SIMPLY RICH by Rich DeVos is a book written in first person by the co-founder of Amway. It is the story of how Amway was created and grew to be one of the most prominent direct sales marketing companies in the world. The tale is in two parts: the first is about how the concept of direct sales came about and the second is how Amway built its model and moved forward. As it is a memoir, there is a lot of sagely advice on not just how to conduct business, but also live life.
The story of DeVos is interesting. Coming from a relatively humble background, DeVos says he learnt a lot from doing odd jobs like delivering newspapers and working as an attendant at a gas station. This was where he imbibed the basic attributes needed to do good business. His take is that there are lessons to be picked up from any job and, as a corollary, no job is demeaning.
Experimenting with various jobs, he, along with his friend and partner Jay Van Andel, started selling a product called Nutrilite, which was a vitamin supplement in the US. The model was a simple one. They bought the product from the producer and sold it directly to customers who, in turn, could also become distributors for it. The important thing here is that everything was done by word-of-mouth. It is a unique way of selling, which also made DeVos a good and effective speaker.
DeVos would gather a lot of potential customers and tell them the virtues of the product. Some would buy the product and, within this group, some would agree to be distributors. Hence they would start talking to their own set of friends and acquaintances about it. A chain was set in motion. So the product was made available through different individuals, and not at retail outlets. They ran into rough weather when the FDA created a stir about the promises made by the product. Soon, when their problems escalated, they decided to create their own company called American Way Association, or what is now known as Amway.
The route followed was the same. They started with Frisk, an all-purpose cleaner made with natural ingredients and devoid of chemicals. It became very popular. The product range was then expanded through other similar products, including detergents and soaps. As the company grew, they went on to make their own products. The logical extension was to get into manufacturing, too, with their own factories producing goods that could be sold onwards through these created channels. It was hence a case of forging forward linkages by selling other people's products followed by creating their own niche products. Advertising was done on radio to spread the word.
Amway became global, as it expanded into countries like China, Germany, the UK, France, India, etc. The pattern was to start with countries similar to the US and then move to countries with different cultures. China was a challenge, as it insisted that production facilities had to be in the country. Convincing governments was always a challenge, as some like South Korea were apprehensive that such a model would increase their trade deficit.
The novelty of this model was that it helped each and every partner down the line become an entrepreneur. The commissions given at the top percolated downwards and everyone knew what had to be done to sell the products and make money. This pass-through system was key to the business and the USP of Amway. The business could also be sold or just handed down to the next generation. It hence had ‘wealth value’.
The Amway story captures the idea of partnership and how it can be built with customers who become distributors, creating their own customer relationships that finally build the chain. A question asked often is whether Amway is a product or distributor business. It is evidently a combination of the two, which kept the business moving across towns, cities and, finally, countries.
On a different level, DeVos talks a lot about the lessons he learnt from life. He stresses on three factors that are needed for success: action, attitude and atmosphere. This sounds fairly commonsensical, but one may lose track along the way and become a dreamer or loser when things do not go our way.
The book may not be inspirational, but it tells a lot about a unique business model. Given the recent controversy in India over Amway’s operations, it should be read by all concerned to understand how things really work here. In an age where we are looking to create jobs in India, there could be a strong case for us to create similar models, which deliver both profits for the entrepreneur and gainful employment or sub-entrepreneurship for those down the line. Given the vast potential in rural areas, the government could enter into meaningful engagements with the industry to explore ways of higher peoples’ involvement.
The story of DeVos is interesting. Coming from a relatively humble background, DeVos says he learnt a lot from doing odd jobs like delivering newspapers and working as an attendant at a gas station. This was where he imbibed the basic attributes needed to do good business. His take is that there are lessons to be picked up from any job and, as a corollary, no job is demeaning.
Experimenting with various jobs, he, along with his friend and partner Jay Van Andel, started selling a product called Nutrilite, which was a vitamin supplement in the US. The model was a simple one. They bought the product from the producer and sold it directly to customers who, in turn, could also become distributors for it. The important thing here is that everything was done by word-of-mouth. It is a unique way of selling, which also made DeVos a good and effective speaker.
DeVos would gather a lot of potential customers and tell them the virtues of the product. Some would buy the product and, within this group, some would agree to be distributors. Hence they would start talking to their own set of friends and acquaintances about it. A chain was set in motion. So the product was made available through different individuals, and not at retail outlets. They ran into rough weather when the FDA created a stir about the promises made by the product. Soon, when their problems escalated, they decided to create their own company called American Way Association, or what is now known as Amway.
The route followed was the same. They started with Frisk, an all-purpose cleaner made with natural ingredients and devoid of chemicals. It became very popular. The product range was then expanded through other similar products, including detergents and soaps. As the company grew, they went on to make their own products. The logical extension was to get into manufacturing, too, with their own factories producing goods that could be sold onwards through these created channels. It was hence a case of forging forward linkages by selling other people's products followed by creating their own niche products. Advertising was done on radio to spread the word.
Amway became global, as it expanded into countries like China, Germany, the UK, France, India, etc. The pattern was to start with countries similar to the US and then move to countries with different cultures. China was a challenge, as it insisted that production facilities had to be in the country. Convincing governments was always a challenge, as some like South Korea were apprehensive that such a model would increase their trade deficit.
The novelty of this model was that it helped each and every partner down the line become an entrepreneur. The commissions given at the top percolated downwards and everyone knew what had to be done to sell the products and make money. This pass-through system was key to the business and the USP of Amway. The business could also be sold or just handed down to the next generation. It hence had ‘wealth value’.
The Amway story captures the idea of partnership and how it can be built with customers who become distributors, creating their own customer relationships that finally build the chain. A question asked often is whether Amway is a product or distributor business. It is evidently a combination of the two, which kept the business moving across towns, cities and, finally, countries.
On a different level, DeVos talks a lot about the lessons he learnt from life. He stresses on three factors that are needed for success: action, attitude and atmosphere. This sounds fairly commonsensical, but one may lose track along the way and become a dreamer or loser when things do not go our way.
The book may not be inspirational, but it tells a lot about a unique business model. Given the recent controversy in India over Amway’s operations, it should be read by all concerned to understand how things really work here. In an age where we are looking to create jobs in India, there could be a strong case for us to create similar models, which deliver both profits for the entrepreneur and gainful employment or sub-entrepreneurship for those down the line. Given the vast potential in rural areas, the government could enter into meaningful engagements with the industry to explore ways of higher peoples’ involvement.
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