping, Amway believed that the Indians would gradually move to online shopping. But it thought the process would take time, as het pleasure of window-shopping and the actual shopping experience could not be replaced very easily. Amway provided graphics and three-dimensional views in the product display sections on its website. The company also planned to have portals in various Indian languages to ensure wide coverage.

THE INDIAN MLM JOURNEY

MLM was the fastest growing sector of the direct selling industry worldwide. In 1988, the total revenue generated by MLM was $ 12 billion, which doubled to $ 24 billion by 1998. The direct-marketing industry in India was about Rs 6 billion in 1999. This was a growth of 62% over the previous year.

In the pre-liberalization era, network marketing in India was usually in the form of various chit fund companies like Sahara India. These had a system of agents, who simultaneously mobilized deposits and appointed sub-agents for further deposit mobilization.

Companies such as Eureka Forbes and Cease-Fire pioneered the direct selling system in the country with a sales force that was trained to make direct house-to-house sales.

Oriflame International was the first international major to begin network marketing operations in India in 1995. This was followed by the entry of Avon India in late 1996. Tupperware, with a product portfolio comprising plastic food storage and serving containers, also entered India in 1996. Later, Avon's decision to opt out of the MLM setup came as a major setback to the industry³.

The first homegrown MLM major was Modicare, started by the house of Modis in 1996. Modicare's network was spread across northern and western India. Commenting on the Indian MLM experience, S.K.Gupta, COO said, “The concept is especially relevant for India because of the highly fragmented retail structure, high brand proliferation which limits shelf-space and massive brand wars both at the trade and advertising level.”

The direct selling industry in India was in its initial stages even in early 2001. Besides Amway, Oriflame Avon and Tupperware, other players included Lotus Learning, LB Publishers and DK Learning, all selling books. All the direct selling companies were members of the Indian Direct Sellers'Association (IDSA), and were bound by its code of conduct.⁴ 

[3] Avon was the world's largest seller of beauty products operating in 135 countries. The company opted for MLM in India while worldwide it was known for its door-to-door direct selling success. Avon's decision to adopt MLM was led by the belief that in India, door-to-door salespeople were treated with a strange indifference. However, this led to Avon losing its focus on its stronghold of having a strong end-user focus. Besides, the company could not make the shift in mindset that multi-level selling required, as MLM required a strong distribution push mentality, which was very different from the hard selling to the end users that Avon was good at. Avon had also significantly lowered its advertising expenditures. Avon's Managing Director, David F Gosling said, “It was a mistake to adopt multi-level system when we weren't good at it. We soon realized that we should stick to what we knew best.” He claimed that MLM had simply turned into a recruiting machine and it was difficult to ensure that the distributor down the chain was not thriving on the performance of his recruits without actually performing (selling) himself. Also, Avon held back the much-needed distribution push as the company gradually lost faith in the system. Within two years, Avon switched back to door-to-door selling, putting in place a three-tier network of beauty representatives (BR), beauty advisors (BA) and independent sales managers, which established clearer relationships between the distributor and the company.

[4] IDSA primarily focused on promoting consumers'awareness and interest. Its other main objective was to support and protect the character and status of the direct selling industry, and assist in the maintaining of qualitative standards in direct selling. Legitimate direct selling companies were thus concerned with developing, protecting and maintaining a suitable public image and ensured that their salesforce observed company as well as industry standards of performance and complied with ethical and legal requirements.

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