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Amway

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Amway
Company typePrivate
IndustryMulti-level marketing
Founded1959
HeadquartersAda, Michigan
Key people
Steve Van Andel
Doug DeVos
Lynn Lyall
Number of employees
17,000 Edit this on Wikidata
Websitewww.amway.com

Amway is a multi-level marketing company founded in 1959 by Jay Van Andel and Rich DeVos. The company's name is a portmanteau of "American Way," a term coined by the founders. [1] Based in Ada, Michigan, the company & family of companies under Alticor reported sales of $6.4 billion for the performance year ending August 31, 2005 marking the company’s sixth straight year of growth. Its product lines include personal care products, jewelry, dietary supplements, and cosmetics, among others. Today, Amway conducts business through a number of affiliated companies in fifty eight countries [2].

In 1999 the founders of the Amway corporation launched a sister (and separate) Internet-based company named Quixtar. The Alticor corporation owns both Amway and Quixtar, plus several other concerns. Quixtar replaced the North American business of Amway in 2001, with Amway operating in the rest of the world. Amivo acts as an Amway subsidiary in Europe, as does a2k in Australia and New Zealand.

Amway cofounder Jay Van Andel (in 1980) and later his son Steve Van Andel (in 2001) were elected by the board of directors of the United States Chamber of Commerce as chairman of that organization.

The Corporation

Anyone can become an Amway Independent Business Owner (or IBO, formerly known as a Distributor); IBOs may purchase products from Amway at rates published as wholesale prices.

Each product has an associated Points Value (PV), which is the same for that product all around the world. It operates like an international currency, which represents the amount of profit inherent in the product. The sum of the group's PV determines the commission level (3%, 6%, ... 25%) payable. The Business Volume (BV) turns the PV into the local currency, after removing items such as value added tax (which obviously cannot be part of the profit). The commission level is applied to the BV in determining the monthly payments to be received as commission.

Like in most MLM businesses, a person wishing to join Amway is "sponsored" by an existing IBO. This involves the new IBO purchasing an "Amway Opportunity Kit" or "Business Pack" and completing the appropriate forms. The kit also contains literature and some starter product. IBOs must pay a yearly fee to remain in Amway, although they are not required to buy a minimum amount of products.

Amway claims to have 4 million distributors worldwide who have renewed at least once, including 500,000 in the U.S. Japan represents a very fast-growing market with 1 million distributors. Recently, Amway received permission to establish a network in China and have done sales of over 2 Billion U.S. dollars in 2004. (It should be noted that Amway cannot conduct Chinese operations as it typically does elsewhere due to a ban on direct sales).

Training organizations exist to offer a variety of business services to IBOs as well as their prospective business partners. This includes training seminars, CDs and literature. Often, public meetings are made available as a way of helping present the concept to prospects.

Amway's distributors are organised hierarchically, and the corporation employs a system of pin levels to reward successful distributors (so-called because attainees are awarded a stick pin to indicate their level.) Higher-level distributors act as mentors to newer distributors, organize regular meetings of their group and (controversially) may derive most of their profit from the sale of motivational tools to them. "Crosslining," or associating with people from a different "leg" or distributor chain, is generally discouraged.

Pin Levels

Pin levels reflect the level an IBO has reached in the Amway business. As such they are an indication of both the size of an IBO's group and their income, and by extension the IBO's knowledge and expertise in the field. Top pin level IBOs may have groups numbering hundreds or thousands of people, and are in high demand. They also command respect and adulation from their group. High pin levels are named after precious metals or gems to convey a sense of the wealth that they are supposed to represent.

The lowest pin levels reflect successively higher volumes of PV sold through the IBO's group, and are named after the percentage bonus that each level pays.

The first significant pin level is that of Platinum (formerly known as a Direct.) The term Direct came from distributors beginning to get products sent to them directly from the corporation after attaining this level, as opposed to previously having bought them via their "sponsoring" distributor. (These days the "Direct" concept is defunct, as all IBOs order their product direct from Amway.) This level requires the IBO's group to be moving 7,500 PV (or 10,000 PV in some countries) of product per month, and the Amway recruitment plan customarily shows that such a group will have a total of 75 people; although in practice that number is often much larger. The income at the Platinum level, generally speaking, is (purportedly) about the same as the average full-time wage in the IBO's country of origin.

A significant pin level is that of Diamond. This level requires that six people the IBO has sponsored have themselves reached the Platinum level (or higher). The remuneration at Diamond is (generally) a "six-figure" passive annual income, and advertised to represent financial freedom for the IBO. Almost all IBOs aspire to this pin level because of this "freedom" aspect.

