Amway changes tack to tap middle class

In a major shift in strategy, Amway India, the wholly owned subsidiary of $6.3 billion direct selling American giant Amway Corporation, is focusing on the middle income group.

The company, which has so far been in the premium and super-premium category, is developing India-specific products in the home and personal care categories.

This step has made the Indian market unique in Amway's global operations spread over 88 countries, as the only market with country-specific products.

It recently launched Attitude, a colour cosmetic range only for India, for the mid-income group. Whereas Avon and Oriflame, which have most mid-priced products, are looking at expanding their offerings to premium products, Amway is doing the opposite, say industry experts.

Amway is the largest direct selling company in India followed by Tupperware. This year saw the entry of another direct selling cosmetics major, Mary Kay.

The Indian direct selling market is valued at Rs 3,100 crore and growing at 14 per cent annually. The global market for the same is valued at $105 billion.

"Since a large section of our target consumers has lower purchasing power, we would develop products in the mid-price segment. We would also focus on youth and add 130 more offices this year as our offices act as information centres for new consumers and help them to know the company better," said Sanker Parameswaran, director-legal and corporate affairs, who has been with the company since 2002, and is also the chairman of Indian Direct Selling Association.

The company has 80 offices in the country, 5 contract manufacturers and 4.5 lakh active distributors. Amway recorded a turnover of Rs 738 crore last year and is expected to clock Rs 800 crore this year.

Unlike fast moving consumer goods company (FMCG) that retail their products through shops and outles, direct selling companies through their distributors sell directly to consumers.

One of Amway's 100ml Artistry skin care product is priced at Rs 1,029. However, its new colour cosmetic range has a lipstic priced at Rs 200, similar to other cosmetic brands such as FMCG major Hindustan Unilever's Lakme.

Amway started Indian operations in 1998 with a premium and super-premium products portfolio. Over the years, the company has realised that some of its distributors themselves could not purchase the products they sold.

"The main objective behind having higher-margin products was to ensure good margins to our distributors," says Parameswaran.

Amway distributors earn commissions in the range of 3 to 21 per cent, based on the amount of purchase order handled by them.