Amway finds its way on ugly market

Amway entered the local market in 1997 but it would be another three years before the company started to post serious growth. This year, Amway predicts it will reach a turnover of EUR 32.45 million, a lower figure than last year due to the recession. The firm now has around 50,000 authorized distributors and privileged clients on the local market. George Popescu, country manager of Amway Romania, says the country is an important market in Europe.

Otilia Haraga

How many Amway distributors are there in Romania?

There are approximately 50,000 Amway authorized distributors and privileged clients – people who join Amway but do not wish to sell, only consume products. The number of those who re-sell our products to final clients amounts to several thousand and is rising.

What is your pricing policy?

Product launches and price strategies are not local. We are working at European level and countries are very different; there is no similar profile for the consumer. It is very likely that a certain launch won’t have the same effects in Romania and Germany, but due to differences between the size of these two markets, it is more important for the company to have a more positive effect in Germany. Marketing is centralized at a European level. We try not to have discrepancies between prices because this would also create unrest among distributors, as prices from one country to another are well known. We had to increase prices by 4 percent in March because there were currency exchange differences that we had to cover. Prices also increased a little with the growth of VAT.

Your sales take place in Romania via what channels?

Amway was one of the pioneers of direct sales via the internet and most of our sales – 70 percent – take place through this channel. We have maintained a store in Bucharest – The Center for the Selection of Products – and approximately 24 percent of our sales are made through this outlet. It is a concept that Amway started with in most countries in Europe. We still keep it going because in Bucharest people prefer to actually go shopping rather than wait for a courier at home. Currently we are working with courier companies TCE and Pegasus. The remaining 6 percent of sales are orders via the telephone or

fax, which have a value of over USD 1,622 (RON 5,000). Orders that are higher than this sum cannot be paid in cash because of legislation stipulations, they are paid through bank transfer and the orders come through a different channel.

What about sales per each range?

Sales in Romania per range of products are relatively similar to other European countries.

Sales of more expensive products have been the most affected, due to the recession, no matter what category they were part of. We have more than 400 cosmetic products. The range of cosmetics and personal care product brings approximately 60 percent of our sales. However, food supplements are strongly gaining ground, bringing us 25 percent of sales. In the Nutrilite range, we have approximately 50 products. Nutrilite is the most stable range of products at the moment. There are products that are present on other European markets but not here. Otherwise, the products are the same throughout Europe. In Western Europe, sales of food supplements are higher; there are countries where these sales represent 40 percent of the total figure. This year, having launched Beauty Cycle, a more accessible range of cosmetics that is available only in Europe, we have focused a great deal on beauty products, and this naturally had an impact on the mix of sales.

The remaining 15 percent of our sales are split among food, homecare products, water treatment devices and our set of cooking dishes. Last year, Amway Romania sold 2,400 eSpring water treatment systems. Next year, we will continue to launch new products on all segments but not an entire range.

How many employees does Amway have at the moment? Do you intend to hire more?

At the moment, we have 39 employees, 14 of whom work in the store and the warehouse. The rest of them work in the distributor relations, marketing, operational and financial departments. No new recruitment is planned, unless a position becomes vacant.

Where are your offices and store?

The Center for the Selection of Products, has a warehouse and a training room with a capacity of 100. The training room is used by the company’s training team but can also be used by our partners for meetings and events. The warehouse and the shop are within the Romexpo compound and the space is rented. Currently, there are 14 employees working there who are in charge of operations in this facility. The premises were inaugurated in 1997. Initially, the offices were also there but in 2006 we moved them to an office building in Floreasca. We pay rent but the sum is confidential. However, as it was negotiated for three years, we can tell you that it is at an advantageous level.

What share does Amway Romania have on the market of direct sales?

We cannot provide you with an official figure but regarding the general positioning among companies of direct sales, we are around third place. In first place is Avon.

What turnover and profit do you estimate Amway will post in 2010?

This year we estimate we will have a turnover of USD 32.45 million (RON 100 million – ed. note: calculated at the current exchange rate). Last year we posted USD 37.12 million (RON 109 million – ed. note: calculated at the 2009 average exchange rate). Our turnover has decreased because of the lower purchasing power of the Romanian consumer. Last year, Amway Romania posted a profit of approximately USD 3 million (RON 9 million) and this year we estimate a similar level.

How important is Romania in the European region?

Romania is among the top 10 European markets for Amway and among the most important ones as well. Before Romania are countries with a tradition such as Germany, which is the first market in Europe where Amway launched operations. Other countries with a large volume of sales are Turkey and Ukraine, but these countries also have a larger population.

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