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Amway is an international multi-level marketing
system comprised of a company called Amway Corporation and several surrounding
but legally separate Amway Motivational Organizations (AMOs).
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 took over the North American business of Amway in 2001. Amivo acts as an Amway daughter-company.
Amway has been often criticised as a scam; some detractors have called the organization "Scamway." [1] (http://www.rickross.com/reference/amway/amway23.html)
The system
Anybody can become an Amway distributor; distributors may purchase products from Amway at rates published as wholesale prices.
In the United States, a distributor may use up to 30% of these monthly purchases for personal consumption, but must sell the remaining 70% to others. (In most other countries, how much distributors use for personal consumption and what proportion they sell to others remains entirely a matter of personal preference). If a distributor can convince a new participant to join the system, the distributor becomes the new person's sponsor, or upline.
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.
The AMOs 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, a legend in 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. By packaging his tapes in a weekly subscription format, Dexter was able to leverage peoples' apathy into a major fortune. He is one of Charlotte, N.C.'s biggest landowners.
Political causes
Commentators have often (but not strictly accurately) identified Amway as supporting the US Republican Party and other right-wing causes. Amway Corporation, as such, supports no political party. 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. Perhaps paradoxically for an organization so widely regarded as right-wing, Amway touts the environmental benefits of many of its products, and in June 1989 UNEP's Regional Office for North America recognized it for its contributions to the cause of the environment.
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. 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.
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. 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". However, internal documents from the Amway Corporation including a study memorandum prepared in 1983 called the "Postma Memo" validates many of the critics' claims regarding the pressures used in the Amway "motivational systems."
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.
External links and references
Criticism
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