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 Amway is a direct selling company and manufacturer that uses multi-level marketing to sell a variety of products, primarily in the health & beauty industry.[3][4][5] Amway was founded in 1959 by Jay Van Andel and Richard DeVos. Based in Ada, Michigan, the company and family of companies under Alticor reported sales growth of 15%, reaching US$8.2 billion for the year ending December 31, 2008.[1] Its product lines include home care products, personal care products, jewelry, electronics, Nutrilite dietary supplements, water purifiers, air purifiers, insurance and cosmetics. In 2004, Health & Beauty products accounted for nearly 60% of worldwide sales.[6] Amway conducts business through a number of affiliated companies in more than ninety countries and territories around the world.[7] It is ranked by Forbes as one of the largest private companies in the United States[8] and by Deloitte as one of the largest retailers in the world.[9].
[edit] History[edit] FoundingJay Van Andel and Richard DeVos, friends since school days, had been business partners in various endeavors including a hamburger stand, air charter service, and a sailing business. In 1949 they were introduced by Neil Maaskant (Van Andel's second cousin) to the Nutrilite Products Corporation. Nutrilite was a California-based direct sales company founded by Dr. Carl Rhenborg, developer of the first multivitamin marketed in the United States. In August 1949, after a night-long talk, DeVos and Van Andel signed up to become distributors for Nutrilite food supplements.[10][page needed] They sold their first box the next day for $19.50, but lost interest for the next two weeks. Shortly thereafter, at the urging of Maaskant, who had become their sponsor, they traveled to Chicago to attend a Nutrilite seminar. The meeting was at a downtown hotel, with over a hundred people in attendance. After seeing promotional filmstrips and listening to talks by company representatives and successful distributors, they decided to pursue the Nutrilite business opportunity with enthusiasm. They sold their second box of supplements on their return trip to Michigan, and rapidly proceeded to develop their new business further.[10][page needed] In 1949, DeVos and Van Andel had formed Ja-Ri Corporation (abbreviated from their respective first names) for importing wooden goods from South American countries; after their trip to the Nutrilite seminar, they dropped[clarification needed] this business and Ja-Ri became their Nutrilite distributorship.[11] In addition to profits on each product sold, Nutrilite also offered commission on the sales of products by new distributors introduced to the company by existing distributors—a system today known as multi-level marketing or network marketing. By 1958, DeVos and Van Andel had built an organization of over 5,000 distributors. However, following concerns about the stability of Nutrilite, in April 1959 they and some of their top distributors formed The American Way Association to represent the distributors and look for additional products to market.[12] Their first product was called Frisk, a concentrated organic cleaner developed by a scientist in Ohio. DeVos and Van Andel bought the rights to manufacture and distribute Frisk, and later changed the name to LOC (Liquid Organic Concentrate).[13] They subsequently formed Amway Sales Corporation to procure and inventory products and to handle the sales and marketing plan, and Amway Services Corporation to handle insurance and other benefits for distributors (Amway being an abbreviation of American Way)[14]. In 1960 they purchased a 50% share in Atco Manufacturing Company in Detroit, the original manufacturers of LOC, and changed its name to Amway Manufacturing Corporation.[15] In 1964 the Amway Sales Corporation, Amway Services Corporation, and Amway Manufacturing Corporation merged to form a single entity, Amway Corporation[16] Amway bought control of Nutrilite in 1972 and full ownership in 1994.[17] [edit] International expansionAmway expanded overseas to Australia in 1971, to Europe in 1973, to parts of Asia in 1974, to Japan in 1979, to Latin America in 1985, to China in 1995, to Africa in 1997, to India and Scandinavia in 1998, to Russia in 2005, and to Vietnam in 2008. [edit] QuixtarIn 1999 the founders of the Amway corporation established a new holding company, named Alticor, and launched three new companies, 1) a sister (and separate) Internet-focused company named Quixtar, 2) Access Business Group, and 3) Pyxis Innovations. Pyxis, later replaced by Fulton Innovation, pursued research and development and Access Business Group handled manufacturing and logistics, for Amway, Quixtar, and third party clients.