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Country manager warns against pyramiding

Amway Philippines country manager Leni Olmedo is in the business of direct selling, but she is among those actively warning the people against some direct selling companies that may be involved in pyramiding.

Amway Philippines country manager
Leni Olmedo
She says direct selling is a P40-billion industry, which has been growing at a double-digit rate in the Philippines.  “So now, we try to keep the integrity of the industry. It would be difficult for the industry, if its reputation would be tarnished every now and then by scams, like pyramiding,” Olmedo says in an interview in Manila.

“Pyramiding is a problem in the Philippines, where economic growth has been picking up and the direct selling industry has been rising faster.  Our aim is to make direct selling a viable option for the people,” says Olmedo, who also sits as a board director of the Direct Selling Association of the Philippines and vice chairman of the Health and Dietary Association of the Philippines.

Olmedo describes direct selling as a personal way of marketing and selling products to consumers, without the use of retail stores and shops.  “It is more of a personal type of selling.  Your consumers are the people that you meet.  Of course, compared to retail-oriented companies, where products are on the shelves,” she says.

Pyramiding, on the other hand, is an unsustainable business model whose main motivation for distributors is the huge commissions for enrolling people into the scheme, instead of promoting the quality of the products and services to the public. It thrives on a network of commissions.

Olmedo confirms that not all direct selling companies in the Philippines can be considered legitimate, as some of them may be dabbling in the so-called pyramiding, although she did not name these entities.

“Right now, the direct selling industry is about $1 billion or about P40 billion as of 2012, with the growth over the previous year of about 30 percent. It is one of the fastest-growing industries in the Philippines. Of course, not all would be legitimate.  That’s why in the Direct Selling Association of the Philippines, we are pushing for a Direct Selling Law,” she says.

Olmedo says while DSAP has only 32 members, there are more than 100 players in the local direct selling industry.  “The industry is growing.  So far, we have 32 members in the DSAP, but there are more than 100 direct selling companies.  We want to include as many as possible so that enforcement and compliance can be ensured and everybody will gain from improving their competitiveness, as we do training,” she says.

Staff at an Amway Philippines distribution center
She says to guide consumers on how to spot a pyramiding scam, DSAP has developed an eight-point test.  “This one is what the SEC [Securities and Exchange Commission] is also using.  We work with the DTI [Trade Department] and SEC for enforcement to determine if a company is a pyramiding or not,” she says.

Olmedo says first, there is a real product being sold and second, commissions are paid on sale of products, and not on registration/entry fees.  Third, the intent to sell a product is not a position and fourth, there is no direct correlation between the number of recruits and compensation.

She says in a legitimate direct selling company, participants will still be able to make money, even if the recruitment of new distributors stopped. The company also has a reasonable product return policy, she says.

Olmedo says the products of legitimate direct selling companies have fair market value.  Finally, consumers have a compelling reason to buy the company’s products, she says.

Olmedo, who obtained a BS Psychology degree from University of the Philippines in Diliman in 1988 and a Master of Business Administration from the same university in 1992, had worked for various pharmaceutical companies before joining Amway, which is now considered the world’s largest global direct selling company with annual sales of over $11 billion.

She worked for Mead Johnson Nutritionals and Metrolab Industries Inc., before joining the Makati City-based Amway Philippines, where she served as marketing and business relations director from April 2003 to March 2012.  She was appointed country manager on April 2, 2012.

Olmedo, who has two children, likes the way Amway promotes organic products and healthy lifestyle.  “We really hope to promote environment-friendly products,” she says.

The Michigan-based company,  a wholly-owned subsidiary of Alticor Inc., was founded by former Nutrilite salesmen Jay Van Andel and Rich DeVos. 

“The inspiration for Amway is Nutrilite.  The founders of Amway started as Nutrilite salesmen.  Then, they started their own company.  As the company grew, they were able to buy Nutrilite,” she says.

“We are very big in personal care.  We also have our homecare.  In 1959, Amway started with the liquid organic cleaner.  So in 1959, we are first to come out with a product that is organic, in concentrated form and very kind to the environment,” she says.

