Amway Forever E-Book

Kathryn A. Jones

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 360

Veröffentlichungsjahr: 2011

Beschreibung

A fascinating look at five decades of Amway's innovation Amway started in 1959 as a way for people to earn extra moneyselling soap and cosmetics. Today, it has recaptured the public'sattention largely because of an extensive print and broadcastcampaign featuring the Quixtar name-with ads saying "you know us asAmway." Amway Forever chronicles the amazing inside story of thisglobal business phenomenon. Page by page, it explores the historyof Amway and its remarkable resurgence around the world. From howthe company began and its growing pains in the 70's and 80's to itsrecent online revival, this book explores how Amway has survivedand thrived over the past fifty years. * Delves into how innovation has led to Amway's growth into aninternational powerhouse * Reveals Amway's pioneering marketing tactics and salesstrategies * Offers an historic perspective, as well as a contemporary look,at how the company has evolved Engaging and informative, Amway Forever is a must-readfor anyone interested in this company's unique business model andbuzzworthy emergence into a global success.

Leseprobe

Contents

Acknowledgments

Introduction: Selling a Dream

Chapter 1: Capitalism and Controversy

Selling Directly to Buyers

Exporting a Sales Model

A Fuller Picture

Multiple Transformations

Influences on Public Perception

Chapter 2: An Adventurous Partnership

Jay Van Andel

Richard Marvin DeVos

The Pact: Someday, A Business Together

Chapter 3: Taking Flight and Sailing Away

First Attempts

Learning from Failure

Changing Direction

Selling Nutrilite

Chapter 4: Sell Something Everybody Needs

Learning the Ropes

Love and Marriage

The Debate Begins over Structure

Another Change in Direction

The Grand Slam Hit

Chapter 5: Unveiling “The Plan”

Humble Beginnings

The Plan

Opportunity Meeting

On the Road

Soap and Hope

Chapter 6: Toppling the Pyramid

The Method Catches On

Expansion

Pyramid Structures under Scrutiny

The FTC’s Definition of a Pyramid Scheme

The Decision

Moving Forward

Chapter 7: Retooling the Machine

Turning Point in Wisconsin

Avoiding Division and Friction in Canada

Reversing the Damage

New Rules of Conduct

Retooling More than the Business

Chapter 8: Diamonds, Rubies, Emeralds, and Pearls

The Life of a Top Distributor

The Other Side

The Price of Success

Chapter 9: Clash of the Soap Titans

In Direct Competition

If at First P&G Does Not Succeed . . .

Enough Is Enough

Chapter 10: Friends in High Places

Getting Involved

Giving to the GOP

Rich Passes the Baton

Jay Passes the Baton

Amway’s Influence

Chapter 11: West Meets East

Yen and Yang

Countering Critics in Korea

Good Morning, Vietnam

Moving into Malaysia

Entrepreneurs in India

Yearning for Earnings in Eastern Europe

To Russia with Love . . . and Money

Chapter 12: The Biggest Market Ever

Enter Eva Cheng

Paving the Way for Direct Sellers

Growth of an Industry

Chapter 13: New Heart, New Identity

Learning by Inspiration

Renewing the Business

Renewing the Brand

Chapter 14: Amway Redux

United Kingdom’s BERR Case

A Shot of Innovation

Foray into State Politics

A Second Rebranding

Winning the Hearts and Minds of Customers and IBOs

More Litigation

Chapter 15: The Way Ahead

Building into the Future

Regulations on the Horizon?

Notes

Selected Bibliography

About the Author

Index

Copyright © 2011 by Kathryn A. Jones. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

Published simultaneously in Canada.

No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, [phone], fax [phone], or on the Web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, [phone], fax [phone], or online at http://www.wiley.com/go/permissions.

Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.

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Library of Congress Cataloging-in-Publication Data:

Jones, Kathryn A., 1956-

Amway forever: the amazing story of a global business phenomenon / Kathryn A. Jones.

p. cm.

Includes bibliographical references and index.

ISBN 978-0-470-48821-8 (hardback); ISBN 978-1-118-107751 (ebk); ISBN 978-1-118-107768 (ebk); ISBN 978-1-118-107775 (ebk)

1. Amway Corporation. 2. Direct selling—United States. I. Title.

HF5439.H82J66 2011

381’.130973—dc22

2011014330

For my parents, Samuel and Wanda Jones

Acknowledgments

This book would not exist without the vision of Debra Englander, executive editor at John Wiley & Sons, Inc., who proposed the idea of telling the story of Amway’s rise to a global powerhouse. Her commitment and confidence in the book spurred me forward.

