Amway

From Academic Kids

The single word Amway generally refers to an international multi-level marketing system consisting of a company called Amway Corporation and several surrounding but legally separate motivational organizations.

Amway Corporation, a privately held company founded in 1959 by Jay Van Andel and Rich DeVos and based in Ada, Michigan, has annual sales of $6.2 billion (2004). It manufactures and sells personal care products and markets products from other companies, including (in Australia and New Zealand), Emma Page jewelry.

In 1999 the founders of the Amway corporation launched a sister (and separate) internet-based company named Quixtar. Both Amway and Quixtar are owned by Alticor. Quixtar replaced the North American business of Amway in 2001 and at this current time Amway only operates in Australia, Europe, Asia, Africa and South America. Amivo acts as an Amway daughter-company in Europe.

Contents

Controversy

Amway and its online incarnation, Quixtar, have been controversial for years because of allegations that these companies are pyramid schemes. Critics claim that most of the products sold by Amway are to the Independent Business Owners (IBOs) themselves for personal consumption rather than to retail consumers who aren't enrolled as IBOs. Buying products from Amway or Quixtar gives IBOs points and they are paid back on the number of points that they generate from personal consumption. It is claimed to be a business opportunity and hence an existing IBO can help others to get an IBO number and divert their buying habit from other stores to Amway or Quixtar. Thus the business grows as a greater number of people join the group. The share of profit is based on the leverage that an IBO has.

The business skills of the IBOs are honed by business support material and tools sold or provided by select successful individuals within the higher ranks of the organization. It is claimed that the support material can be of help to an IBO if he wants to build a big business, however undercover investigations like one done by MSNBC Dateline (http://www.msnbc.msn.com/id/4375477/) in 2003-04 suggest that most of the money being earned by these successful individuals was coming from the hidden "tools" business rather than through selling the company products.

The system

Anybody can become an Amway distributor; distributors may purchase products from Amway at rates published as wholesale prices. Amway distributors receive monthly payments based on the amount of sales their group generates; the group consists of all people sponsored by the distributor, and all people sponsored by those, and so on. One cannot join without a sponsor, and one has to purchase an "Amway Opportunity Kit" in order to become a distributor. Amway claims to have 3 million distributors worldwide, including 500,000 in the U.S. Japan represents a very fast-growing market with 1 million distributors. Recently, the Amway cluster received permission to establish a network in China and have done sales of over 2 Billion U.S. Dollar in 2004.

Motivational organizations exist to offer free motivational speeches for people who have not yet joined the Amway system, and sell motivational seminars, tapes and literature to Amway distributors.

Amway employs a system of "levels" to reward successful distributors; higher-level distributors act as mentors to newer distributors, organize regular meetings of their group and derive most of their profit from the sale of motivational tools to them. At the highest level rank Crown Ambassadors, but with only a handful of Crown Ambassadors in the world at present most distributors aspire to the level of Diamond.

"Crown Ambassador"

Some Crown Ambassadors include Leonard and Esther Kim; Jim and Nancy Dornan; Tim Foley; Bill Britt; Jim and Sharon Janz; Charlie and Elsie Marsh; Bill and Joan Laing; Frank and Rita Delisle; Dan and Bunny Williams; Mitch and Diedre Sala; Dick and Sandee Marks; Bill and Joyce Schmidt; Chuck and Jean Strehli; Peter Lee & Choi Kit. Kaoru Nakajima of Japan, known as 'the master,' has achieved the mythical pin of "Double Crown Ambassador", meaning he has double the required 20 personal direct legs.

Dexter Yager, considered a legend by some within the Amway organization, is probably the most famous American Crown Ambassador. He created a training system of functions, books of the month, and tapes that has been copied by Dornan and Britt, among others. He is one of Charlotte, N.C.'s biggest landowners.

Political causes/Culture

Commentators have often (but not strictly accurately) identified Amway as supporting the US Republican Party and other right-wing causes. Amway Corporation claims to support no political party, yet 100% of its political donations benefit Republicans. Rich DeVos and Jay Van Andel, who fully owned the company until their retirement (when they delegated authority and substantial ownership to their children), have strongly supported the Republican Party and both socially conservative and pro-capitalist causes, but that has been with their personal assets, not as a company position per se. Many of Amway's best-known distributors, including Dexter Yager, have also declared themselves Republicans. Amway touts the environmental benefits of many of its products however, and in June 1989 UNEP's Regional Office for North America recognized it for its contributions to the cause of the environment.

