Amway to shun e-commerce

Amway saw a drop of 20% in net profit and 8% in turnover in 2013-14

Amway, India's largest direct selling company, said that the company's stance on not allowing to sell its products on e-commerce sites remain unchanged.

Speaking on the sidelines of a product launch, Sundip Shah, chief marketing officer of Amway India said, " We will distribute our products only through our distributors and have no plans to adapt the e-commerce mode as our main strength is word-of-mouth." Direct selling companies like Amway, Tupperware and Oriflame had earlier issued notices to Flipkart, Ebay and Snapdeal asking them to stop selling their products on their platform.

Under Amway's business model, distributors, enrolled for free, earn commissions on sale of products directly to consumers, in addition to a share in business volumes of their group, comprising other distributors. About half the 1.5 million direct distributors Amway operates through are actually consumers who have turned distributors, primarily to buy for themselves at a discount.

But in a a substantial change from its earlier marketing initiatives of not advertising the company has now planned to " advertise aggressively" to increase their brand visibility through print, television and digital campaigns. " Now we have an annual advertisement budget of Rs 60 crore in order to create a brand for our products before our distributors take it to the customers," Shah said.

Amway started India operations in 1998. It has a presence in 80 cities across 10,000 postal codes, 145 offices and 65 warehouses. Its competitors include Oriflame, Herbalife, Avon and Modicare. The direct-selling market is estimated at Rs 7,200 crore, and is projected to grow to Rs 64,500 crore by 2025, showed a recent joint study by the Federation of Indian Chambers of Commerce and Industry and global consulting firm KPMG. When the company began in India, it was importing all these.

Today, 90 per cent of its products are made here, through contract manufacturing. It is also setting up its own factory at Nilakottal (near Madurai), with an investment of Rs 500 crore. " We want to make it a regional hub for the company," said Shah.

Amway today launched All Plant Protein Powder under the Nutrilite brand. The company has aggressive plans to grow Nutrilite in to a Rs 1,800 crore brand in five years, from its current valuation at Rs 1,200 crore.

Amway saw a drop of 20 per cent in net profit and 8 per cent in turnover in 2013-14. Shah accorded it to the overall slowdown of the economy and consolidation phase for the company. He said that the company will be back to double digit growth in two years.