I also want to thank my agent, Grace Freedson, who has worked tirelessly on my behalf and has been a writer’s dream.

Jennifer MacDonald, Wiley’s development editor, has been efficient, cordial, and very detail oriented, which every writer hopes for in an editor.

Thanks also to Stephen Duthie in Amway’s communications department. To all the former and current Amway distributors who spoke with me on and off the record, thank you for your time and insights.

Introduction

Selling a Dream

Amway Corporation marked its 50th anniversary in May 2009 with a glitzy celebration at the MGM Grand on the Las Vegas Strip. Spotlights swept across the crowd of well-dressed people who had come from all over the world for the event. A movie theater–sized screen splashed the Amway logo against a cobalt blue background. Cameras flashed and music pulsated. The upbeat mood and excitement inside the auditorium felt similar to the energetic vibe at a national political convention or a religious rally.

One charismatic speaker after another extolled the virtues of hard work and the freedom that comes from owning one’s own business. It was both a patriotic message and one infused with an almost sacred belief that the opportunity for wealth and success is a universal right. And Vegas turned out to be the ideal setting for the company that has inspired millions of people to bet on the hope that someday they, too, can hit the entrepreneurial jackpot and become as rich and successful as the Amway business owners who have received Rolex watches and bejeweled pins for building immense networks of salespeople around the globe.

The evangelists of enterprise preached to the faithful that day because most of the thousands of people gathered were “Diamond” Amway distributors, meaning its top producers. Among the speakers were the company’s co–chief executive officers, Steve Van Andel and Doug DeVos. They had followed their fathers, Amway founders Jay Van Andel and Rich DeVos, in an unusual dual-family succession into top management, and they uncannily reflected their fathers’ characteristics. Like his father, Jay, Steve is lanky and fair-haired and speaks in a low-key but self-assured manner. Doug DeVos, like his father, Rich, sports a boyish smile, diminishing hairline, and forceful, gregarious speaking style. Their words pumped up the crowd and fed the sense of euphoria that typically hovers over Amway gatherings. “Owning your own business is a chance to change your life . . . and if you can change your life, you can change the world,” Steve said, arms stretching outward. “Amway in its essence came from one thought and one desire—to give people an opportunity and to improve their lives through a business of their own. When you introduce the concept of freedom and free enterprise, people change. They put aside their differences and become a part of a group, one unified group of people, behind a cause, behind a dream, and pursuing that dream.”1

Doug also delivered a rousing message about personal freedom, emphasizing key words like a minister speaking to his flock: “We have an idea to keep us alive—all of us—of freedom . . . and free enterprise . . . and the power of having a business of your own,” he said, pacing back and forth across the stage and gesturing for emphasis like a politician. “Because the Amway idea is alive and well, and what happens to us from this day forward . . . well, it’s up to us, isn’t it? Right? And as we look forward, Steve and I know all of you . . . together . . . believe we are just getting started.”2 Then Rich DeVos, the billionaire who’s revered by Amway distributors as the company’s iconic patriarch, took the stage to look back on a half-century of business. In his 80s and balding, with age spots on his scalp, Rich got a second chance at life after a heart transplant in 1997. “Now is our time,” he said. “And when you’re in this business, you learn to work with where you are now. So now we’re going to move on and you’re all going to go home and think back, I hope, of the good time you had, but most of all of the people out there who don’t know yet about what they’re missing. And you’re going to be the missing link in bringing it to them and their life will change because of you, as many others have already.” DeVos, who’s known as a naturally gifted and persuasive speaker, not to mention a crackerjack salesman, paused to let the words sink in. He smiled and said he liked to think of himself simply as the “Amway guy.” “When I meet people, they say, ‘What do you do?’ and I say, ‘I’m the Amway guy. I’ve been in it a long time,’” Rich explained. “‘I believe in it. And I like it.’”3

Then Rich shocked the audience by saying that Amway’s cofounder and his old friend, Jay Van Andel, would like to “wrap it up.” What could Rich mean? Jay died from Parkinson’s disease in 2004. He and Rich, who became friends in high school, had shared a rare lifelong business partnership. They made an odd but effective couple—Jay, the nerdy, straight-A’s numbers cruncher, and Rich, the glib, fun-loving extrovert. The partners, though, over the years repeatedly said they were stronger together than they would have been on their own. The combination of Jay’s analytical mind and Rich’s persuasive speaking and selling skills proved ideal for a business like Amway.

