“Vietnam is a success that exceeds all our expectations!” says Johan Nordstrom, Regional Manager for Swedish cosmetics firm Oriflame.
Not an overstatement when you learn that Oriflame Vietnam met and surpassed its first monthly sales budget in a mere four days after the pre launch 26 August 2003.
What happened and why?
“Oriflame is the first direct sales company in our niche making a serious investment in Vietnam. We are first on the scene. And our products are affordable. When we arrived there were top tier, expensive, foreign luxury cosmetics plus a range of domestic cheap products and limited supply of mid range products. Add to that the Vietnamese purchasing power is much higher than we anticipated. They seem to have more money to spend than official statistics indicates,” explains Johan Nordstrom.
Two months later the numbers of Oriflame consultants, company lingo for the direct sales people that have passed Oriflame’s training and now work in the field selling the products, are around 8 000.
“We underestimated demand and growth. Our target was some 500 consultants by mid October. So now we look at having one more office in Ho Chi Minh City, which will also serve as a distribution hub and a warehouse, and soon a Hanoi office as well to support the growth as sales expand north from Ho Chi Minh City. All this was originally scheduled to happen one year from now!” says Johan Nordstrom. “With this in mind I now believe we will have some 20 000 consultants working with Oriflame Vietnam within twelve months.”
Drawing from the lesson learned in Thailand is one more reason for the rapid growth in Vietnam. When Oriflame began operating under its own name in Thailand three years ago they did it from a large, nice, unique and old but largely invisible white mansion in an off Sukhumvit Soi.
Direct sales experts usually shun traditional marketing, like advertising and billboards, trusting the marketing power of their people knocking doors, sell the products and do the branding. But in Thailand Johan Nordstrom for the first time found a market with a different mindset.
“One similarity between Thailand and Vietnam, and a difference compared to our experience in Europe, is that we must sell our brand supported by visibility in the market. That despite that we direct sales people really don’t like to spend money on traditional marketing – we want to spend it on motivating our consultants instead. But then, when we are faced with reactions like ‘Oh, a European company with quality products. Sure, but why have you “hidden” your office on a backstreet soi?’ This is a real question and not insignificant if you like to be a big player, despite the dynamics of direct sales.”
Consequently, Oriflame located its first Vietnam office, in Ho Chi Minh City, in full view at a very central location on the road leading to the airport. And large Oriflame signs, seen from far away, have been set up on the building’s walls.
“And we will steer the Thai company in a similar direction. As sales in Thailand takes off and we have shown that the concept is right, then we too must be more visible here and make more public events and hence engage in some traditional marketing activities.”
Two of the public events in Thailand have been product launch and information shows for Oriflame consultants, usually held in the privacy of a hotel, now moved into large shopping malls in Bangkok.
“One was OK but not more as the area we got was a bit off. But the second show was a great success because we were in the midst of the mall and seen from all floors.”
More of the same will be achieved when Oriflame moves to a much more noticeable office in the Ital-Thai Tower on Petchburi Road. Oriflame will occupy the mezzanine floor plus one back office space higher up in the same house.
“The mezzanine area will be utilized to receive our consultants and be a showroom for our products while the back office will host management and support staff,” says Johan Nordstrom.
When Oriflame started year 2000 in Thailand it was with a budget and manning that later proved to be too small.
“Our experience from developing nations in Central & Eastern Europe was not applicable to the market conditions in Thailand, which are tough and very competitive. So we decided to use our learning when preparing for opening for Vietnam, even though Vietnam in many aspects is very similar to the European nations we successfully entered in the early 1990’s,” continues Johan Nordstrom.
In Vietnam the necessary but not unwelcome restructuring to match the unexpected growth may hold back some of the offensive measures to make the brand more known.
“Still, during 2004 we will run print ads, air TV commercials and put up more billboards in Vietnam. But we have to tune it so we can cope with growth and support our customers properly.”
Do you stress Sweden and Swedish in Oriflame’s marketing?
“Absolutely. A lot. There are good historical relations between Sweden and Vietnam and we are always very well received in official circles when they know we come from Sweden. In sales and marketing we do it indirectly by stressing that our products are natural Swedish cosmetics, no animal testing, natural substances, recyclable packings etc in line with the strict Swedish environmental concerns.”
And generally speaking, what strikes you in Vietnam?
“There is a huge market for consumer products, if the price is right. Vietnam is tailor made for direct sales. People are diligent, very entrepreneurial, and have the right attitude. While a European might hesitate to sell to a friend or relative because it would be embarrassing, the Vietnamese turn it around and say ‘Why would you buy from somebody you don’t know!’”
That enthusiasm is somewhat cooled by a very challenging bureaucracy.
“It is a lot of paperwork and things take time, even if all documentation is there and correct. One should make a budget for delays, and have the financial strength to cope with delays. Invest in time. That is important. Thailand is, in comparison, very straightforward and smooth,” adds Johan Nordstrom. “But perhaps that is the price that you have to be willing to pay when you are a pioneer on a new market. Given the results so far, I think it is definitely worth it!”
