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Amway benefits through working with Chinese officials, although business is slowing

By Andrew McDougall+

26-Mar-2013
Last updated the 25-Mar-2013 at 17:01 GMT

Michigan-based Amway has manufactured its own success story in an unlikely market, although its sales growth looks to be slowing in China as competition increases, and counterfeits become a bigger problem.

Fifteen years ago direct selling was banned in China, but this did not stop Amway as it worked with local officials to make significant shifts in the way it did business in that market; which ultimately saw it make sales of about $4 billion in China last year, led by its Nutrilite line of nutritional supplements.

However, the cosmetics and vitamins seller had sales growth below 10 percent last year after growing above that level in previous years, and expects sales to grow less than 10 percent this year too.

Amway president Doug DeVos said growth in China,which accounted for about a third of the company’s 2012 global sales of $11.3 billion, is slowing amid competition from international and Chinese companies in its product lines, including cosmetics, whilst nutrition supplements are being counterfeited in China.

Dealing with ban

However, a slight stall now is nothing compared to the work the company had to put inover a decade ago, to make its China business a success.

In the April 2013 issue of the Harvard Business Review, DeVos reflects on the company's lessons learned when China banned all direct sellers 15 years ago.

The Amway boss describes how the company worked side-by-side with local officials to make significant shifts in the way it did business in that market, in order to rebuild trust in the company and in legitimate industry players by demonstrating long-term commitment in both words and actions.

Staying on the good side

“When Eva Cheng , who ran Amway China at that time, called me to report that the ban was likely, she advised that we not lose sight of an opportunity: We could co-operate with the government to help it understand the problems and find solutions to them,” he says.

“Working with the Chinese to create good direct-selling legislation would be the right thing to do for consumers, our industry, and our business.”

That effort paid off when China issued Amway a new license to conduct business in 2006, and this allowed the company to achieve tremendous growth in their businesses in China, which consistently ranks as one of the company's top 10 markets.

"Our efforts in China showcase a common theme across our organization – pairing commitment to our guiding principles with an entrepreneurial pursuit of business innovation," adds Amway Chairman Steve Van Andel.

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