There was a flicker onstage and suddenly Jay appeared, reincarnated through technology in a life-sized hologram. A company called Digital Illusions LLC stitched together seven clips from archival footage to create a two-minute speech in high definition.4 It was a “wow” moment for many of those in the audience as the deceased Van Andel’s image materialized, much like Obi-Wan Kenobi’s spirit appeared in the Star Wars sequel to dispense advice to young Luke Skywalker. “The volume of that applause not only is gratifying to me, but it lets me hear how much we’ve grown since Rich and I held our first Amway convention in 1961,” Van Andel’s lifelike visage said. “At that time I think the entire audience could have easily fitted on this stage.” These days, it takes an auditorium or even a stadium to hold an Amway gathering. “When Rich and I started Amway in our basements of our homes, we had a dream,” Jay’s image went on to say. “We dreamed that everyone should have the opportunity to be in business for themselves. Today, I look at this tremendous group, this great crowd, and see all of you as fulfillment of that dream.” The audience gave Jay Van Andel’s eerily realistic hologram a standing ovation. Then it flickered off. Rich and Doug DeVos and Steve Van Andel stood together onstage, arms raised like rock stars, to thunderous applause. A laser light show pulsed, and a shower of special effects sparks rained down upon them.5

In Vegas, Amway Diamond distributors and executives also were treated to private performances by Elton John and the Blue Man Group. They roamed the slick “Experience Amway” exposition hall, complete with product experts and samples. They talked about how “the business” had transformed lives. Their personal stories sounded like testimonials at a revival. But the spirit that filled them was the spirit of free enterprise—and, of course, the prospect of making even more money—as they schmoozed in the city where millions of people every year gamble on dreams.

The anniversary gala underscored that five decades after the company’s founding, few corporate names inspire such passionate reactions as “Amway.” The direct-selling pioneer grew from humble beginnings peddling soap and vitamins into the world’s largest and arguably most influential multilevel marketing, or MLM, company with a line of more than 450 products, from cosmetics and skin care lines to water purifiers to cookware. Although Amway started out selling soap, detergent, and other household products, beauty and health care products now account for most of its business. Along the way to the top, Amway sparked its share of copycats and the company spawned other MLMs, but it still reigns as the supreme example of a direct-sales machine adept at packaging and selling not only products, but also dreams, to individuals who believe they are on a divine mission to chart their own destinies. The words of founder Jay Van Andel still resonate in the videos he left to inspire others: “We’ve learned that Amway principles translate into many languages and transcend many cultures,” he said. “Being rewarded in proportion to how much you do is a universal language for people around the world. Our goal must be to make the lonely and the frustrated and the scared have that sense of hope and security that we can bring them. That’s why you’re here. That’s what we’re all about. We have to believe in ourselves. You can’t predict the future, but you can follow your dreams.”6

Following their dreams had led Amway’s founders to enormous riches as well as controversy. From its inception, Amway was caught in the crosshairs of government regulation and legal challenges. Some of the company’s own former distributors have accused Amway of running an illegal pyramid scheme. Yet, despite the allegations, the giant direct seller has continued to survive, operate, prosper, and spread its philosophy of free enterprise—and universal dreams of prosperity—around the globe.

When I first got involved in this book, my publisher expected that the company would cooperate and provide access to company executives. My knowledge of Amway before writing this book was minimal. I’ve never bought anything from Amway or knew much about the company except that it sold soap. Despite more than a year of back-and-forth communications between Amway and the publisher, however, efforts failed to convince the company to allow unfettered access to its managers, employees, and archives.

Objectivity and distance are important because, until now, most books about Amway have been authored by its founders, corporate or personal friends, and current or former independent business owners, or IBOs. They tend to fall into two categories. Some were written by mega-distributors such as Dexter Yager, who says he loves Amway and the IBOs in his group and wants to share with others how to get started with their own Amway businesses. On the other end of the spectrum, some Amway IBOs or people involved with other MLM businesses had a negative experience, lost their money, and want to warn others away from MLM schemes. Both perspectives convey a valuable side of the Amway narrative, but they don’t tell the complete story. Emotion clouds objectivity, and people get very emotional about money, especially when they make—or lose—a great deal of it.

My research took me across the United States, to Europe, and to Asia to visit some of the markets where Amway has established a presence and shown a remarkable ability to adapt to other cultures and consumer attitudes. Over the past year I’ve interviewed dozens of current and former Amway distributors, attorneys, consultants, authors, government officials, and others, and pored over hundreds of pages of legal documents. I’ve listened to motivational tapes and watched video footage of Amway seminars and rallies all over the world. I wanted to tell the Amway story as much as possible through people, but I did run into limitations. Because I did not have the company’s blessing, many Amway distributors, who are loyal and protective to the max, refused to talk to me. Some did so only if their names were not used. “IBOs are not allowed to do mass market advertising, and appearing in a book might be considered by some as just that,” an IBO in Europe told me. As a result of the media-shy company’s refusal to grant access to its leaders and employees, I have had to rely on secondary sources more than I would like to with the caveat that I took into account each person’s subjectivity, experiences, and motives.

