Amway

While Amway’s leadership position is far from being under any threat at least for a few years ahead (world #2 Avon’s 2016 sales is $5.7B), the trend after 2013 does not look so positive. Amway’s sales dropped from $11.8B in 2013 to $8.8B in 2016, or by $3B, or by almost 25%.

The company’s revenue development between 2010-2016 is presented below:

Following the results in 2016, Amway Chairman Steve Van Andel was satisfied. “Across the world, Amway did well in 2016. We experienced sales growth in several top markets, saw double-digit percentage growth in nine additional markets, and continued to evolve the business in China as we seek to take advantage of shifting market conditions and achieve the market’s long-term growth potential,” he said.

He added, “We are pleased to see the continued and growing relevance of the direct selling model in today’s marketplace as people place real value on personal recommendations, and technology enables our distributors to connect with customers at any place, at any time.”

Product Categories

Once again, nutrition line made up the largest category once again, in 2016. Its share was 49% (up 3% from 2015). Amway’s top-selling nutrition products are reported as Nutrilite Protein Powder, Double X / Triple X, and Vitamin C Plus. Euromonitor announces Nutrilite as the world’s #1 selling vitamins and dietary supplements brand.

Amway’s second largest category was beauty with a 25% contribution (the same as 2015). The most famous brand in this category is Artistry and again, based on Euromonitor reports, Amway says this line is among the world’s top five, largest-selling, premium skincare brands.

Home products was Amway’s third largest category. It had 22% share in 2016. This category breaks down into durables (15%, down 1% from 2015) and home care (7%, the same as 2015). Within this category, Amway’s top-selling home durable product was eSpring water filtration systems, and top-selling home care product was Dish Drops Concentrated Dishwashing Liquid.

Markets

Amway reports it has operations in more than 100 countries and territories, with over 19,000 employees.

The top 10 markets for Amway in 2016 were China, United States, South Korea, Japan, Thailand, Taiwan, India, Malaysia, Russia and Hong Kong.

This “Top 10” list in 2015 was as follows: China, South Korea, United States, Japan, Thailand, Russia, Taiwan, Malaysia, India and Ukraine.

Amway said nine of its markets in the world experienced double-digit percentage growth, compared to 2015 figures. The company did not identify these markets nor did it release any sales figures for individual countries. Amway reported it had lower sales in China, in its biggest market, for the third straight year in 2016. Company’s President Doug DeVos commented on Amway’s performance in China, “We’re struggling a bit here now,” and said the China business was suffering from “a direct selling cycle” and faced growing competition, with more than 90 direct selling companies now operating in the country.

2017

Looking forward to 2017, Amway management is optimistic pointing to:

* Millennials’ increasing interest into Amway: In the U.S, for example, majority of individuals who started an Amway business in 2016 were millennials, according to Amway.

* The new product categories exceeding their expectations: The XS brand of energy drinks, snacks and sports nutrition products achieved 40% growth in 2016.

* The convergence of product categories, such as nutrition and beauty, showing strength: Newly launched Truvivity by Nutrilite, a supplement focused on skin hydration, is exceeding sales estimates success has been found in pairing this product with premium skincare lines.

For more on Amway’s 2016 results, please click here and here.

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Hakki Ozmorali is the Principal of WDS Consultancy, a consulting firm specialized in providing services to direct selling firms. He is also the publisher of The World of Direct Selling, global industry’s leading weekly online publication. He is an experienced professional with a strong background in direct sales. Hakki was the first corporate professional in the Turkish network marketing industry. His work experiences in direct selling include Country Manager roles at Oriflame, Herbalife and LR Health & Beauty Systems, and Regional Director, North America role at Lifestyles Global Networks.

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I asked the following question to some of the noteworthy people from the global industry:

“If you were the sole decision maker, would you prefer an expat or a local Country Manager for your direct selling company’s next international market and for what reason?”

