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Vol.20 : Terry White (Amway Japan Ltd.)
July 11, 2007
Hard-pressed, Abe ties fate to resolving pension fiasco
Strong sentiment backs rate hike speculation
Citibank Japan back in business
Automakers hit by slack domestic sales
Expanded coverage: Aircon makes school so cool
distributor：販売業者
Independent Business Owner：独立した事業主
direct selling：訪問販売
（ T: Terry, R: Russell ）
| R : |
Japan is obviously a big country and Amway is big in Japan - could you give me a little bit of an idea of the scale and scope of Amway's operations here? |
| T : |
Okay, we have been here now for nearly 30 years. And in fact Japan was one of our first offshore markets after Australia and the UK. Interestingly we went to Australia first because America and Australia spoke the same language, so if they made a mistake it wouldn't matter to the Amway business, but we came here and since that time we've much pretty grown steadily.
Last year, our sales were around 110 billion yen and we have around 680,000 distributors here as well as something on the order of 260,000 Kaudake club members, they are people who just want to buy our products, don't want to have an Amway business. So if you add that together, that's in the order of 1 million people.
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| T : |
Yeah, like one in every 13 people you meet has probably got a relationship with Amway.
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| R : |
Incredible. And is the Amway business model the same in Japan as it is worldwide? |
| T : |
No. In fact the business model is different from pretty much country to country. Here in Japan it is not anywhere near the same focus on what we call business tools, so the videos and the cassette types and the books that people are used to associating with Amway businesses we don't allow here and that's always been the case. But apart from that, pretty much the product range and the way we reward our distributor network is pretty much the same as elsewhere.
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| R : |
So those numbers you gave me were pretty overwhelming in terms of the total amount of sales and the number of distributors. The number of - are they according to independent business owners, as they are in the United States? |
| T : |
We use the word in Japanese we say distributor, because that's the word we've always used.
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| T : |
If we were having a conversation with our colleagues in the United States we would say IBO - Independent Business Owner and then that number is 680,000.
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| R : |
680,000 of those and then you have also people who are member of the Amway club who are just interested in Amway products and services. |
| R : |
So why do you think Amway has been so successful in Japan? |
| T : |
You know Japan is the world's biggest direct selling market. And some statistics I saw in a magazine that they sourced from the ministry, from METI - Ministry of Economy, Trade and Industry showed that something like 21 million people had some connection with direct selling here in Japan.
Whether it's the Pola range of cosmetics or MIKI Prune or any one of them, why is that so? I mean Japan prides itself on the village concept and tight community structures, everybody knows everybody else and if you look at the history of post Edo-period, Japan, the growth of private enterprises has been around that door-to-door sales type. |
| R : |
Personal recommendations, personal relationships with people. |
| T : |
Yes, very much. Toyota used to sell cars by people knocking on doors. Insurance is still sold door to door and if you look at statistics, Japan ranks the highest in terms of - I am sorry let me take that back. If you ask people what influences your decision, more than 60% of people in Japan say it's 'people like me'.
So the personal recommendation as you say and some degree of informed decision making is pretty unique to this marketplace. That's why we have so many distributors. |
| R : |
To match all the different people... |
| T : |
Yeah, and in that bunch of distributors there's people who like to sell a whole lot of product and there are people who just the product for themselves and their family. So as a business model across the 700 odd direct selling companies that are registered in Japan, it's pretty well known to people.
The unfortunate side of it comes around that's happened to us in about 10 years ago is when people try and push the system too much and in that circumstance, we as a company have to be very, very careful, one, to maintain our integrity, two, to protect our reputation - integrity is important to us.
And what we need to do is control the distributor...he gets excited about what the business opportunity represents and so over the last 10 years, we have been very, very careful about how we managed that, how we educate and train our distributors given the information that they need so that they can effectively recommend products to their friends and people they know.
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| R : |
You said that some of your distributors are quite small and some are quite big as a multilevel marketing organization, could you give me an idea or how that small and big might... |
| T : |
Big could be tens of thousands of people in an organization, so 1% sponsors another person to join in the business who sponsors another one who sponsors another one and...
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| R : |
So lots of levels there. |
| T : |
Yeah, and our structure is infinite, so that you can sponsor as many people as you like, we don't want to see that get out of control, we also don't want to see people build a business, 'When they want to take Amway as a business opportunity' built with too few people, and some of the people who have been in our business here for 25 years or more, obviously over a period of time have created organizations that are huge. And in fact one of the world's biggest distributors is based here in Japan.