That said, what follows is neither an exposé nor an authorized corporate biography, but an unbiased, journalistic look at the rise, stumble, and rise again of a dynamic and controversial company that has changed the world of direct selling forever. Whether it’s changed that world for better or worse is up to the reader to decide.

Chapter 1

Capitalism and Controversy

Amway’s gateway to the world begins in an unlikely place—a small Midwestern township called Ada, Michigan, 12 miles east of Grand Rapids. Founded as a French-Canadian trading post and home to a historic covered bridge over the Thornapple River, Ada is best known these days for the sprawling world headquarters of Alticor Inc., parent company of Amway. The complex of office buildings and manufacturing plants stretches for more than a mile. Its busy visitors center has become a local tourist attraction with its giant see-through metal globe in front and 50 flagpoles flying the flags of affiliates’ home countries. In the spring, the garden around the globe is planted in tulips, a nod to Jay and Rich’s Dutch heritage. The business partners are immortalized in life-size bronze statues that stand in the headquarters lobby.

Selling Directly to Buyers

The company that Jay and Rich created casts a goliath’s shadow over the direct-selling industry, but Amway wasn’t the first company to sell directly to buyers. Others, such as Fuller Brush, Stanley Home Products, Avon Products, and Tupperware, preceded it. But Amway took the multilevel marketing (MLM) concept and ran with it around the world. It not only laid the foundation for other MLMs, but also helped spark some of the business trends taken for granted today—working from home, shopping from home, globalization, and shifting the activities of selling and distribution away from brick-and-mortar structures and traditional systems. The Direct Selling Association (DSA), the industry’s major trade organization, says that a record 16.1 million Americans worked as direct sales representatives as of 2009. That was up by 1 million people from 2008’s sales force. People are “looking to earn extra money on their own terms and at their own pace,” says Neil Offen, the DSA’s president and chief executive officer.1

Business icon Donald Trump, British airline tycoon Richard Branson, and billionaire Warren Buffett have limited involvement in MLMs and direct selling as well. The Trump Network in 2009 began selling nutritional supplements, healthy snack foods, and skin care products. The marketing materials make the network sound a lot like, well, Amway:

It’s an opportunity. An opportunity for you. And an opportunity to help rebuild a country founded on that very premise. It’s a chance to turn a land overwhelmed by stress and ill health to one of strong bodies, bright minds, and free spirits. A chance for you to promote wellness and entrepreneurialism. Even more, a better way of life. This is far more than a financial opportunity. This is a chance to live and promote something you can believe in.2

Branson’s Virgin Group in 2009 sold its Virgin Vie at Home skin care and makeup division to its management team. And in 2003 Buffet’s company, Berkshire Hathaway, purchased The Pampered Chef, a direct seller of kitchen gadgets and cookware.

Amway, though, stands out from the pack of direct sellers for its distinctive culture and ideology. What sets Amway apart isn’t that it sells products in a nontraditional—and often controversial—way. It’s that it sells its sellers, who are called independent business owners (IBOs), on the dream that the company’s founders and executives spoke of in Las Vegas. And not just any dream, but the “American dream”—the idea that if you are motivated and work hard enough, you deserve success and it will come your way. Call it bootstrap capitalism with a blend of “soap and hope,” a marriage of manufacturing and motivation. “Rich DeVos and Jay Van Andel didn’t set out to sell products,” says Pat Williams, senior vice president of the Orlando Magic national basketball team, which Rich owns. “They sell confidence. They fire up people to believe in themselves, and those people sell the product.”3 The founders espoused the quintessentially American ideal of hard work, perseverance, taking risks, and overcoming obstacles at a time in the late 1950s when the fear of Communism and socialism was spreading. Indeed, the very name Amway is a compressed version of “American way.” It’s direct selling wrapped up in a flag, along with spiritualism and family. Former distributor Stephen Butterfield, who is now deceased, put it this way:

Here is obviously a new power in American life: a corporation with immense popular appeal, a grass-roots following among all classes and trades, an explosion of political and religious energy such as has not been released since the growth of industrial unions in the 1930s. What makes this power all the more remarkable is that corporations have never been very dear to the hearts and minds of the American people.4

One of the reasons for Amway’s power is that it embraced social networks long before anyone heard of the Internet, Facebook, or Twitter. “We probably were one of the original social networks, before there was technology associated with it,” Steve Van Andel says.5 Its primary social network was and still is the one-on-one connection, at first person to person and later tied to the Internet.

