“Ecommerce marketplaces are just going to have to find some new ways to operate and adjust their business models,” said Amway Corp co-chairman Doug DeVos, referring to India’s revised guidelines on foreign direct investment (FDI) in the sector that took effect on February 1. “Ecommerce isn’t going to stop.”
Online sales for the maker of Nutralite dietary supplements, Amway Queen cookware and Glister toothpaste currently contribute close to 35% to its India revenue.
“We have had challenges too but we continue to believe in this market and work through it. I think the government is trying to get their arms around how the supply works for ecommerce companies,” said DeVos, who is visiting the country for the India-US CEO forum.
DeVos dismissed a recent Morgan Stanley report that suggested Walmart may review its Flipkart investment following the new FDI rules.
“I think that’s a lot of short-term reaction. I can’t imagine anyone wanting to exit this market for whatever reasons. After the initial shock, they will adjust and adapt in their business model to comply and find a path to be successful,” he said.
According to the revised guidelines, no vendor can have equity participation by a marketplace or its group companies. The inventory of a vendor will be deemed to be controlled by the marketplace if more than 25% of the vendor’s purchases are from the marketplace entity. India doesn’t allow such control.
GST, Demonetisation Show India a Robust Market: DeVos
In its full-year earnings statement for 2018, $8.8-billion Amway Corp, the world’s biggest direct-selling company said its top markets included China, the US, Thailand and India. It manufactures all its locally sold goods in the country and is now considering taking some of its organic products overseas. It is also planning to take its herbal brands to Tier-II and Tier-III markets within the country.
India, with sales of Rs 1,864 crore and 550,00 active distributors, is now Amway’s seventh-largest market globally, clocking 7% growth.
“The changes in bankruptcy laws, GST (goods and services tax) and demonetisation have been powerful and position India as a robust market,” he said. “GST and demonetisation were challenging for us to work through and did slow down our business initially. But they have been positive for the country. We are not forecasting any setbacks, and the government’s consumer protection guidelines for direct selling gives us that confidence.”
Two years ago, the government issued guidelines for direct sellers that sought to protect consumers and barred companies from exaggerating benefits of products or charging a fee from agents, to clamp down on fraudulent pyramid and money-circulation schemes. It also prohibited ecommerce platforms from offering products or services of direct sales companies without their written consent.
In May 2014, Amway India chairman at that time William S Pinckney was arrested by the Andhra Pradesh police after a complaint against the company alleging unethical circulation of money. He had been arrested the previous year by the Kerala police on charges of financial irregularities and subsequently released.
Amway named Indian-origin Milind Pant to head global operations late last year. He’s also the first non-family CEO of the company.
“Indian leaders are very well adapted to dealing with diverse situations because of the diversity of this market,” he said. While the family’s commitment remains unchanged, the company believes it should operate at the board level in the long term. On whether the company expected disruption in business with the upcoming elections in India, he said: “Leaders change but businesses stay focused. An election may bring short-term changes but we don’t really use that to change long-term outlook.”
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