Transformation lifts Amway to next level
KUALA
LUMPUR: With its transformation agenda in full swing and starting to
bear fruit, Amway (Malaysia) Holdings Bhd – one of the country’s top
direct-selling companies – hopes to join the billion-ringgit club.
“Our aim is to achieve the RM1 bil revenue mark; we hope to do it within the next few years,” Paul Yee, executive director of Amway, tells FocusM.
The company’s sales hit an all-time high of RM797 mil in 2012, and for the first nine months this year, sales grew by 7% to RM636 mil. It attributes the revenue growth to improved distributor productivity as well as sales and marketing programmes.
During the nine-month period, Amway also posted a net profit of RM80.08 mil, an improvement of 8.9%. “The earnings result is in line with our expectations, accounting for 76.4% and 74.9% of the street’s full-year estimates of RM104.8 mil and ours of RM106.9 mil,” says Kenanga Research.
Based on consensus estimates compiled by Bloomberg, Amway is expected to post revenues of RM842.75 mil and RM892.25 mil for 2013 and 2014 respectively. These estimates were compiled from four research houses.
However, there is only one research house that provides its estimates for 2015. TA Research expects Amway to post some RM979 mil in revenue that year.
For the company to reach its billion-ringgit target, it will need to execute its strategies accurately. The company is embarking on a strategy that focuses on four areas – distribution, products, brand accessibility and consumer experience.
“Distribution continues to be our key partner; getting them to be more productive and recruiting more of them is one strategic focus,” says Yee.
As of end-2012, the company has a core distributor force of over 244,000. Core distributorships are distributors who have stayed with Amway for over a year. Between 80,000 and 100,000 new members sign up as Amway distributors every year. However, a significant portion of these does not renew annual memberships.
TA Research expects Amway’s core distributorship to grow by about 5% annually over the next two years.
Aside from distribution, the company will focus on strengthening its product offerings. In particular, it is increasing its focus on beauty and healthcare.
“Beauty and healthcare products are currently the top sellers in terms of quantity. This category contributes more than 50% of our revenue. In terms of value, the top-selling products come from the durable category, which includes our water-filter system, because it is a high-price item,” says Yee.
However, health and beauty products have not always been company top sellers. Yee recalls that in the early years, the company’s top sellers were homecare products such as laundry detergent, multipurpose cleaner and car wash. “That’s what Amway was famous for and, until now, people remember us for our concentrated detergent products.”
Over the years, though, competition has caught up. “I have been with the company for almost 30 years. I remember that in those days, we were one of the first to introduce concentrated detergents, and that allowed us to fetch a premium. Now it is a common thing – the category is no longer sophisticated.
“Today, the lifestyle has changed; people are more conscious of their health and their lifestyle. That has caused a shift in trends,” he adds.
Yee says the company’s plan to venture into the health and beauty segments took shape as early as the 1980s. This allowed it to tap into the market before the health and beauty trend started to pick up.
“We were kind of ahead of the trend, so right now when it becomes something many people find a necessity, we are right there to serve them,” Yee says.
As part of the company’s transformation, it decided to build more Amway shops. This strategy includes building new physical Amway Shops, and converting existing regional distribution centres into such shops.
“We currently have 21 shops and four regional distribution centres. By the end of next year, we will have 25 shops and will be completely doing away with regional distribution centres,” Yee says.
In the past, distributors would go to a regional distribution centre to place their orders. They could either wait for Amway staff to pack the items and collect them at the counter or to have these items delivered to their homes. These distributors were likely to make buying decisions by referring to product catalogues or listening to the word on the street. They did not have the same shopping experience that consumers saw in hypermarkets or shopping malls.
The Amway Shops are showing positive results. “Of course there is some form of cannibalism in terms of the sale of regional distribution centres. For example, when we set up a shop in Penang island, our regional distribution centres in Butterworth saw a decline in sales. This is normal, as people do not need to go to Butterworth anymore; they can buy the items from the shop.