Exporting a Sales Model

The Amway way isn’t just the American way anymore, however. It’s spreading into a global phenomenon under its rallying cry of economic “freedom.” As Kaoru Nakajima, one of Amway’s major distributors in Japan, puts it: “I was a salaried man working in a company for eight years. Now I am my own boss. Now I am free.”6 Peter Muller-Meerkatz, who with his wife, Eva, amassed one of Amway’s largest distributor networks in Europe, adds: “We believe in capitalism. We are convinced that democracy and free enterprise are the world’s only economic hope. Why wouldn’t we want to share it?”7

Amway certainly did share it, exporting its direct sales model—“the Plan,” as Amway IBOs call it—to much of the world. The company operates in 80 countries and territories and the breakdown of its domestic and international business has flipped. At the end of the 1980s and the beginning of the 1990s, 70 percent of Amway’s business was in the United States. By 2009, however, 90 percent of its sales came from outside the United States.8 Two-thirds of its business is in Asia.9 Its single largest market is China, which accounts for more than a third of its more than $9 billion in annual sales.10 The company’s success there is due in part to tapping a vast market of more than a billion people who are breaking away from old feudal systems and are part of a culture that encourages family members to support a relative’s business venture. Amway says it’s committed to help budding entrepreneurs in the world’s most populous country. “We want to be successful in China and we are here in China to stay for the long term,” says Eva Cheng, executive vice president responsible for Amway markets in Greater China and Southeast Asia. “We are not just here for a few years to make some quick bucks and then go away.”11 Indeed, the company has been adept at gaining access to markets—including China’s—where governments at first resisted its entry. Chinese law limits direct selling, so Amway had to break with its traditional way of doing business and set up government-mandated storefronts. They proved so successful that Amway may open additional retail outlets in other countries. (It still has no plans to sells its products in the United States through stores, however.) Another Eastern country, India, represents a huge market as well. “Our business is based on people and how many people there are,” Steve Van Andel explained. “Well, there’s a lot of people in India and there’s a lot of people in China. . . . We’re available to most of the world’s population, so now we’ve got to take a look at the markets we’re in and to try to figure out how to get better market share.”12 There are still parts of the world without Amway, but that could change. “We’re not everywhere yet, you know—the Middle East, Northern Africa, sub-Saharan Africa,” Doug says. “It’s just a matter of time, I think. Those things are going to happen.”13

Alticor, Amway’s parent company, overcame weak economic trends in recent years to report record 2010 sales of $9.2 billion thanks to strong growth in China, India, Korea, North America, and Latin America.14 An estimated 12,000 people a day sign up to become Amway IBOs around the world. The company employs more than 14,000 worldwide—4,500 of them in the United States—and 300 scientists, who hold about 700 patents. More than 3 million IBOs are active in 80 countries and territories. Moreover, Amway operates factories in Michigan, California, China, and Vietnam. Access Business Group, a wholly owned Alticor subsidiary, oversees packaging design, makes bottles and labels, and contracts to manufacture products under a third-party—and confidential—arrangement for some very large consumer brands. Beyond manufacturing, Alticor owns several downtown Grand Rapids hotels through the Amway Hotel Corporation: the luxury Amway Grand Plaza Hotel, the JW Marriott Hotel, and Courtyard by Marriott. The company’s Enterprise II yacht is a floating conference center for those in the Diamond Club, and a resort on Peter Island in the Virgin Islands awards sales leaders with luxury, vacation-style meetings.

Once known mainly as a direct seller of soap and detergent, health and beauty now account for most of Amway’s sales. Amway’s Nutrilite product ranks as the world’s best-selling brand of dietary supplement,15 and Artistry, Amway’s facial skin care and cosmetics brand, ranks as one of the top five worldwide beauty brands with $1 billion in global sales.16 Major markets are China, Japan, the United States, South Korea, Russia, Thailand, Taiwan, India, Malaysia, and Ukraine. Private and very closely held by the DeVos and Van Andel families, Amway doesn’t disclose profit figures. But, in terms of sales, if Amway were a public company, it would rank in the Fortune 500—No. 253, to be exact, in 2010—elevating it on par between Starbucks (No. 241 with $9.77 billion in revenues) and eBay (No. 267, with $8.7 billion in revenues).17 Among private companies, in 2010 Amway was ranked second on Forbes’s annual list.18 Along the way, Amway’s founding families have grown very wealthy. As of early 2010, Rich DeVos had an estimated net worth of $4.5 billion, ranking him at No. 176 on Forbes’s list of the world’s billionaires.19 Money has brought Amway and its leaders political clout, influence, and access to those in power. Amway’s founders have been major contributors to the Republican Party and conservative causes. Rich’s son, Dick, who was co-CEO with Steve Van Andel from 1993 to 2005, resigned from the company to pursue his own business and political interests, and in 2006 made an unsuccessful run for Michigan governor in the state’s most expensive gubernatorial campaign in its history. The founding families cultivated close relationships with former presidents Ronald Reagan, Gerald Ford, and the Bushes, especially George H. W. Bush. Former Amway distributors—including former House Whip Tom DeLay, who in January 2010 was sentenced to three years in prison for money laundering—have been elected to Congress. In addition to political contributions, the DeVos and Van Andel families and Amway also have used their wealth for philanthropic projects, from building a children’s hospital in their hometown to paying for cleft palate surgery in Thailand to helping educate children in rural provinces of China.

