Amway guns for stronger roles in Korea
Distribute giant overcomes misunderstanding to stand out
By Park Si-soo
Around two decades after its debut in Korea, Amway seems to have nothing to worry about as the outfit posted 913 billion won ($807 million) in sales here, 182 times higher than the 5 billion won in 1991 when it started operations.
During the period, the Michigan-based direct marketing company appears to have successfully positioned itself in the mind of fastidious Korean consumers as a creditable provider of high-quality vitamins and dietary supplements and beauty products.
Yet, behind the achievement is still a traumatic memory that the company has been grappling with since the inception of its business in Korea ㅡ to differentiate itself from unlawful scheme operators; and the efforts continue.
“We have been working hard to dispel the misunderstanding of multi-level marketing and illegal pyramid schemes in Korea,” Amway President Doug DeVos said in an email interview with The Korea Times. “After many years of hard work on this front, it is encouraging to see that people are gradually differentiating the business of our company and illegal pyramid businesses.”
Back in 1991 when Amway knocked on the door of Korea, the country was trying hard to rein in sprouting illegal pyramid schemes and from the perspective of ordinary people, the line between the illegal selling system and Amway’s unique way of multi-level direct marketing blurred.
As a result, the firm’s aggressive promotional campaigns were overshadowed by people’s woes on the ostensible similarity between the two.
Its hard work to dispel such a misunderstanding that has been quite successful. Yet it’s true that there are still many people who cannot draw a clear line between the two.
DeVos underscored that his firm’s business model is all about “offering opportunity to entrepreneurs around the world” with the support of a company that is family owned and financially stable. “With Amway, you are in business for yourself, but not by yourself,” DeVos said.
Under Amway’s multi-level marketing, also known as network marketing, a sales force is compensated not only for sales they personally generate, but also for the sales of others they recruit, creating a down-line of distributors and a hierarchy of multiple levels of compensation.
Illegal pyramid schemes, which were rampant in the late ’80s and early ‘90s, put an emphasis on recruitment of lower-tiered salespeople over actual sales, require high initial start-up costs, selling low-quality products and often encourage the potential exploitation of personal relationships.
The long-running misunderstanding has galvanized the firm to seek aggressive engagement in community services using its independent marketers, called Amway Business Owners (ABOs).
“We’re constantly looking for ways to improve understanding of our business in Korea,” Amway Chairman Steve Van Andel said. “Although we advertise and conduct PR programs, we believe our ABOs have the biggest influence on how people view Amway, by engaging in Korean society in a positive way.”
ABOs host and take part in a wide range of community services.
Under Amway One by One global campaign for children, ABOs contribute their expertise in the “wellness” area to running soccer classes for children. ABOs have also been active in supporting children in their communities, not only through monetary donations, but also through donations of their time in various volunteer activities, the chairman said.
Last year alone, more than 2,000 ABOs volunteers participated in such community service activities as lunchbox delivery, toy cleaning events at libraries, and birthday parties for senior citizens and contributed nearly 6,500 hours of volunteer time, according to Amway Korea.
“Amway Korea has continuously made social contributions with a focus on helping children live better lives,” Van Andel said.
Amway employed a win-win marketing strategy, called “One for One,” in 1998 when the country was hit hard by Asian financial crisis.
“This is a ‘united’ marketing strategy between Amway and local small and middle-sized companies in Korea, whereby Amway Korea distributes new products through our channel,” he said.
The company has also expanded its partnership with local companies through a “Global technology Development Project.”
In the project, the U.S. firm searches for Korea’s small and middle-sized companies with proven technologies, especially in the health and beauty areas, and jointly conducts research and development activities and markets their products through Amway distribution channels worldwide.
Following is the gist of interview with Amway Chairman Steve Van Andel and President Doug DeVos ㅡ E.D.
Q: What is Amway’s strategy for Korean market?
A: Korea’s wellness and beauty markets still have a lot of room to grow and we’re positioning our Nutrilite and Artistry brands to help us gain market share in these categories. I believe that the role of Amway Korea will become more important and envision a day where Korea will help with the distribution and manufacturing of new products for Amway in the Asia-Pacific region. In fact, we launched a distribution center in the free trade region of Busan’s New Port in 2010. The center is responsible for the distribution of Amway products in countries such as Japan, Thailand, Hong Kong, Taiwan and Singapore.
Q: How do you plan to meet the target revenue of 1.1 trillion won ($964 million) for this year in Korea?
A: I believe Korea has still has potential for future growth especially with our Nutrilite and Artistry brands. But our strategic advantage lies within our Amway Business Owners (ABOs). And we will continue to support our ABOs by providing world-class business resources, such as customer support, business and order management, and training and mentoring programs. Everything we do is designed to support our ABOs to build successful Amway businesses.
Q: Any departure plan from your product portfolio centered on health and beauty products?
A: The beauty of the Amway business is that there are hundreds of high-quality products that help our ABOs to build a healthy retail business. We’re so confident in the performance of our products that we offer an industry-leading satisfaction guarantee to our consumers.
Q: What is Amway’s strategy on fast-growing Asian markets, including China, Vietnam and India?
A: Our strategy on Chinese market is to maintain the momentum. We will continue to offer the leading direct-selling business opportunity today and for future generations, not just in China, but all around the world. Vietnam and India are strong and growing markets for Amway. Our strategy in these and other markets is to provide the best support for our ABOs backed by the best products available to help them succeed in our business. And as they succeed, so does Amway through increased market share and sales.
Vietnam and India are strong and growing markets for Amway. Our strategy in these and other markets is to provide the best support for our ABOs backed by the best products available to help them succeed in our business.