Amway's Indian Network Marketing Experience

<< Previous

'Network'ing its Way into the Future Contd...

With Internet usage levels increasing and little spare time for shopping, Amway believed that the Indians would gradually move to online shopping. But it thought the process would take time, as het pleasure of window-shopping and the actual shopping experience could not be replaced very easily. Amway provided graphics and three-dimensional views in the product display sections on its website. The company also planned to have portals in various Indian languages to ensure wide coverage.

The Indian MLM Journey MLM was the fastest growing sector of the direct selling industry worldwide. In 1988, the total revenue generated by MLM was $ 12 billion, which doubled to $ 24 billion by 1998. The direct-marketing industry in India was about Rs 6 billion in 1999. This was a growth of 62% over the previous year. In the pre-liberalization era, network marketing in India was usually in the form of various chit fund companies like Sahara India. These had a system of agents, who simultaneously mobilized deposits and appointed sub-agents for further deposit mobilization. Companies such as Eureka Forbes and Cease-Fire pioneered the direct selling system in the country with a sales force that was trained to make direct house-to-house sales.

Oriflame International was the first international major to begin network marketing operations in India in 1995. This was followed by the entry of Avon India in late 1996. Tupperware, with a product portfolio comprising plastic food storage and serving containers, also entered India in 1996. Later, Avon's decision to opt out of the MLM setup came as a major setback to the industry.³

Amway's Indian Network Marketing Experience - Next Page >>>

3] Avon was the world's largest seller of beauty products operating in 135 countries. The company opted for MLM in
India while worldwide it was known for its door-to-door direct selling success. Avon's decision to adopt MLM was led by
the belief that in India, door-to-door salespeople were treated with a strange indifference. However, this led to Avon
losing its focus on its stronghold of having a strong end-user focus. Besides, the company could not make the shift in
mindset that multi-level selling required, as MLM required a strong distribution push mentality, which was very different from the hard selling to the end users that Avon was good at. Avon had also significantly lowered its advertising expenditures. Avon's Managing
Director, David F Gosling said, "It was a mistake to adopt multi-level system when we weren't good at it. We soon
realized that we should stick to what we knew best." He claimed that MLM had simply turned into a recruiting machine
and it was difficult to ensure that the distributor down the chain was not thriving on the performance of his recruits
without actually performing (selling) himself. Also, Avon held back the much-needed distribution push as the company
gradually lost faith in the system. Within two years, Avon switched back to door-to-door selling, putting in place a
three-tier network of beauty representatives (BR), beauty advisors (BA) and independent sales managers, which
established clearer relationships between the distributor and the company.

Terms of Use | Privacy Policy | FAQ | Sitemap

Copyright © 2010 IBS Center for Management Research.
All rights reserved.