Amway boss sees net turnaround

By DITA DE BONI

The visiting president of US-based Amway Corporation says this is the "turnabout" year for the global direct-seller of household products after a post-Asian recession sales slide.

Dick DeVos is confident the introduction of Amway's new internet sales site - operating in the United States since September 1999 - marks a change in a whole new and profitable direction for the company, saying "the only risk with the internet is if you ignore it."

An Amway New Zealand website launch will follow suit in September this year, and will aim to increase current annual sales of around $NZ33 million.

New Zealand is considered by Amway a small market, but one which has "not been penetrated to the point we'd like," says Mr DeVos.

Globally the company is looking to return to its mid-90s heyday. Retail sales for the corporation tripled between 1990-96, peaking at $US7.9 billion in 1996 before dropping back to $US7 billion in 1997 and back further to $5.7 billion in 1998.

The company now does around $US5 billion in sales, and is growing again in South East Asia after losing $US1 billion of sales from Japan, Korea, China, Malaysia and Thai markets in 1998.

E-sales should help redress a shortfall in certain key Asian markets like Japan that are "still lagging", says Mr DeVos.

"Both the slow down in economic activity in that region and the impact on the exchange rate were the primary drivers behind the sales decline," he says.

Mr DeVos says the Amway website - called Quixtar - has the ability to grow company sales because of the Amway's "really strong infrastructure, unlike some other company's who have great sites but fall down in the actual execution of getting the product to the customer."

"Your backroom still has to be in order."

The site registers between 20 and 30 million hits each day and has generated $US100m in sales in the first 100 days of operation, he says, which bodes well for the company aim of seeing double-digit annual sales growth in the area.

"A lot of journalists have asked me about the impact of the internet on the direct selling business - some have predicted internet would be a threat," he says.

"But I think that's a simplistic response. The internet really is a tool and a new channel that organisations such as ours can blend into the [selling] mix."

"Previously, [Amway] customers may have wanted products but couldn't always get in touch with representatives, so now they have a win-win situation where they can access the products and information with ease."

Amway believes internet sales will not steal too much of the business of its salespeople - including New Zealand's 18,000 distributors - who make up the lifeblood of the organisation.

The Quixtar homepage explains: "A Quixtar business will reward entrepreneurs for delivering new customers and members to [the site] through bonuses earned on the sales volume they generate."

Mr DeVos sees web-based entrepreneurs getting in on a bigger pie: "We are not trying to cut distributors out. We want them to participate, and feel in any case the growth in sales will be additive."

He says margins will not increase dramatically in the move to internet selling, because while transaction costs are lower, distribution costs increase and "people buy more frequently in smaller lots."

"But for us the driving factor is, and has to be, customer choice. We want them to be in charge, and we will provide a new channel to respond to the new paradigm we have been presented with."

The website concept is just one in a group of initiatives to turn company fortunes around.

From the company's first product - laundry soap developed in 1949 - 450 products are now sold by Amway distributors, with around 10 per cent of those products sold under different brands.

More products are continually being added to the mix.

Over 30 per cent of the global business involves the company's most popular brands, generally health and fitness products and cosmetics, although in New Zealand the traditional household products are the company's biggest sellers.

Mr DeVos says direct selling methods have changed over the years and have moved away from high pressure, "getting-in-the-door" methods.

"We tell our distributors now [not to] go door-to-door because it is bothersome. We say use contacts from the other relationships you have with co-workers, sports teams and the like."

While Mr DeVos is in town to rally the Amway New Zealand troops, he's also here to visit his father, ex-Amway president and company founder Rich DeVos, who is in town on the family launch to watch the Americas Cup.

Predictions on the big race? " As a patriot, and an active sailor, my heart is with [America One] because they are great guys," he says.

"But if AmericaOne is knocked out, I'll be donning my black shirt and cheering on the Kiwis."