“We will end this year with a slight increase after we have managed to stabilize the business and set up the groundwork for future rises. In the long term Amway has a big potential on the Romanian market, we can talk about a 4-5 times larger turnover.”
She explains though that this trend is dependent on people’s education in terms of direct selling, on the company’s investments and on people’s desire to supplement their income. The trend of the economy and of consumption do play a role, but a less important one.
“We see a rebound of the market in the future and expect our business to grow. For Amway, Romania is its tenth largest market in Europe and its third largest in the region,” says the 41 year-old Romanian manager who previously worked for companies in the pharmaceutical, FMCG sectors, and was a consultant for OMV Petrom.
For 2013, Amway has budgeted a turnover of $23 million, slightly up from this year and from 2011.
Hurt by the crisis
Amway’s Romanian business started to decline in 2009, the first year of crisis, and had yet to return to growth last year. The company’s turnover reached 78 million lei (EUR18 million) last year, over 40% lower than in 2008, the last year of boom for the Romanian economy.
In dollars the turnover reported to the parent company was $22 million (the company used a dollar/leu exchange rate of RON3.5 to the dollar, different from that announced by Romanian central bank BNR).
“In 2012 we decided to invest in a new business center and in launching new products. These investments will show in our business in the coming years.”
The company’s manager says the company has 40,000 representatives (authorized private entrepreneurs) in Romania. Their number has remained steady in the past few years, but the value of the average order has declined. “The average bill is RON333, VAT-less.”
Out of the 40,000 partners, some become resellers, others buy products for their own use.
“Our partners tend to be couples who want an additional source of income.” In order to become an Amway partner, Romanians have to pay a registration tax of RON151 for online registrations and RON177 for offline registrations.
Once registered, they can buy products at a special price – smaller than that displayed on the website or the catalog price.
What do Amway customers buy?
“We noticed that although clients look for offers and discounts, sometimes limited-edition products are even more in demand. So we did not introduce more products in our promotional offers because on the one hand this is not specific to us and on the other hand we could lose credibility.” Amway’s portfolio includes both products for average income earners and luxury products from the Artistry range, whose prices exceed RON1,000.
Amway’s portfolio is divided between cosmetics and personal care products (41% of the turnover), health care and nutrition (26%), and household care (33%).
“There was a time during the crisis period when Romanians shied away from very expensive brands, but now they are returning to them. The steadiest segment has been nutrition.” Most Amway clients come from urban areas, particularly from Bucharest (21%).
The Romanian cosmetics and personal care market will rise by 2.2% this year, from RON3.5 billion (EUR823 million) last year, according to information provided by market research company PMR.
(English version by Daniela Stoican)