A Fuller Picture

That’s all quite a transformation from the once little soap company born in a Grand Rapids suburb, leading Richard L. Lesher, former president of the U.S. Chamber of Commerce, to call Amway “one of America’s most spectacular business success stories.”20 Conceived of in the shell of an abandoned gas station with $500 in cash, Amway’s plan sounded simple enough: recruit people to sell products such as soap and cosmetics and sell others on the Amway system. Then they, in turn, would be recruited to sell the products, and so on and so on. To become an Amway IBO, one had to be sponsored into Amway by another IBO, who then received a cut of the new level of the business. And if others could be recruited, then the next distributor got a cut of their business. And so the MLM pyramid-shaped feeding chain of commissions built into multiple levels as distributors “upline” could make money on the layers of salespeople below them, or “downline.” Other names frequently used to describe the business model are “network marketing” and “direct marketing.” Whatever the terminology, Amway has been remarkably successful with its approach of building a network of salespeople through building and taking advantage of relationships. In his book Believe!, Rich DeVos noted that person-to-person selling has gotten a “bad rap” but is a time-honored profession:

We happen to think that personal service beats making the customer stand in line. . . . I respect the man who is in a business where the customers need not beat their way through traffic, park way out in a crowded parking lot and run through the rain or snow to get their goods.21

While Rich paints a folksy picture of direct selling, others view the company and its business model in a much darker light. Litigators, competitors, and disgruntled former distributors who morphed into Amway whistle-blowers have accused the company of operating a pyramid scheme that sells people on unrealistic dreams that, in reality, are built on a system where those at the top earn the pharaoh’s wealth while those at the bottom struggle to get ahead and often fail.

Numerous Internet sites are devoted to exposing Amway as a “scam.” Critical bloggers repeatedly refer to the company as “Scamway” (a Google search on “scamway and Amway” turned up 13,000 results). There’s even an “Amway Wiki” (www.amwaywiki.com) site, a collaborative repository of information, both positive and negative, about Amway; its parent company, Alticor; and Quixtar, the name Amway adopted for its North America operations in 2000 before deciding to go back to the Amway name. Early in 2010, when Robert Pagliarini, author of Your Other 8 Hours, posted a positive blog, “Why You Should Join Amway,” on CBS MoneyWatch.com, the discussion thread that followed set a record for the blog with 582 comments by people either praising or condemning the MLM. CBS Interactive stepped in, though, when the comments turned into a classic Internet flame war. Stephen Howard-Sarin, vice president of business and finance brands for CBS Interactive, posted the last response, No. 583, in the discussion thread: “Thank you, now stop.”22

Despite the razzle-dazzle recruiting rallies and glamorous get-togethers that spotlight Amway’s top success stories, few people make dramatic profits working as Amway distributors. Amway’s brochure, “A Business Opportunity for Entrepreneurs,” boasts that since 1959 it has paid out more than $33 billion in bonuses and incentives worldwide and that in 2010 more than 309,000 North American IBOs received a bonus check. But check the fine print. In the footnotes to the accompanying table of annual compensation, the company discloses that “approximately 0.18% of IBOs in North America achieved at least Gold Status” ($12,303 a year) and “approximately 0.26% of IBOs in North America achieved at least Founders Platinum status” ($40,125 a year). Moreover, the average monthly gross income for “active” IBOs was $115 (approximately 66 percent of all IBOs of record were found to be “active”).23