Below are their responses:

Pam Anthony, Managing Director of Pam Anthony Recruitment, Partner of Pan European Solutions:

“This is a really interesting question and there are pros and cons on both sides. My preference would always be that wherever possible a company recruits a local manager, as they understand the culture and the vagaries of the market. Another consideration that is often missed is that it gives more confidence and credibility to a company, when the domestic population can see that the business is investing in their country and believe in developing local talent. However, dependent upon the company’s structure and business model it is not always possible to source local talent, so when recruiting an expat there is a lot of goodwill to be gained by ensuring that there are obvious plans in place to train and develop local people to progress within the company.”

Jeff Babener, Legal Counsel at Babener and Associates:

“And so they say: Think Global, Act Local. One astute observer of direct selling has noted: ‘a perception may be right or wrong, but it is always right in the mind of the person who holds the perception.’ Translated for direct sellers, this means: Know your market and know the minds of your customers, distributors and employees. Understand what drives them, what are their passions, what are their strengths and weaknesses, what are their biases.  Above all, understand their culture and be able to walk in their shoes. Or to mix metaphors, if you are going to operate under the sea, send a fish and not a mammal. Of course, a company needs an “ambassador” to its foreign operation and one who is able to understand the parent company and its goals; but, for the local operation, a company should look for a talented native executive who clearly understands direct selling, but more importantly understands his or her local market.”

Sean Eggert, President at Hanna Shea Consulting:

“It is truly a case-by-case basis. Depending on the market, you may be faced with a situation where you are working with limited resources, especially if the direct sales industry is not well represented within the expansion country. In this case it makes sense to hire an expat industry veteran. Of course each country is going to have its own caveats and nuances, and to enter a market without the insights of a local leadership team can cause costly mistakes in marketing and sales strategies. Ideally, the best approach is to hire the best candidate (local or expat) that can show they have worked in a situation similar to the one you are about to face, and successfully navigated the unique challenges that come with opening up a new country.”

Miroslaw Lubon, Executive Director of Poland Direct Selling Association:

“Definitely a local Country Manager! Never in the history of my relationship with the industry did it happen that an imported GM performed well enough to make a new business grow at a satisfactory rate. Why? The much acclaimed globalization processes, while obviously being helpful in starting businesses abroad, are still unable to eliminate completely, or even reduce substantially, the significant role played by what you can call “local color”. And by this I mean local habits, customs and first and foremost the mentality of the locals. Add to that a sea of differences in tax, labor or logistic regulations. And then there’s the problem of the language. By its very nature direct selling is all about building lasting and profound relations between not only the seller and the consumer, but to the same degree between the distributors and the company’s management, including the Country Manager. The ability to efficiently communicate in a local language is a must, a rather rare skill among expats.”

Alan Luce, Senior Managing Principal at Strategic Choice Partners:

“When opening a new country market, local talent is always a plus if that person also has a deep knowledge of your company, your culture, your products and your compensation plan.  If the choice is between an experienced direct selling local but one who has no or little knowledge of your company, you are usually better off bringing in an expat with deep experience  with your company as the general manager and hiring the local as the head of sales.  This advice comes out of 40 years of experience that has involved opening or helping to open dozens of new country markets both as a company executive and as a consultant retained for the purpose of opening the market.”

Ed Ludbrook, Leadership Expert:

“Having worked with so many country managers, they should be selected for leadership qualities not where they are from. Unfortunately, all too often the person is recruited locally or brought in as an expat, due to company/industry experience, rather than leadership qualities. My advice is always to hire great quality local people, preferably with no industry knowledge, and then investing heavily in their training and development. Our business is based on leadership and in a stand-alone role like Country Manager, people either have the potential or not. So hire quality, invest in development. “

Ian Morgan, Senior Partner at Meridian / MMi:

“Direct selling normally requires duplication of a business model with no deviation within countries. The philosophy, ethics and product offering are set in stone or should be as far as legally possible. The one way to guarantee that head office strategy and objectives will be given the best possible start is to have an ambassador who knows the business backwards. He or she will set the pattern for the future and duplicate the business as owners would prefer. I have seen local management attempt to improve on the business model with not so perfect results some of which have set markets back years. I spent 14 years as an expat, in some cases trying to raise markets from oblivion. Every time had the start been a duplication of the home office, catastrophe could have been averted. There are no exceptions I can find to cultural differences. The basics of the business and the needs of the independent sales force are the same worldwide.”