[18] After virtually all Amway distributors in North America switched to Quixtar, Alticor elected to close Amway North America after 2001. The main difference was that all distributors, now called Independent Business Owners (IBO) could order directly from Amway on the internet, rather than from their upline "direct distributor", and have products shipped directly to their home. The Amway name continued being used in the rest of the world, and the home of the Orlando Magic was named the Amway Arena in 2005. The Orlando Magic is owned by Amway founder Richard DeVos.[19] In 2006, Quixtar published The Quixtar Independent Business Owner Compensation Plan, in which the company reported that the average monthly gross income for "Active" IBOs was $115.[20] In June 2007 it was announced that the Quixtar brand would be phased out over an 18 to 24 month period in favor of a unified Amway brand worldwide.[citation needed] [edit] Global MarketsIn 2008 two thirds of Amway's 58 markets reported sales increases, including strong growth in the China, Russia and India markets.[21] Amway India sales grew 40% to 1128 crore (US$230million).[22] [edit] Amway ChinaAmway grew quickly in China from its market launch in 1995. In 1998, after abuses of illegal pyramid schemes led to riots, the Chinese Government enacted a ban on all direct selling companies, including Amway.[23] After negotiations, some companies like Amway, Avon, and Mary Kay continued to operate through a network of retail stores promoted by an independent sales force.[24] China introduced new direct selling laws in December 2005, and in December 2006 Amway was one of the first companies to receive a license to resume direct sales. At the time they had a reported 180,000 sales representatives, 140 stores, and $2 billion in annual sales.[25] In 2007 Amway Greater China and South-east Asia Chief Executive Eva Cheng was ranked #88 by Forbes magazine in its list of the World's Most Powerful Women.[26] In 2008 Amway Greater China was Amway's largest market, reporting 28% growth and sales of ¥17 billion (US$2.5billion).[27] [edit] BrandsAmway's product line grew from LOC, with the laundry detergent SA8 added in 1960, and later the hair care product Satinique (1965) and Artistry(1968). Today Amway manufactures over 450 products, with manufacturing facilities in Ada, Michigan, China, and India, as well as Nutrilite organic farms in California, Washington State, Mexico, and Brazil. In addition Amway affiliates market products from hundreds of other manufacturers offering everything from books (eg Barnes & Noble, North America) to wine (World of Wine, Europe).[28] [edit] Household cleanersAmway is best known in North America for its original cleaning products, LOC, SA8 clothes washing products and Dish Drops dish cleaning products. In the January 2007 issue of Consumer Reports, SA8 with Bioquest was rated as the best performing laundry detergent, scoring 99 out of a possible 100.[29] Consumer Reports did however criticise SA8's pricing, which was disputed by Amway.[30] In 2008, Amway's cleaning products were named Favourite of Experts by an independent consumer survey in Ukraine.[31] [edit] Health & beautyThe majority of Amway's sales today come from the Health & Beauty sector and in North America the Amway Global/Quixtar website is ranked the #1 Health & Beauty website by Internet Retailer.[32] In South Korea Amway is ranked one of the top two companies in toiletries and cosmetics.[citation needed] Amway's health & beauty brands include Artistry, Time Defiance, Satinique, Tolsom, Body Series, Glister, Moiskin (South America),[33] Nutrilite, Nutriway (Scandinavia and Australia/New Zealand),eSpring, Atmosphere and iCook as well as XS Energy drinks. [edit] ArtistryMain article: Artistry (cosmetics) Amway's Artistry products include skin care, cosmetics, and anti-aging creams and serums. Euromonitor International, an independent researcher and publisher of market reports, business reference books and online information databases, ranks Artistry as one of the world's top 5 best selling brands in the prestige brand category, alongside Clinique, Estee Lauder, Lancome, and Shiseido.[34][35] Artistry is the only direct sales brand classifed in the "prestige" category.[34][36] [edit] NutriliteMain article: Nutrilite Amway's Largest selling brand is the Nutrilite range of health supplements (marketed as Nutriway in some countries), and in 2008 Nutrilite sales exceeded US$3billion globally[37] Nutrilite products incorporate organically grown whole-plant concentrates. Euromonitor has for several years ranked Nutrilite the world's best selling nutritional brand in tablet or capsule form.[38] In 2001, five Nutrilite products were the first dietary supplements to be certified by NSF International.[39] Surveys by independent group Consumerlab.com since 2002 have rated Nutrilite as having the highest customer satisfaction rating (96% in 2006) in the direct selling/MLM brand category.[40][41] In 2006, 2007, 2008, and 2009 in the nutrient and health food category, Nutrilite won "Platinum" and "Gold" awards in Malaysia, China, Taiwan, Thailand, and Asia overall in the Reader's Digest "Trusted Brands of Asia" survey.