Direct selling biz makes seamless transition since adding website in 2002
45% of US$256mil revenue done online, driven by younger distributors
QUIETLY and without much fuss, direct-selling company Amway (Malaysia) Holdings Bhd has become one of the leading e-commerce businesses in Malaysia with 45% of its fiscal 2013 revenue of US$256 million (RM834 million) transacted over its portal.
This is despite the fact that its portal is only open to its distributors – 246,000 them as of end-2013 – to make purchases.
While e-commerce sites today are talking about offering same-day delivery, Amway Malaysia has been doing this for urban sites from 26 years ago, and for its online orders as well, provided the order comes in by 8:30am. Malaysia is actually one of the few countries in the world where Amway offers such a service.
To Paul Yee, executive director of Amway Malaysia, the company’s adoption of the Internet and technology in general “has tremendously helped our business and our distributors.”
Its push online began back in 2002 with two key factors prompting the move.
With a limited number of warehouses and stores that housed the products it sold, and which operated on a traditional 9-to-5 shift, Amway Malaysia saw the Internet as offering it a more efficient channel to sharpen its supply chain and allow it to operate round the clock.
At the same time, with more agents joining, operations were being overwhelmed. Pre-2002, agents were calling in their orders, dropping by themselves with order forms, or faxing in. Mobile phones had already become popular then and people were starting to demand quicker delivery.
Back then distributors also had to come in to the Amway centres to get a report on how their respective networks were doing. But once the company moved online, it started gradually moving as many operations online as it could.
As a result, distributors back then enjoyed 24x7 access to data on how their networks were doing and which individuals within their network need help. “In a way, it was their own personal dashboard,” says Yee.
But that was not enough and in 2013 Amway as a whole moved to a new platform called Global Web 2.0.
[Corrected: It was earlier, mistakenly reported as 2010]
“It is a powerful tool that allows distributors to drill down further into their networks to see trends. For instance, while the previous system allowed them to scroll down and look at each member’s data within their network, today they can slice and dice the information they seek – they may want to look at the performance of all new members who joined within six months, and who has grown their network the fastest,” says Yee.
The new tools have helped take Amway distributors to a new level where they can better plan their time and efforts, and forecast where the business is heading and what they need to do, he adds. Business dashboards that were previously the domain of C-suites are now working for thousands of distributors.
Amway also recognised early on the importance of mobile and having access on-the-go, and that formed the bedrock of its digital strategy in 2011. But there was also a demographic push, notes Yee.
“55% of those who join us today are aged under 35 who are tech-savvy, social and mobile-oriented,” he says.
To retain this younger set and to keep them interested in the business, Amway started converting its marketing collateral from print to digital versions that were both phone- and tablet-friendly, and with video and animation replacing text where possible. Apps too became an increasingly important tool of the business.
The introduction of the various digital products also helped make the business look more modern and ‘cool’ – a factor that Amway does not underestimate the importance of at all, says Yee.
Next on the mobile front is to allow distributors to order online. At the moment, due to the form factor limitations of phones, this has only been enabled for tablets and laptops.
Negating threats from e-commerce sites
While on the surface it may seem like Amway could be under threat from e-commerce sites that sell the same range of products as it does, and for cheaper, it turns out that its multi-level business model is key to warding off such threats, according to Yee (pic).
Amway’s nutrition, home and beauty products can only be bought by members and are not available online anywhere else. More importantly, its distributors see potential financial returns when they buy Amway products, and encourage their networks to do the same.
Making money in the mid- to long-term via the Amway way and saving money in the short-term as the main e-commerce value proposition, is the biggest factor that allows it to keep its premium pricing and avoid price erosion.
“We are a direct seller and when we moved the business online, it was about marrying high-tech with high-touch – that is, and will be, our competitive edge,” stresses Yee, adding that when buyers order, they have already been sold on the merits of the products and are not going to go online and do price comparisons.
Even better, buyers actually cannot log in to buy the products. Only Amway distributors can do this on their behalf. “So it’s amazing that despite this, we are doing US$256 million in business a year,” he points out.
But that does not make Yee complacent as he acknowledges that the potential threat from e-commerce does keep it on its toes. “We have to keep making sure we are as comparable, if not better, than any e-commerce site out there in terms of accessibility and convenience.”
Disrupting the retail industry: Here’s how you do it
The retail future is bricks + clicks
Disrupt on e-commerce: Big opportunity, intense competition
Digital Malaysia: MDeC launches SME e-commerce reward programme
For more technology news and the latest updates, follow us on Twitter, LinkedIn or Like us on Facebook.