Bobbie Wasserman, Managing Director of Wave2 Alliances:

“From my in-house and consulting experience, my first preference would be a local executive with industry experience. That individual will know the regulatory requirements of the country, how local business is conducted, and will build strong relationships with local Distributors. While strategic directives would originate from HQ, the Country Manager’s understanding of the local business landscape and culture would allow them to report back to HQ on specific needs to help them achieve that country’s business objectives. ”

Bob Woodard, Founder of BW International:

“In general, I would always prefer a local Country Manager if my company was opening a new international market. A local Country Manager arguably would know the market, have local resources, and speak the language. The fact that I would select him or her would mean that they have already been vetted as the ideal candidate with the right qualifications (including values, vision, management style, and experience) to meet or exceed expectations. The exception to this ‘rule’ could be based on what role or roles expected to be played by this individual. For example, if someone were being groomed for a Regional position, they may not be a local national. Or if the country were in need of a turnaround, then the qualifications might call for different skill sets / experience levels and I might choose someone from another country.”

Dirc Zahlmann, CEO of Zahlmann Consulting:

“After guiding our clients in several hundred projects in expanding to international markets, we have experienced a lot of options regarding this matter. After all this experience, we can state that hiring a local country manager is the best solution. As long as this local country manager is experienced and has a regular ongoing communication with a good team from the headquarters, the results are better than sending an expat to an international market. The expat can be very experienced and talented, but always has to adapt to the cultural differences and working methods first, before he/she can concentrate on the market and people development. A local country manager is experienced in his market and when he loves the story and products of the company that he represents he will be faster and more sustainable in achieving success for the company.”

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Amway’s 10-year growth between the 2004-2014 period has been 68% with 5.1% average year-over-year growth in the last five years.

This week we will take a little closer look at Amway’s 2014…

Last year, 43% of Amway’s revenue was generated by its nutritional products. This was followed by beauty (25%), durables (19%), home care (8%), and others (5%).

Among these, Amway labels three of its brands as “power brands”, namely Nutrilite, Artistry, and eSpring. Nutrilite and eSpring are known to be the leader brands in their categories globally. Artistry on the other hand, is among world’s top five highest-selling skin care brands.

As of end-2014, Amway had 17 manufacturing and processing plants all over the world. The total number of its other establishments like experience centers, plazas and distribution centers exceeded 700. Alongside with these, Amway also owned and operated over 6,400 acres of certified organic farmland in the U.S., Mexico and Brazil

Amway’s global operations have been divided into four regions: Americas, Asia-Pacific, Europe-India-Africa, and China. The top 10 markets for Amway in 2014 were China, South Korea, Japan, United States, Thailand, Russia, Taiwan, India, Malaysia and Ukraine. For the overall sales decrease in 2014, company blamed lower revenues in China and fluctuation in foreign currency exchange rates.

Amway management was especially happy with the growths achieved in some of its most mature markets like Korea and Taiwan. In Brazil, Mexico, Argentina, Costa Rica, Guatemala, Chile, Panama, Italy and Spain, there were double-digit percentage growth performances in local currency sales.

Towards the end of 2014, the Chair at the World Federation of Direct Selling Associations (WFDSA) was passed to Amway President Doug DeVos. He assumed the role of Chairman from Alessandro Carlucci, former CEO of Natura. DeVos was elected for this role for a three-year term.

Whether Amway will increase its sales in 2015 as compared to last year, we don’t know yet. However, it is very unlikely that it will leave the global leadership position.

Please click here and here for more detailed information on Amway’s 2014.

The post Amway in 2014 at A Glance appeared first on The World of Direct Selling.