(Note that it cannot merely be assumed that the income of a Diamond IBO is a simple 6x multiple of the income of a Platinum, since there are several other ranks between Direct and Diamond, and monetary bonuses are paid as a result of having attained these as well.)

The highest level is Crown Ambassador. This level used to require at least twenty legs, each at least at the Platinum level. Amway has recently introduced a system called FAA Points, where it is possible to become a Crown Ambassador with only 9 legs - however each needs to have a Diamond within that leg. This is helping to create much more stable sustainable businesses.

Only a small number of people in the world have attained this pin level, and they are in constant demand for recruitment, training and motivational speaking engagements. The remuneration at the Crown Ambassador level runs into the millions annually.

Other pin levels include Ruby (15,000 PV per month), Emerald (three Platinum legs), and Executive-, Double- and Triple Diamond (nine and twelve and 15 Platinum legs respectively - or with differing numbers of FAA Points.)

On top of the remuneration for PV moved through their group, an IBO may be entitled to additional monetary incentives. These bonuses are paid for meeting growth targets, extraordinary recruitment number, etc and can represent a significant portion of an IBO's income.

Alticor recently started a program that makes it possible to attain the Crown Ambassador level with only 9 legs. If all of the 9 legs are Diamonds, the IBO receives 27 FAA points as every Diamond counts for 3 FAA points. This allows for greater earnings than with the "old-fashioned way." Additionally, approximately 80 FAA-points would guarantee a 7 figure bonus (USD) per year.

"Crown Ambassador"

By way of their seniority most Crown Ambassadors sit on various Amway boards, deciding business policy which affect all IBOs worldwide. Most also run, or contribute heavily to, their own motivational organizations.

Dexter Yager, one of the biggest landowners in Charlotte, North Carolina, 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. This has been done by a number of other organisations, such as Network 21 which is the most international of the business systems which run parallel to Amway.

Lines of Sponsorship

A line of sponsorship (LOS or line of affiliation) is an essential organizational concept in Amway organizations. Status is determined by where one is on the hierarchical continuum within the LOS. Those upline have higher status and those and downline have less status. [3] A given IBO signs an agreement upon initial employment that says he will not switch LOS (Crossline). [4] Some of Amway LOS have included: TEAM (formerly Team of Destiny), InterNET, BWW, WorldWide Dream Builders (WWDB), Alliance Net Solutions (ANS), Empire, True North, eFinity, InterNet Associates (INA), International Connection, International Leadership Development (ILD), MarkerMan Productions (MMP), ProAlliance, Interbiz, IBO Alliance, and GlobalNet.[5]

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.

Typically, IBOs spend a large amount of money on tapes, books, and seminars (known as "tools" in AMO parlance) which are ostensibly "required" to "hone the business skills of the IBOs". These are not provided by Amway itself but organizations often described as Amway Motivational Organizations (AMO) in general run by people in the higher ranks of the organization. Claims regarding the support material range from "can be of help to an IBO " to "are absolutely required" to "build a big business". However, undercover investigations like one done by MSNBC Dateline in April 2003 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. Critics also claim that the materials are specifically geared towards encouraging IBOs to continue working for a noneconomic return, rather than improving their actual business skills.

Dexter Yager's organisation, the International Dreambuilders' Association/Digital Alliance (usually simply referred to by the abbreviation IDA) is arguably the largest and best-known of the AMOs, and is probably the one most commonly associated with Amway.

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 have been to 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 socially and economically conservative 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, and in June 1989 the United Nations Environmental Programme'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 Amway Motivational Organization's (AMO's) perception of the role of women, though, always includes successful women in awards, recognition and speaking engagements. One rarely, if ever, sees 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 1950s style nuclear family model. (Women have successfully developed Amway/Quixtar businesses around the world.)

Another cultural element within Amway consists of the level of education which distributors receive about the topic of generalised, non-Amway specific entrepreneurship.

Doug Wead, who was a Special Assistant to former U.S. President George H. W. Bush, is a successful IBO who is a regular speaker at group rallies.

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.

Supporters

Robert Kiyosaki, author of the best-selling (but controversial) business books Rich Dad, Poor Dad and Cashflow Quadrant, endorses organizations that, according to him, promote financial literacy. A few of those organizations utilize Amway as a vehicle to develop a business.

In the 1979 In re. Amway Corp. (93 F.T.C. 618) ruling [6], the Federal Trade Commission 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. [7]

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 that country.

Other violations

In 2005, Amway/Quixtar orchestrated an attempt to drown out sites reporting deceptive practices and negative opinions. The "Web Initiative" was flagged as Google bombing, a violation of Google's Quality Guidelines.

Amway detractors accuse the company of spreading right-wing beliefs among its distributors:

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 faith

Resources

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