[42] In 2008 Nutrilite scientists, in partnership with Alticor subsidiary Interleukin Genetics won the 12th John M. Kinney Award for Nutrition and Metabolism for their research into the interaction between nutrition and genetics.[43] [edit] eSpringAmway's eSpring water filter, introduced in 2000, was the first home water treatment system to incorporate a carbon block filter and Ultraviolet disinfection unit, becoming the first home system to achieve certification for ANSI/NSF Standards 42, 53 and 55.[44] The unit was also the first commercial product to include sister company Fulton Innovations eCoupled wireless power induction technology. Fulton Innovation introduced the technology in other consumer electronic products at the 2007 International Consumer Electronics Show. Companies licensing this technology include General Motors, Motorola and Visteon.[45][46] In 2006 eSpring was named Product of the Year by the Poland-based non-profit World Foundation of Health, Heart and Mind.[47] eSpring has won numerous Gold and Platinum awards in the Reader's Digest Most Trusted Brand Asia surveys.[48] [edit] AtmosphereIn 2008 Amway's HEPA air filtration system became the first air cleaner certified Asthma and Allergy Friendly by the Asthma and Allergy Foundation of America.[49] [edit] Ditto DeliveryAmway owns a patent on the online shopping method of Ditto Delivery, which allows consumers to specify an automatic monthly delivery of each product..[50] In May, 2001, Ditto Delivery accounted for 30% of Quixtar's North American sales.[28] [edit] Business ModelAmway combines direct selling with a multi-level marketing strategy. IBOs may both market the products directly to potential customers and also recruit (sponsor) and train other people who become IBOs themselves and in turn have the same opportunity. Each IBO may earn income both from the retail markup on any products they sell personally, plus a performance bonus based on the sales volume they and their downline have generated[3]. People may also register as IBOs to buy products at a discounted rate.[51] [edit] Definitions
[edit] Other Interests[edit] RadioAmway bought the Mutual Broadcasting System radio network in 1977 and sold it in 1985.[citation needed] [edit] Orlando Arena naming rightsIn December 2006, Alticor secured the naming rights for the 17,000-seat basketball arena in Orlando, Florida - home of the Orlando Magic, which are owned by the family of Rich DeVos. The arena, formerly known as the TD Waterhouse Centre, is now called Amway Arena.[citation needed] [edit] San Jose EarthquakesPrior to the 2009 Major League Soccer season, Amway Global signed a three-year deal with the San Jose Earthquakes to become the team's official jersey sponsor. A major part of the partnership is focused on community initiatives in the Bay Area. As a result, Amway Global is now also the official sponsor of the team's Kicks for Kids program that focuses on fitness and healthy lifestyles, as well as bringing underprivileged children to Earthquakes games. The partnership also saw the creation of the Amway Global Street Team, which appears at all Earthquakes home games and at a number of soccer and non-soccer events throughout the Bay Area. The members of the Amway Global Street Team give away Earthquakes-branded merchandise and provide soccer skills demonstrations at each event.[52] [edit] Los Angeles SolIn March 2009, Amway Global signed a multi-year deal to become the official presenting partner of the Los Angeles Sol of Women's Professional Soccer.[53] [edit] Politics and culture
Commentators have identified Amway as supporting the U.S. Republican Party,[54] and its founders contributed $4,000,000 to a conservative 527 group in the 2004 election cycle.[55] Amway states that its business opportunity is open to people regardless of their religious and political beliefs.[56] Rolling Stone's Bob Moser has contended that former Amway CEO and co-founder Richard DeVos is connected with the dominionist political movement in the United States. Moser states that DeVos was a supporter of the late D. James Kennedy, giving more than $5 million to Kennedy's ministry.[57] Multiple high-ranking Amway leaders such as Richard DeVos and Dexter Yager are also owners and members of the board of Gospel Films, a producer of movies and books geared towards conservative Christians as well as co-owner (along with Salem Communications) of Gospel Communications.[58] One of Amway's most successful distributors, Dexter Yager, has criticized Democratic President Bill Clinton. Mother Jones reported that Yager stated in voice mail to his downline network of distributors, "If you analyze Bill Clinton's entire inaugural address, it is nothing but a New Age pagan ritual. If you go back and look at how it was arranged and how it was orchestrated, he talked about forcing the spring. So what they're trying to do is...force the emergence of deviant lifestyles, of a socialist agenda, and force that on us as American people."