Invest KOREA

Overcoming and Prospering in the Korean Market

Amway Korea looks back on 20 years of “glocalization”

Amway Korea President Park Se-joon talks often about “the people.” The people are passionate. The people are goal-oriented. The people are loyal. And by “people,” Park does not mean Amway employees, but rather, the independent business owners (IBOs) in Amway Korea’s marketing network.

There are 900,000 of them, and they bring Amway products to domestic consumers. Their system goes by several names - direct-selling marketing, network marketing, multilevel marketing - and compensates salespeople not only for the sales they generate, but those of salespeople they recruit. This system can carry negative connotations for its association with pyramid schemes, but as far as Park is concerned, Amway is “helping people live better lives” - their motto - by providing quality products and business opportunities.

“It’s very honest,” he said. “[It’s all about] what you paid and your effort.” Having overcome negative perceptions since starting local operations in 1991, Amway Korea is today considered an ugly-duckling-turned swan of the retail industry. One of Amway’s 58 global subsidiaries, it has about 400 employees, runs 13 service centers nationwide and sells more than 1,000 products.

Amway, the world’s second-largest direct-selling enterprise, markets and manufactures nutrition, beauty, homecare, personal care and durable products. Among the 450-plus products produced by Amway headquarters in Michigan, USA are the well-known Nutrilite and Artistry brands.

Amway’s total annual revenue is $9.2 billion, and the Korea branch is its 4th strongest, with annual revenue of 780 billion won ($738.3 million) as of 2010. Park credits the company’s domestic success to Amway Korea’s people and marketing plan, but also to its quality products, a manufacturing-to-distribution vertical integration system, a focus on sustainability and “glocalization.”

Park remembers how the local Amway was viewed unfavorably at first for being an American company and because of the poor reputation of multi-level marketing operations. Things got worse with the Asian financial crisis of 1997, as people equated foreign companies with importers, and importers with major contributors of the foreign currency crisis.

“But through that, we learned what is the best way to mitigate the emotional conflict between the different cultures,” Park said.

The main solution involved Amway Korea’s One for One project, which was launched in 1998 to achieve mutual prosperity with Korea’s small- and medium-sized enterprises (SME). Every time the company receives a new product from headquarters, it sells it alongside a product manufactured by a domestic SME.

Korean companies have sold more than 300 products through this project. Notable enterprises include Kidong & Company, a scouring pad manufacturer, and Cell Biotech, a bio-venture company.

“That is our will to demonstrate we care for the country,” said Park.

Amway Korea also began exporting locally sourced products - especially biotechnologies - to headquarters, which delivers them to the 58 countries in Amway’s network.

Another measure that has helped Amway Korea establish a sound presence in the domestic market is the Amway Global Development Project (GDP), which was started in 2010 and identifies unique ideas and exceptional technologies/materials from local subsidiaries. The products are supplied to Amway’s global sales network through joint research and commercialization. Two hundred domestic companies applied for the project and 16 were chosen.

One particular feat drew global attention: the success of the Korean bio-venture Unhwa Corporation in the world’s first plant stem cell isolation and culture.

This open-innovation strategy includes an online supplier’s portal through which domestic SMEs can submit proposals for their products, technologies and raw materials to Amway Korea or headquarters.

“Good technologies can be globalized through our headquarters,” Park said.

Another milestone from 2010 is the opening of Amway’s Asian Logistics Hub in Busan to efficiently deliver products manufactured in the U.S. to Asian countries. Busan New Port won the bid for the hub, which is expected to create more than 50,000 jobs annually and bring in 100 billion won in economic benefits for the next five years.

The numbers are impressive and Amway Korea’s list of achievements is long. But as the company celebrates its 20th year, Park says it’s really about promoting entrepreneurship - about helping mom-and-pop businesses succeed.

That’s often how it works, he explained. The homemaker wife starts thinking about what will happen after her husband retires. She wants to start a small business but lacks the confidence and knowledge. She is supported by an IBO and starts her business, learning as she goes. The husband, after retiring, joins in.

“Now she has her own life, she has goals,” Park said. “I think that is really changing life.”