Amway has put in place a clear strategy to address both problems. To increase its revenues, it is now making a major push into consumer durables, a category into which it had earlier made a cautious entry by launching premium cookware. Buoyed by its success – the company has already hit Rs 1 billion in sales – Amway is now planning to sell a few other products in the category, such as air purifiers (initially for cars and later for homes), home water purifiers, and so on.
Amway India Enterprises CEO Anshu Budhraja says: “We will not get into every consumer durables product, but only those that are within the health category. About 15 per cent of our global turnover comes from durables. We expect that will also be the case in India in a few years. We will be launching these products in 2019.”
The company has also made a big push in selling traditional herb range, with four of its products already registering Rs 1 billion in sales within a few months of launch. Interestingly, about 55 per cent of the buyers of these products are under the age of 35 years. To Indianise such products, the raw material is being extracted from farms in various states of the country. Amway might look at these products’ export potential, too.
What has caused the drop in Amway revenues in the past few years? Explaining the reason, Budhraja says the drop was primarily because of a rethink in the company’s strategy between 2013 and 2015 which entailed shifting from high-volume personal and home care products to nutrition and beauty products. “We decided not to make any fresh investments in personal and home care as we thought our strength and value lay in nutrition, which is the sweet spot, rather than products like soaps, which had become a commodity business,” says Budhraja. He also points out that with government rules on direct marketing unclear and a confusion in the market, Amway also decided to go slow.
Amway also acknowledges the challenge its direct distribution system faces from e-commerce players. But e-commerce companies
say they are a marketplace, so the onus lies on Amway to curb its distributors putting up products for sale on e-commerce sites in violation of the Amway distribution rules.
The US-based company has, of course, found a way out. It has revamped its own online store and is investing $3-5 million in it. It is backing that up by offering one-day delivery in as many as 30 key cities of the country. It has also invested in software by which batch numbers of products being sold online could be traced back to the distributor for the required action to be taken.
Budhraja says: “The move has helped us. Currently, 35 per cent of our sales comes from our online site, compared with 15 per cent 18 months ago. And the amount of sale that still takes place on other e-commerce sites has gone down to 8-10 per cent from around 15 per cent earlier.”