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| R : |
One of the world's biggest is based in Japan. |
| T : |
Yeah, and that man travels all around the world because he's sponsored people everywhere. He was recently in Brazil and recently in India and I mean for him it's a global operation and he just has huge charisma and appeal and has been very successful.
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logistic infrastructure：物流基盤
CSR initiative：企業の社会責任の先駆け
self-expressive：自己表現
eat-your-lunch：打ち負かされる
（ T: Terry, R: Russell ）
| R : |
So over the last 30 years or so, what changes in the business environment have affected Amway the most, I'm thinking here of things like the internet, mobile phones and those kinds of regulations.
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| T : |
I think to answer the last part, first the regulatory environment, Amway as an organization, as a company we want to respond to the regulatory environment and we want to be a positive player in that space. So at no stage, would I ever characterize anything that the regulators have done as being a barrier to our business.
In terms of the internet and mobile telephony and those sorts of things I mean it's a huge change and currently our digital sales would be in the order of 40% of that $1 billion, higher, edging up towards 50%, which makes us one of the largest internet trading companies in Japan.
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| R : |
That's astonishing. I mean does that mean though that those sales are going direct to Amway HQ rather than through distributors? |
| T : |
No they are going, they're orders that distributors place...
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| R : |
So the distributors place, I see, and then they are still selling directly when they are buying... |
| T : |
Absolutely - our job is to power the distributor network, but our internet site which we are currently doing some work on and our mobile site and at the end of each sales month are just overwhelmed with huge volumes, $10-$15 million worth of sales in a day. And we've put a lot of time and energy into that space because we realize that's where the society is going.
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| T : |
And the most important people to us in one sense as the communications people, our audience is the people who have yet to join our business. How do you respond to the needs as they are changing out there in the marketplace? We are in Shibuya, what way the young people walking up and down the street, how are they communicating and how are they aggregating their information?
So we have spent a lot of time and energy in that space, we'll be sending more time and energy globally in developing our capabilities and we hope to be doing some really innovative things over the next 12 to 18 months to reach out to that bunch of people who communicate in a different way than their parent's generation. I think the other thing that's really impacted our business over the years has been Japan's extraordinary logistic infrastructure.
In Japan, we can probably get a product on the phone line on and probably the main, okay we can get a product to the people within 48 hours.
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| R : |
It's incredible, isn't it? |
| T : |
It's huge, and that means that your customer satisfaction levels are much different than they are in other markets, and when you think about it, it means that the products are touching so many different people. And the businesses are touching so many different people. That it can become for us and is for us a sense of - a point of pride. The other thing that we have learnt being in Japan over the last 30 years is that it is very important to give back to society.
And the way that Japan approaches corporate social responsibility or the CSR phenomenon is something that we as a corporation globally have learnt a lot from. On the basis of - on the back of that learning couple of years ago, we set up an organization called the One by One foundation for kids and what we want to do is globally impact the lives of kids everyday and we don't want to do that through huge grant-made programs or by large gala activity, we mean one by one.
So you'll see our employees volunteering to go and do things, our distributors would turn up to support the Special Olympics. We sponsor activities in nature forests and all of that in order to touch the lives of children one by one around the world
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| R : |
So that's Amway's main CSR initiative in Japan? |
| R : |
In Japan, or worldwide? |
| T : |
Everywhere. What we decided to do was if we are going to have a CSR initiative let's make sure that we are all in sync with one another and that we are able to do something that made a difference. We learn a lot from what Avon was able to do with the breast cancer and the pink ribbon campaign.
And companies like ours should do things like those. And the families that own our company seriously and honestly believe in the role of a person in giving back to community. So it's not something we do to attract attention. It's not something we do for PR.
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| R : |
It's actually a natural instinct... |
| T : |
Yeah, we do because it should be done and we're very proud of the fact that our employee base of nearly 580 employees are actively involved in these sort of programs all the time.
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| R : |
So you've got your direct employees involved and you encourage your distributors to be involved at the same time? |
| T : |
Absolutely, if we can bring one thing to a community activity in Japan, it's the large number of people who are in our network and what's most important in community-based activity is time, giving time to somebody who needs it, particularly with kids and in that context we believe that what we can give that few other organizations can actually apply is the number of people.