As well as tending towards being right wing, the senior distributors also promote a worldview encompassing Pentecostal Christian fundamentalism, and a general advocacy of boomer/50s values. The AMOs' perception of the role of women, though always includes successful women in awards, recognition and speaking engagements. You rarely, if ever, see a male, married distributor speak on stage without his wife getting equal billing, and explaining her active role in the business. This is a reflection of the AMOs' strong advocacy of the 50s style nuclear family model. (Women have successfully developed Amway/Quixtar businesses around the world.)

In May of 2005, former Amway President Dick DeVos, one of the wealthiest people in Michigan, and his wife Betsy were listed as two of the largest campaign contributors of the 2004 election. Just days later, Dick announced that he would run against Governor Jennifer Granholm in 2006.

Criticism

While supporters of the system point out that Amway offers an easy way to earn money on the side and that it makes sense to buy products for personal use "from your own business" at wholesale prices, critics charge that even the wholesale prices published by Amway often exceed retail prices elsewhere. Supporters of the system usually respond to this by maintaining that many of their products, such as cleaning solutions, come in highly concentrated form, and therefore may still be competitively priced when that is taken into account, and the manufacturer generally claims that their products are of higher quality than less-expensive similar products. However, it is worth noting that this explanation cannot apply in the area of all products.

Like many multi-level marketing operations, Amway has been called a pyramid scheme. Critics point out that participating in the system is not free, that AMOs often emphasize the recruitment of new participants over selling products and that many distributors spend little time actually selling products to others. It is also alleged that the above-mentioned "70% rule" is not sufficiently emphasized to new recruits, and that few products are ever sold to people outside of the Amway organization.

Another criticism is that only a small fraction make any money at all, with the average distributor making around $100 per month before expenses and operating at a loss after expenses. Amway supporters reply that the organization does not have fixed working hours, and that how hard a distributor works (if at all) is a personal choice. The implication of insufficient effort or laziness is resented by former distributors who say that they got nothing for the sacrifices they made. Supporters of the system might suggest that it could be that an individual's personality and people skills are factors, as are such external circumstances such the state of the economy and the receptivity of the market, factors which vary considerably from one place to another.

Critics also assert that AMOs target psychologically vulnerable people, and that some distributors have become alienated from family and friends who were invited to become sub-distributors or customers and resented the attempt to turn their personal relationship into a commercial one. Amway supporters reject this as an exaggeration, pointing out that the Amway manual prohibits taking advantage of sub-distributors, but in such a large organization comprising such diverse individuals and groupings, the possibility always exists of certain individuals abusing their power over their "downlines".

Amway has changed enormously over the past 15 years, (1990-2005) presumably in an effort to remain appealing to potential distributors/IBOs, and in an attempt to shed the distributor organisation's public image. The name change to Quixtar and the associated metamorphosis is reminiscent of actions taken by numerous other groups.

G. Robert Blakey, a professor from America's University of Indiana, authored a report (http://www.amquix.info/blakey.html) about Amway as an expert witness in the case "The Proctor & Gamble Company, et al. v. Amway Corporation, et al, Case No. H-9723 84 (S. D. Texas, Houston Division)." This report may be of interest to those considering becoming Amway distributors.

Legal rulings

In a 1979 ruling, the FTC found that Amway does not qualify as an illegal pyramid scheme since the main aim of the enterprise is the sale of product. It did, however, order Amway to change several business practices and prohibited the company from misrepresenting the amount of profit, earnings or sales its distributors are likely to achieve. Amway was ordered to accompany any such statements with the actual averages per distributor, pointing out that more than half of the distributors do not make any money, with the average distributor making less than $100 per month. The order was violated with a 1986 ad campaign, resulting in a $100,000 fine.

In 1983, Amway pleaded guilty to tax evasion and customs fraud in Canada, resulting in a fine of CDN$25 million, the largest fine ever imposed in Canada.

In 2005, Amway/Quixtar orchestrated an attempt to drown out sites reporting deceptive practices and negative opinions. The "Web Initiative" (http://www.webraw.com/quixtar/archives/2004/10/the_quixtar_web_initiative.php) was flagged as Google bombing, a violation of Google's Quality Guidelines (http://www.webraw.com/quixtar/archives/2004/11/google_guidelines.php).

External links and references

Amway detractors accuse the company of spreading right-wing beliefs among its distributors 1, (http://www.motherjones.com/news/special_reports/1996/09/burstein.html) 2 (http://io.scoop.co.nz/stories/HL0412/S00154.htm). This has led to the derogatory term "Amway Christian", which suggests a professed Christian with a lack of commitment to the social-justice elements of the faith3, (http://www.holyobserver.com/detail.php?isu=v02i05&art=amway)4, (http://www.webraw.com/quixtar/archives/2005/02/amway_christian.php,)5, (http://www.augustafreepress.com/stories/storyReader$31336) 6 (http://www.augustafreepress.com/stories/storyReader$31336,)

Resources

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