William Pinckney, Managing Director & CEO, Amway India

"Direct selling is a very mature and established industry in the US, which competes very successfully with the traditional FMCG retail channel. In India, this industry is just 10 years old and has a very long way to go to evolve and to develop to the size of the US industry."

William S Pinckney, Managing Director & CEO of Amway India Enterprises, is optimistic about the growth of the direct selling market in India. He believes that direct selling can compete with traditional FMCG retail. Pinckney came to India in February 1998 after spending 17 years in senior sales and marketing positions with Amway. He launched the Indian operations on May 5, 1998, and in three years the Amway’s annual revenue in India crossed the Rs 500 crore mark.

Pinckney joined Amway Corporation in 1981. Prior to coming to India, he had participated in new market openings in countries like Brazil, Indonesia and the Philippines. In India, he has become an active participant in many business forums and seminars. He is a member of the CII National Committee on Consumer Affairs and was a member of the CII Council for MNCs 2001-02. He is also a member of the CII National Committee of Fast Moving Consumer Goods. He lives in New Delhi with his wife Laurie and enjoys playing golf in his leisure time. Pinckney spoke to Malini Menon of exchange4media on Amway’s future plans for India. Excerpts:

Q. What is the growth that you are looking at?

This year we are looking at a growth somewhere between five and eight per cent. We believe this business will really expand beyond Rs 1,500 crore in the next few years. It is easier to mange consistent growth like this, whereas 20-30 per cent is exciting but tough to manage.

We generally come up with 12 products in one year. This year, we have launched a series of products with the new range, Attitude, and look forward to other launches as well. We are introducing a men’s grooming range, products that will be specifically formulated for the Indian market and manufactured in India. We have used the help of the research labs in the US to create this formulation specifically for India. In fact, Amway USA has a shaving product but we are introducing something specific to India under the brand name ‘Dynamite,’ which is also unique to India. The Dynamite range will comprise shaving foam, after-shave splash and moisturising lotion. The target group continues to be the premium segment.

We also have some nutrition products coming up this summer. We have decided to launch a weight reduction programme next year. It is going to be an exciting launch considering that there are more and more people who are becoming weight conscious in India.

We did have a global brand ambassador for Artistry but not many people know about her in India. When we launched Attitude specifically for the Indian skin, we wanted somebody from India who would be the core fit to what the brand stands for. We didn’t see Diya as impacting the brand or making the brand successful, but we saw Diya as a person who could really complement a really outstanding new cosmetic in the market place. And by her presence, we wanted to communicate that it is a young, soft product for the people who aspire to reach high up in life.

I don’t know where this came from! We never actually had this plan. There are basically three manufacturing bases in the world — one is the US, the second is China and the third in India. However, in India we operate through contract manufacturing. Now, the truth of the matter is that the contract manufactures have done such a good job for us that we really do not feel the need to start our own manufacturing at this stage. We have transferred a lot of technology to them and helped them with world class standards. Thus, we have been able to get them to make every product we have asked them to make up to our international standards.

I think direct selling industry is one of the fastest growing industries in the country. Last year the growth was around 34 per cent and a similar growth level is expected this year. Now this growth has been happening more with the new entrants other than established companies like Amway. A lot of it is estimation because there is the organised sector and the unorganised sector. The organised sector comprises all companies like Avon, Amway, Tupperware, etc., who are members of the Indian Direct Selling Association. We belong to this association because of a couple of reasons. Firstly, this association represents direct selling companies. They try to do everything to build the image and reputation for the industry. They also try to build regulations for this industry. But secondary to this is that all the companies who are members also subscribe to a very strong code of ethics. This is applicable to those who take up this business opportunity and consumers who buy the products. However, the industry is growing very well and will continue to do so. We are bullish about that.

Our sales target last year was close to Rs 600 crore and we overachieved it. We had a turnover of Rs 636 crore. So we grew by 10 per cent over the year before.

We have never faced any problem related to our products here in India. We have promoted all the cosmetic brands of Amway as our heritage. We have been in the market now for more than 50 years. They are global products and have been developed by 450 scientists who do nothing but work on the formulations to improve and enhance them. So, the first task was to give consumers the surety, a promise that these products have worked. In fact, for any reason if a product does not show the desired effect, our commitment to consumers is that we will return their entire money if it is within 30 days. This is a big promise that we have made and not many companies in India give this sort of guarantee. However, our products have done pretty well and very few have comeback. But you can’t build that kind of trust until and unless you have a historical perspective.

Internet sales have never ever achieved what they were expected to do. There are very few successful Internet-based sales companies. Among the ones you can recall are eBay, America Online and a couple of others, but then most of them haven’t done well. This doesn’t mean that over time they can’t do better. But here in India, what’s driving it is are a couple of things like lack of market penetration and the issue of culture and trust. In Australia or the US for that matter, people are comfortable buying products through the Net by credit card and will patiently wait for two weeks for them to arrive. However, here in India, culturally consumers believe in I-pay-the-money-and-I-get-the-product, instead of an exchange. This is the reason why the majority of our business in India is through pick up. This is despite the fact that we do excellent home delivery. So in India, consumers have to evolve and mature to feel comfortable to operate in that environment.

I wouldn’t use the word tough. I think it is fair competition and appropriate. In the sense that if you have nothing to benchmark yourself against and if you have nothing to react to or be challenged by, then you can never be really good in what you do. I think competition keeps you on your toes and I am happy with what we have done. If you compare us with the competitors, you will see that we have done some good things and we are going to continue to do the same and innovate further.

Unlike the US, where direct selling is 100 years old with more than 3,000 companies associated with the direct selling association, it is still evolving in India. In the US it is a very mature and established industry, which competes very successfully with the traditional FMCG retail channel. In India, this industry is just 10 years old and has a very long way to go to evolve and to develop to the size of the US industry. However, in India too, direct selling can successfully compete with the traditional FMCG retail channel. Direct selling is after all just another way to buy, and what it allows a consumer to do is make additional choices. The consumer can pick up from the store, telephone, Internet, TV or from the representative. Cosmetics lend themselves well to the direct selling channel because consumers can try the products before they buy. They like to ask questions — how to use them, how to apply them. Even after they have bought the product, the questions continue. With direct selling you can achieve this. That is why cosmetics have done so well in this channel. Amway is a company that has four or five main product categories, which include the two key ones — nutrition and cosmetics. If you look at our competitors, Avon is selling only these two categories and so is Oriflame.

Amway has always had great expectations from India and we believe that there is a lot of potential here. We see this as a long-term proposition and not something that will happen overnight. The size of our business in seven years has grown to Rs 636 crore and has expanded the distribution to 1,700 cities. We have only 55 products available in India out of the 450 products that we manufacture worldwide. I believe that we have a very strong future and we are very optimistic about it.

This is the unique thing about our model. We don’t treat our brands like an FMCG or traditional retail channel and we don’t promote them through mass advertising. People get to know about our brands by talking to our representatives one-on-one. It certainly takes longer to build your client base but ultimately they are much more loyal. As a consequence, we are not subject to market fluctuations and are not impacted by the new advertising campaign that somebody else just brought out. It does not mean that the traditional FMCG brand building is wrong but it just means that it is different. So the downside for us selling channel is that it takes longer to build but the upside is that you generally tend to build more brand-loyal consumers who aren’t as quick to change because of an advertising campaign.