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| R : |
Well its great to hear about Amway doing that. I would like to move on to one other question. If you could just very briefly summarize this, the differences between market conditions here and let's take as an example America or if you prefer Australia... |
| T : |
I think that the United States and Japan are very similar in terms of market demographics and market issues. I think there is a bit more diversity in the United States. |
| R : |
When you say market demographics, the type of people who become distributors in Japan are demographically similar to. |
| T : |
Reasonably similar. Their level of education is typically higher, but that's - our distributors in Japan look like people in Japan, and our distributors in the US look like people in the US. So that when you think about the numbers that are involved, you would expect that. |
| T : |
I think in terms of market conditions, both United States and Japan are very mature markets for us, the challenge is to innovate, the challenge is to become consumer focused, the challenge is to become performance driven in a way that we've never been before in order to create new value in a whole range of different places.
And the way that you do that in the two markets is intrinsically different, that's why most of the people who work here at Amway, Japan are can you believe it, Japanese. Most of the people who work at Amway Italy are, Italians!
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| R : |
People who look like Italians. |
| T : |
There's a reason for that and instead a direct selling company like our own or many of our colleague companies in the industry reflect the cultures and the communities that they are part of, and if we don't respect that and indeed honor it, then we wouldn't be very successful at all.
So our challenge is those three things going forward is to retain the innovation, we have great R&D and we have made some great acquisitions in terms of IP. We now need to actually monetize that model a bit better than we have been doing and reflect it in the way we go to market.
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| R : |
How about the competitive environment, is it tougher in Japan? |
| T : |
In terms of products or in terms of the industry? |
| R : |
In terms of the industry. |
| T : |
Industrywise we are the biggest suppliers in Japan, we would battle with some of our competitors' market by market as the largest, but typically we probably are. In some places around the world, notably South America, people eat your lunch everyday and we don't do very well there at all. I think because direct selling is a mature industry here in Japan and it's becoming more and more understood. I think the marketplace is relatively stable. |
| T : |
The issue is around the products. Do you want to think about cosmetics and skincare, the first names that come to anybody's lips are Shiseido, companies like that that are just wonderful companies that produce outstanding products and have superb reputation being able to be in a marketplace with companies like Shiseido is really a plus for us. Our market share is small, but the quality, this demand that is in the marketplace means that we have to go on and continuously improve what we do. |
| R : |
So how would you like to see the market for direct sales, organizations like yourselves developed in Japan and how do you think it will? |
| T : |
I would like to see 125 million distributors but that's not going to happen. I think what I would like to see is, as we trend towards a social media environment and Web 2.0 becomes much more of a reality and Japan is one of the leading countries in the world in that sort of space.
What I see is a network of highly-enabled individuals who make very definite lifestyle choices. And the strength of the LOHAS movement and the lifestyle movement here in Japan I think is a wonderful indicator of the possibilities. I mean Mixi is the largest community site in the world.
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| T : |
And the way that podcasts and other things have taken off here is an incredible stimulus to us... |
| R : |
More blogs are written in Japanese more than in any other language. |
| T : |
Any other language and you know that Americans really dislike that, but it's true. And I think as we look around the region, I mean mobile this is a mobile community in terms of its computing power. The platform has become ubiquitous... |
| R : |
Right, the mobile internet has been in Japan for such a long time and people are thinking now this is a great new revolution in the states, we have had it here for years. |
| T : |
We can do stuff on our mobile phones that we can't do on internet sites in most countries and that's an incredible thing. So more power to it as young people become more accustomed to those social media environments and as Japan moves to that Hodan Sakai [ph] that self-expressive society. |
| R : |
Finally Terry are you familiar with the Nikkei Weekly? |
| T : |
I adore the Nikkei Weekly. I read the Nikkei newspaper everyday although I don't read the evening edition, I have to say it's - I just... |
| T : |
Well I just get home and I am full for the day. But the Nikkei Weekly is a great summary of some wonderfully deep analysis and some really well positioned commentary that people in our sort of walk of life need to be able to access.
And when I am in the United States, I will read the New York Times and the Wall Street Journal and I subscribe to the Financial Times and as well as the Nikkei and what it does is that gets our head around issues that matter.
And as a business and as businesspeople unless we are focused on business - on things that matter, then what we are doing is writing a retirement plan rather than a business plan.
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 Charles Duncan / Managing Director
Continental Airlines Japan 
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