Jay Van Andel often remarked that anyone who thought he or she would get rich quick with Amway was mistaken. “If you are looking for a magic bullet—a surefire gimmick that will make you a millionaire overnight—you’re looking in the wrong place,” the cofounder wrote in his memoir, An Enterprising Life.24 Rich said pretty much the same thing. “I have never tried to make it sound easy,” he wrote in his memoir Hope from My Heart. “It isn’t easy. It wasn’t easy for us. When people came to us with the expectation of quick prosperity, I told them to look elsewhere.”25 But try telling that to the throngs of recruits who pack auditoriums and stadiums and watch a parade of wealthy Diamonds and Crown Ambassadors onstage. They are people like Butterfield, a former English professor-turned-Amway-distributor, whose 1985 book, Amway: The Cult of Free Enterprise, was the first of a string of exposés. “I liked the idea of making money, lots of it, without having to show up for work . . .” Butterfield said. “I wanted to be plucking the fruit from the money tree, not sitting on the outside of the circle chewing pits while others feasted.”26

Multiple Transformations

To its supporters and believers, Amway remains a symbol of free enterprise—an “empire of freedom,” as one best-selling book put it 27—and the resilient spirit of entrepreneurship under attack by big government. As one top distributor, Ron Puryear, says about walking away from his previous job and following his dream: “I chose freedom.”28 At the heart of Amway’s success is helping people to feel good about themselves, he adds:

We are a stand-on-your-feet-and-cheer-each-other’s-victories people. And our cheering isn’t phony or contrived. We know how hard each of us works. We know what it takes to stay motivated, to go out night after night when it’s easier to stay home and watch television. We know what those first hard years cost in time, energy, and commitment.29

Leonard Kim, who is a marathon runner and with his wife, Kim, formed a leading global sales organization in South Korea, says that some people mistakenly think the Amway business will “give you a fortune right away. However, in reality, the business is a like a long marathon.”30 The key to productivity and making money, Jay and Rich believed, was to motivate people like Puryear and Kim, who didn’t want to work for someone else in a big company, and to show them the way to self-sufficiency. Amway set up a highly decentralized organization and eschewed top-level bureaucracy to encourage people down the chain of command to work harder because they were working for themselves. “The A. L. Williams Company (a whole life insurer) and other members of the direct selling industry, such as Amway Corporation, Tupperware, and Mary Kay Cosmetics, have stopped trying to fine-tune bureaucracy in the search for productivity,” University of California at Davis management and sociology professor Nicole Woolsey Biggart says in the first full-scale study of the industry, Charismatic Capitalism: Direct Selling Organizations in America. “Instead, they have adopted a form of organization that dates from this nation’s colonial past and have shaped it to fit the circumstances and aspirations of contemporary Americans.”31 Avon Products Inc., founded in 1886, remains the world’s leading direct seller, with $10.4 billion in revenues and more than 6 million distributors.32 (Amway made an unsuccessful bid to acquire Avon in 1989 for $2 billion.) Unlike Amway, it relies on single-level and multilevel compensation plans.33 Ranked third behind Avon and Alticor is Germany’s Vorwerk & Co. KG, which includes JAFRA Cosmetics. It’s followed by Mary Kay Inc., Herbalife Ltd., Primerica Financial Services Inc., Tupperware Brands Corp., Natura Cosmeticos SA of Brazil, and Oriflame Kosmetiek B.V. of Sweden. Other top 100 direct-sellers are in Japan, Peru, and Mexico.34 The most common sales categories overlap with Amway’s: beauty products, nutritional aids, cookware, and replenishable household products.35

While worker ants in Corporate America may have lost faith in working for someone else, belief in Amway’s system at one time was shaken, too. Growth stalled in the 1980s in America as some “black hat” distributors cast the company in a bad light with their cultlike recruitment tactics and exaggerated promises of wealth. Those practices left many Amway distributors in the hole while top-of-the-food-chain distributors grew very rich. Amway’s critics say the real money has been made by those who built their own pyramid-shaped sales organizations based on pushing non-Amway tools or “peripherals,” including motivational books, CDs, suits, jewels, and tickets to motivational rallies. According to critics, by letting some mega-distributors and so-called “Amway motivational organizations” grow unchecked for years, Amway allowed renegades to tarnish the company’s image. As part of its transformation, top Amway executives said they are “reasserting” their roles to oversee distributor behavior and establish “boundaries” for conduct. “The biggest issue is when people don’t feel they’re being told the truth,” Steve Van Andel says. “Somebody’s misleading them, or at least not telling them everything there is. And that’s the cause of a lot of issues.”36

People who tend to get lumped by the media into the category of Amway “critics” haven’t stopped raising questions, even though Amway has taken some of them to court. Ironically, for a company that shies away from media coverage except when it’s to its advantage, Amway has been embroiled in controversy and lawsuits for decades. It’s been sued by its own distributors, competitors, foreign governments, and the U.S. government. That’s true of many large international businesses, of course, but few companies have been accused and investigated of operating a pyramid scheme—an accusation it has fought in the courts and so far defeated time and time again. In the best-known and most significant challenge, the U.S. Federal Trade Commission (FTC) in 1975 charged that the company was, indeed, running an illegal pyramid scheme. But because the core of Amway’s business is based on the sale of products, not just direct payments to join, and because of other procedures Amway had in place, the FTC in 1979 ruled the operation to be a legal enterprise.37 The order not only gave Amway the green light to continue business, it also had the effect of legitimizing the MLM model and creating a whole new business genre based on the “Amway rules” laid down by the FTC (this is discussed in detail in Chapter 6, “Toppling the Pyramid”). Other businesses adopted those rules, and MLMs proliferated in the United States and around the globe.