Olmedo says Amway has exceptional products.  “Products really set us apart.  Second is the compensation plan. We have sustainable kind of business,” she says.

Amway offers products in more than 100 countries. In the Philippines, it has six distribution centers and one training center, which makes available over 100 product options to more than 50,000 independent business owners nationwide.

The distribution centers are located in Makati City, Shaw Boulevard in Mandaluyong City, Urdaneta City in Pangasinan, Cebu City, Cagayan de Oro City and Davao City.  A training center is located in Baguio City.

Olmedo says Amway has more than 10,000 employees in the world, including 65 in the Philippines. 

Amway Philippines, which was formed in April 1997, carries flagship brands including Nutrilite, the global vitamin and mineral brand that grows, harvests and processes plants on its own certified organic farms, and Artistry, one of the world’s top prestige brands for facial skin care and color cosmetics. 

Nutrilite, a leading brand in food supplements, is celebrating its 80th year.  “It is the first vitamin brand to be sold in the US,” she says.  “We grow our own plant materials in our organic-certified farms. There are 6,500 acres of certified organic farms in the US.  We grow it, we manufacture, then we pack it,” she says.

Amway also includes a wide range of personal care, homecare and agricultural products.”Here in the Philippines, we also have agri products,” she says.  “We have some locally sourced products like coffee, in a tie-up with Figaro and some cosmetic products. We try as much as possible to make Amway accessible to the Philippines.  Our  products are imported from the US.”

“This is our 17th year. We have 50,000 independent business owners [distributors].  Individually, they sign a contract with Amway. They renew their contract every year.  Around 30,000 join Amway every year,” she says.

“Once they sign a contract with Amway, they are free to conduct business on their own, but of course bound by our rules or Code of Conduct,” she says.

“We have more than 50,000 IBOs renewing every year.  That’s what we call active distributors.  After two years of not renewing, they are called inactive.  We also have 30,000 joining the business every year,” she says.

Olmedo estimates that Amway Philippines has a potential customer base of 500,000, based on an average of 10 customers per distributors.  “We are ramping up to double the business,” she says.

“Sometimes, when you reach a certain level, typically, not all of them will have customers. Some of them, their customers are their families.  But once they reach a certain level, our standard is about 10 customers per distributor,” she says.

She says successful distributors or the so-called platinum members, can earn P50,000 to P60,000 a month. “It can reach P80,000, full-time,” she says. “Some of them have replaced their incomes completely with Amway.”

She says Amway Philippines has seen sales growth at double-digit in recent years, led by strong demand for Nutrilite products.  “Right now, more than 50 percent of our business is Nutrilite, because of the growing health consciousness in the country. That’s one of the reasons why growth was really so fast over the years, as people become aware of  their food intake,” she says.

She says Amway distributors cut across socioeconomic groups, including professionals, entrepreneurs, farmers and tricycle drivers.  Top distributors are rewarded with free trips overseas.

“We have farmers and tricycle drivers who toured New Zealand.  We have street sweepers who went to Melbourne.  They grew their business so much that they joined our trips for free. We have trips every year, all-expenses paid,” she says.

Olmedo says as a way of giving back to community, Amway promotes values education in the Philippines.  “What we do is we have partner schools and we build these literacy centers. We either donate books, revitalize their libraries and we volunteer in story telling,” she says.

Asked why the company decided to focus on education, she says: “What really builds the nation is the love for country and the values for the nation.  We want to bring that back to school.  In partnership with the DepEd’s Adopt a School program, we have identified history books as part of the modules for K-12 program.  Right now, the results are good,” she says.

Another component of Amway’s corporate social responsibility program, she says, is the assistance extended to typhoon Yolanda victims.  A team from Amway recently visited Leyte for the second time, she says.

“That’s the second time we went there. We distributed food.  The first time we visited the ground was a month after it happened. Two weeks ago, they went there with hygiene kits.  What we plan to do over the long term is to rebuild some schools,” she says.

Olmedo says Amway is doing the CSR programs “because that is our thrust.”  RTD

Topics: Amway , pyramiding , direct selling , Leni Olmedo
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