“However, the net effect is positive. We are experiencing a net increase in sales,” adds Yee.
For full story, go to www.focusmalaysia.my, which also targets other Malaysian businesses.
“Our aim is to achieve the RM1 bil revenue mark; we hope to do it within the next few years,” Paul Yee, executive director of Amway, tells FocusM.
The company’s sales hit an all-time high of RM797 mil in 2012, and for the first nine months this year, sales grew by 7% to RM636 mil. It attributes the revenue growth to improved distributor productivity as well as sales and marketing programmes.
During the nine-month period, Amway also posted a net profit of RM80.08 mil, an improvement of 8.9%. “The earnings result is in line with our expectations, accounting for 76.4% and 74.9% of the street’s full-year estimates of RM104.8 mil and ours of RM106.9 mil,” says Kenanga Research.
Based on consensus estimates compiled by Bloomberg, Amway is expected to post revenues of RM842.75 mil and RM892.25 mil for 2013 and 2014 respectively. These estimates were compiled from four research houses.
However, there is only one research house that provides its estimates for 2015. TA Research expects Amway to post some RM979 mil in revenue that year.
For the company to reach its billion-ringgit target, it will need to execute its strategies accurately. The company is embarking on a strategy that focuses on four areas – distribution, products, brand accessibility and consumer experience.
“Distribution continues to be our key partner; getting them to be more productive and recruiting more of them is one strategic focus,” says Yee.
As of end-2012, the company has a core distributor force of over 244,000. Core distributorships are distributors who have stayed with Amway for over a year. Between 80,000 and 100,000 new members sign up as Amway distributors every year. However, a significant portion of these does not renew annual memberships.
TA Research expects Amway’s core distributorship to grow by about 5% annually over the next two years.
Aside from distribution, the company will focus on strengthening its product offerings. In particular, it is increasing its focus on beauty and healthcare.
“Beauty and healthcare products are currently the top sellers in terms of quantity. This category contributes more than 50% of our revenue. In terms of value, the top-selling products come from the durable category, which includes our water-filter system, because it is a high-price item,” says Yee.
However, health and beauty products have not always been company top sellers. Yee recalls that in the early years, the company’s top sellers were homecare products such as laundry detergent, multipurpose cleaner and car wash. “That’s what Amway was famous for and, until now, people remember us for our concentrated detergent products.”
Over the years, though, competition has caught up. “I have been with the company for almost 30 years. I remember that in those days, we were one of the first to introduce concentrated detergents, and that allowed us to fetch a premium. Now it is a common thing – the category is no longer sophisticated.
“Today, the lifestyle has changed; people are more conscious of their health and their lifestyle. That has caused a shift in trends,” he adds.
Yee says the company’s plan to venture into the health and beauty segments took shape as early as the 1980s. This allowed it to tap into the market before the health and beauty trend started to pick up.
“We were kind of ahead of the trend, so right now when it becomes something many people find a necessity, we are right there to serve them,” Yee says.
As part of the company’s transformation, it decided to build more Amway shops. This strategy includes building new physical Amway Shops, and converting existing regional distribution centres into such shops.
“We currently have 21 shops and four regional distribution centres. By the end of next year, we will have 25 shops and will be completely doing away with regional distribution centres,” Yee says.
In the past, distributors would go to a regional distribution centre to place their orders. They could either wait for Amway staff to pack the items and collect them at the counter or to have these items delivered to their homes. These distributors were likely to make buying decisions by referring to product catalogues or listening to the word on the street. They did not have the same shopping experience that consumers saw in hypermarkets or shopping malls.
The Amway Shops are showing positive results. “Of course there is some form of cannibalism in terms of the sale of regional distribution centres. For example, when we set up a shop in Penang island, our regional distribution centres in Butterworth saw a decline in sales. This is normal, as people do not need to go to Butterworth anymore; they can buy the items from the shop.
“However, the net effect is positive. We are experiencing a net increase in sales,” adds Yee.
For full story, go to www.focusmalaysia.my, which also targets other Malaysian businesses.
