Rediff.com  » Business » Why Amway India has failed to meet targets

Why Amway India has failed to meet targets

By Surajeet Das Gupta
Last updated on: April 27, 2022 12:13 IST
Get Rediff News in your Inbox:

It’s a company that has never been short on ambition.

In 2013, weeks after getting bail in a case of alleged cheating in Kerala, Amway India’s then managing director, William Scott Pinckney, dec­l­a­red that the company was ai­m­ing to hit revenues of Rs 10,000 crore in India in a decade.

Fast forward to 2021, and Milind Pant, Amway’s global CEO, announced that the company has designated India as one among the top three markets for growth and investment (after US and China), and is now looking at hitting revenues of Rs 20,000 crore over the long term.

 

Unfortunately, the reality on the ground for the country’s poster boy of direct selling has been much more subdued.

Amway’s current revenues of Rs 2000 crore are not even a fifth of what Pinckney had envisaged and similar to what it hit in 2017.

Moreover, the attractiveness of the direct-selling model is waning, and the company continues to be in trouble with law enforcement agencies.

On Monday, the Enforcement Directorate attached Amway’s assets worth Rs 758 crore in connection with an alleged money laundering probe.

On its revenue performance, an Amway spokesperson said: “The business environment in India has been very dynamic. We have been progressing as per our plans and have been working with the government to get much needed clarity and consistency to policies.

"We see a huge role for direct selling. However, considering the current situation we are unable to share business specific details.”

Direct-selling players like Amway won a big victory last year after the government included direct selling under the Consumer Protection Act (Direct Selling) rules, which clearly differentiates them from companies promoting money circulation or pyramid structures.

Amway says this confusion was at the heart of the misunderstanding over what it does and was the reason it was hauled up.

To be sure, Amway has made serious investments.

It has pumped in Rs 600 crore for a plant in south India, which has helped it reduce the import of raw materials dramatically.

It is putting in another Rs 170 crore to set up more research and development facilities here in the next two to three years.

Seeing the trend towards online shopping, the company has also made similar moves.

Today, 70 per cent of its products are sold online, compared with 30 per cent two years ago.

But why has it not met its ambitious growth targets?

Says Arvind Singhal, chairman of Technopak: “Quality and brand are key for customers.

"You cannot sell products based only on your relationship as you do in a multi-level marketing when your brand salience is limited.

"Two, affordability is still a key factor and always a big challenge.

"Also, you cannot endlessly expand the multi-level marketing chain.

"So revenues will slow down after an initial spurt.”

Photograph: Reuters

Get Rediff News in your Inbox:
Surajeet Das Gupta in New Delhi
Source: source
 

Moneywiz Live!