ADS NO WAY FOR AMWAY TO SWEEP CZECH MARKET

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PRAGUE-Without a jot of mainstream advertising, direct seller Amway stormed the Czech Republic this month, its fourth eastern European market since 1991 and a precursor to Turkey in July and Slovakia next year.

Amway began introducing its household cleaners and haircare products on March 1 and reeled in more than 20,000 distributors during its first two weeks.

Using its tried-and-true formula for direct selling, the $4.5 billion-a-year Michigan-based marketer expects the Czech Republic of 10 million people to attain higher per capita sales than Hungary, where first-year sales for the 15 million to 20 million population totaled $20 million, and Poland, with $45 million in 1992 for its 40 million people.

"It's the smoothest launch," said Jim DeVoss, Amway manager for Central Europe.

But the numbers testify more to the power and promise of person-to-person marketing in countries where consumers have become accustomed to surly shop clerks and a lack of incentive to sell goods. Amway's arrival in Eastern Europe also points to the success of religious-like marketing techniques-some call them fanatical-in countries where socialist belief systems are on the scrap heap, replaced by capitalism.

Direct selling has had an easy time here since the downfall of the Communist regime, since in its heyday people learned to rely heavily on the black market for many of their daily needs. From that routine grew a system that depended on trust among friends and family members, now seen as a plus for Amway.

The theory is that Amway's products, such as highly concentrated biodegradable household cleaners touted as environmentally friendly, need a personal explanation from the seller.

But Amway is also teaching capitalism to a ripe market of eager students who hope to build businesses as distributors.

In each of three former East Bloc countries, a small number of Amway employees opened offices, secured governmental clearance and wrote local distributor guidelines.

The heavy footwork, however, comes from Amway's highly motivated international network of independent distributors who try to build distributor networks that work below them, recruiting one person at a time to work for Amway, then having that person convince another, and so on.

It's the trickle-down theory, where distributors make money from those people they have "sponsored" and serve as part of their network. Distributors generally charge their customers 30% over what they pay Amway to cover their own costs and make a profit. Distributors with larger networks are rewarded with bonuses for large sales volumes.

Although Amway markets thousands of items and 400 under its own name, the Czech Republic started with just nine: six for laundry and household cleaning and three toiletries. The roster will gradually expand, starting with a full line of haircare products in September.

Some of its biggest competition comes from major multinationals using more traditional distribution channels, but Amway thinks it has an edge. "We are competitors for them more than they are for us," said Jan Stransky, Czech Republic country manager.

Companies, such as Procter & Gamble, keep a watchful eye. "We are aware of this competition; we do take all competition seriously," a P&G official said.

To keep its distributors informed, 35,000 strong now in the Czech Republic, Amway provides regular updates in a newsletter, holds seminars and a yearly rally, featuring pep talks by inspirational speakers. This is essentially the only promotion the company has planned.

The first Czech rally will come by early 1995. "We will hold up [good distributors] as very public examples for everyone else," Mr. Stransky said.

Although Amway only announced its designs on the Czech Republic last Nov. 1, distributors around the world got wind of the plans beforehand. Their preparations, combined with an intensive schedule of receptions and informational meetings hosted by Amway-attended largely by German- and English-speaking members of international networks-meant that by March 1, troops of 20,000 newly converted loyalists were ready to sign on.

Amway distributors in Germany, for example, used contacts in the Czech Republic to build a wide network. Through friends of friends of friends, the networking reached Prague resident Miroslav Karnolt, who was publishing match box ads at the time.

By March 31, Mr. Karnolt had assembled a network of 64 distributors below him. Though he expected to make only about $178 in his first month, by year's end he expects more than $700 monthly.

"They explained the system to me and an important role was the fact that the people who offered [a place in the network for him] were friends of mine," Mr. Karnolt said. "They were people I know and trust."

New recruits like Mr. Karnolt start with an initial investment of $89 for a nine-product "starter kit." The startup cost is almost twice an average Czech's rent.

Last October and November, to prepare for its March 1 introduction, Amway shipped $12 million in inventory to the Czech Republic. If all goes well after two or three years, Mr. DeVoss expects Amway will look for contract manufacturers here.

"When Amway makes a commitment to a market, we decide when we go in, we stay forever."

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