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Direct seller's roller-coaster ride pays off

By Wu Yong (China Daily)
Updated: 2008-09-25 23:41

Editor's note: Direct sales company Amway has had a dramatic experience in China. It had to re-engineer its Chinese network when its original mode of operation was virtually outlawed by the central government as unsuitable. Now, it runs 180 retail outlets around the nation that contributed over 13 billion yuan in revenue last year, compared with the company's global sales of $6.4 billion.

So how did Amway manage this turnaround? Steve Van Andel, chairman of Amway Corp and its parent company Alticor Inc, talks to China Daily's Wu Yong and Liu Ce about the firm's unique marketing, management and development approach to the Chinese market.

Steve Van Andel, chairman of Amway Corp

Q: Amway started up over 10 years ago in China and it's seen a lot of ups and downs in that time. But every time the company has successfully adapted to its new environment and situation. As the chairman of Amway, how have you managed this?

A: As you mentioned, Amway had up and downs when we started business in China. At first, not everyone could understand what we did. We believe that our business concepts are pretty good and can adapt to any country around the world. We take the principles and have to put it into different cultures. We need time to adjust to the local culture.

We also have regulations to adjust since there was no such thing in China before. Many companies pretend they are direct selling, but in fact they are pyramid selling. So people may get confused as they cannot distinguish between the two. Now there are regulations and legal companies can get licenses from the commercial department. We know some principles and we have never changed during this process.

Q: The management team at Amway China are all Chinese. As a well-known foreign company, why do you choose Chinese instead of foreigners to manage the company? What do you think about the concept of localization?

A: We adapted to the market not because I understand the culture or somebody from the US understands the culture. But our local employees here help us to know the culture and to move our business, since they are more familiar with the local culture and give us advice on the direction of our development in China. And we don't need to translate during our work because all of them are Chinese. Everybody helps us on how to work like the locals. And we have headquarters in different places with local salespeople.

As you mentioned, we have covered over 80 countries and areas. As a business, we are trying to maintain flexibility in adapting to different countries. But sometimes, we have to keep American culture to be more efficient.

Q: June's sales created a new record for Amway Corp. What's behind the increase? And what do you think Amway's development prospects are in China?

A: I think there are a number of reasons. The most important one is people, including our employees and salespeople. It's their hard work and dedication to their job.

The second is that our products are well established. Take Nutrilite as an example. It has a long history that can go back to China in the late 19th century. The originator of Nutrilite lived in China for many years and he was very interested in the medical idea that China has. So he brought it back to the US and combined it with modern technology. Even the products we have today, we use many Chinese ideas.

Also, a couple of years ago, we set up a research and development center in Shanghai to help with developing Nutrilite products for China.

So there are two aspects to really help us to achieve success. One is people, dedicated to their work. The other is our high-quality products.

Q: China's production price index (PPI) has been rising in recent years. Many foreign companies have moved their production bases out of China to cut costs. Does Amway have any such plan?

A: We have a manufacturing facility for China in Guangzhou. We also have facilities around the world. You have to find out the reasons why you produce the products in different places. One is to acquire high-efficiency around the world. Labor cost is not the only concern, but also whether or not the facility can provide support for our business.

So the plant is a long-term decision. We do not make decisions today and change them tomorrow. We built the China R&D center several years ago, and that is also due to our production in China.

Q: This year is the 30th anniversary of China's reform and opening up. As a foreign company with over 10 years' history in China, what do you think are the biggest changes in China over this period?

A: First I'd like to say the progress that China has made is astonishing. I've traveled around Asia and I found many enterprises would like to invest here in China. Business is the most sensitive for opportunity, you know. So this proves that China has great development potential.

I just came from Sichuan. Although it has been struck by the earthquake, it has an increase of 11 percent in its economy from the beginning of this year to now. And this proves that China is developing very well and people are unbelievably hard working there.

I've been in China many times during the past 15 years. And as we know, the US is the biggest economy, but China's, I think, has the most potential.

Q: Amway is one of the most active companies in terms of charity work in China. It had donated 250 million yuan by the end of June. Amway has also donated lots of money to Sichuan. What's your philosophy on corporate social responsibility?

A: That would go back to my dad. He told me it's very important to help others. In fact, my family always helps others. It's basically what we can afford as an individual. It's important for us to adapt to the community, the society and the market wherever we go. So I take it as a principle.

In fact, I do it as an individual instead of as an enterprise. And we'd like to do charity and to share our wealth with all around the world. So whether we work in China or India, we have works for children. And in Thailand, we have a project called Smile. We do it all around the world. And we do it just because we can do it.