Despite the federal government’s pronouncement that Amway’s sales model was legal, lawsuits against the company continue under state statutes related to pyramid schemes. Rival Procter & Gamble also accused Amway of running an illegal pyramid operation, contending that it primarily sells products to its distributors rather than making retail sales to consumers. Some of Amway’s former IBOs have made similar charges in lawsuits. Amway’s business model also has come under scrutiny in Canada, the United Kingdom, India, and other countries for a variety of alleged practices, from price-fixing to avoiding paying customs duties to playing hardball with vocal critics. And in 2007, former distributors for Quixtar—the name Amway was using for its North American operations at the time—filed a class-action lawsuit also alleging the company and some of its top-level distributors operated a pyramid scheme. In November 2010 a settlement was announced under which Amway agreed to pay $34 million in cash and $22 million in products to the distributors. The settlement also included amending the complaint to remove the term pyramid scheme from the case.38

Influences on Public Perception

Still, public perception can be slow to fade. When I told people I was working on a book about Amway, their typical responses were, “Isn’t that a pyramid scheme?” and “Don’t they sell soap?” Amway management grew more press-shy over the years, not feeling it got a fair shake in the media and dodging persistent accusations that it ran an illegal pyramid scheme despite the FTC ruling. “There was a very adversarial feeling between ourselves and the media early on, during the first publicity crises,” Jay wrote in his memoir. “Rich and I were incensed at first, then frustrated by the power newspapers and television had over the American public. The newspapers and television had the ability to define us for the public—to present a false image of what we were all about at Amway.”39 Jay went on to say that mainstream media had a “bias” against Amway because it and other network marketing firms rarely advertised in those outlets.

In 2007 the company began a two-year global transformation and rebranding—or “retro-branding,” as Steve and Doug call it—to return to the Amway name.40 Its parent company, Alticor, created a single, global brand—Amway Global—and invested more than $200 million to boost compensation to IBOs and an advertising campaign to bolster its reputation. The company now is called just “Amway,” but it’s a new Amway, company executives insist. “We are reintroducing a $1 billion start-up company,” says Steve Lieberman, vice president and managing director of Amway’s U.S. and Canadian businesses. “The company is switching from being distributor focused, where distributors are the only ones carrying our messaging to the public. We’re becoming distributor and consumer focused. So we’re taking our message directly to consumers.”41 It’s doing so by airing “The Power of Positive” national television commercials to “reintroduce” shoppers and potential distributors to the company.

Amway also has been working its way into popular culture in a variety of ways. For example, Amway Global sponsored the Tina Turner Live 2008 North American Tour as part of a stepped-up marketing strategy to raise awareness of Amway business opportunities and products in North America. It also sponsored the YMCA National Wellness Campaign, two professional soccer teams (the San Jose Earthquakes and the LA Sol), the U.S. Rock and Roll Marathon, and Skate Canada. The home of the NBA’s Orlando Magic has a new name, Amway Arena. Amway also has tried to jack up its credibility and once-low profile with celebrity endorsements. In spring 2010 Amway Global launched the first of a line of healthy snack products with musician and TV and radio personality John Tesh. Tesh’s wife, actress Connie Sellecca, athlete and model Gabby Reese, and world soccer star Marta also signed similar endorsement contracts. Amway regularly has been a sponsor at the Olympics and was among the companies sponsoring the U.S. Pavilion at the 2010 World Expo in Shanghai, which drew 73 million visitors, a record for an international expo.42 The company lined up Olympic champions such as Chinese hurdler Liu Xiang to be a spokesperson for its line of health supplements, Nutrilite. Amway also has partnered with one of the most enduring symbols of American wholesomeness, the Miss America organization, to sponsor scholarships. Teresa Scanlan, Miss America 2011, is acting as an ambassador for Amway’s Artistry cosmetics line. There’s even an Amway Global Visa credit card now with the blue and red logo. “We’re beginning to register again with the general public,” Lieberman says.43 Consumers, though, still can’t go online and buy directly from Amway. They still must buy through an IBO’s online site.