[59] Yager also allowed Republican George W. Bush to send messages through that voicemail system to thousands of distributors.[60] Doug Wead, who was a Special Assistant to U.S. President George H. W. Bush, is a successful IBO who is a regular speaker at group rallies.[citation needed] In 2000, President George W. Bush appointed Timothy Muris, a former anti-trust lawyer whose largest client was Amway to head the FTC, which has direct federal regulatory oversight over multi-level marketing plans.[citation needed] Amway co-founder, 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.[61] In May 2005, former Amway President Dick DeVos, one of the wealthiest men in Michigan, announced that he would run against Governor Jennifer Granholm in Michigan's 2006 gubernatorial election. DeVos, running as a Republican, won 42% of the popular vote, while Granholm won 56%.[62] Amway touts the environmental benefits of many of its products, and in June 1989 the United Nations Environmental Program's Regional Office for North America recognized it for its contributions to the cause of the environment.[63] [edit] Controversy[edit] Pyramid Scheme AccusationsAmway has several times been accused of being a pyramid scheme. A 1979 FTC investigation in the United States (see below) and a 2008 court judgement in the United Kingdom dismissed these claims.[64] [edit] FTC InvestigationMain article: In re Amway Corp. In a 1979 ruling,[16][65] the Federal Trade Commission found that Amway does not qualify as a pyramid scheme since Amway compensation system is based on retail sales to consumers, not payments for recruiting. It did, however, order Amway to stop retail price fixing and allocating customers among distributors and prohibited the company from misrepresenting the amount of profit, earnings or sales its distributors are likely to achieve with the business. 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.[66] [edit] Amway Andhra Pradesh (India)In September 2006, following a public complaint, Andhra Pradesh state police (CID) initiated raids and seizures against Amway distributors in the state, and submitted a petition against them, claiming the company violated the Prize Chits and Money Circulation Schemes (banning) Act [67]. The complaint was initiated following a dowry dispute between a local man and his wife, an Amway distributor.[68] Following a petition by Amway, the state High Court issued an injunction against the CID and stated the Act did not prima facie apply[69], however after Amway requested the CID petition be dismissed the High Court declared that if police allegations were true, Amway's Indian subsidiary would be in violation of the act and the investigation should continue. On August 14, 2007 the Supreme Court of India ordered the state police to complete the investigation against Amway in 6 months.[70] In 2008, citing the High Court decision, the Andhra Pradesh state government enacted a ban on Amway media advertisements.[67] Amway challenged the ban and in July 2009 the AP High Court refused a petition the ban should be enforced.[71] As of June, 2009 the original 2006 CID case was still pending at the Chief Metropolitan Magistrate Court in Hyderabad.[72] [edit] Canadian Tax caseIn 1983, Amway pleaded guilty to criminal tax evasion and customs fraud in Canada, resulting in a fine of $25 million CAD, the largest fine ever imposed in Canada at the time. In 1989 the company settled the outstanding customs duties for $45 million CAD.[73] [74] In a 1994 interview, Amway co-founder Rich DeVos stated that this incident had been his greatest "moral or spiritual challenge", first in "soul searching as to whether they had done anything wrong" and then for pleading guilty for technical reasons, despite believing they were innocent of the charges. DeVos stated he believed that the case had been motivated by "political reasons".[75] [edit] RIAA lawsuitThe Recording Industry Association of America (RIAA), as part of its anti-piracy efforts, sued Amway and several distributors in 1996, allegeding that copyrighted music was used on "highly profitable" training videotapes.[76] Amway denied wrongdoing, blaming the case on a misunderstanding by distributors, and settled the case out of court for $9 million.[77] In a related lawsuit initiated by the distributors involved, the Court established that Mahaleel Lee Luster, who had been contracted to make the videotapes, had violated copyright without the knowledge of three of the five of those distributors.[78] [edit] Procter & GambleSome Amway distributors were involved with an urban legend that the (old) Procter & Gamble service mark was in fact a Satanic symbol or that the CEO of P&G is himself a practicing Satanist. (In some variants of the urban legend, it is also claimed that the CEO of Procter & Gamble donated "satanic tithes" to the Church of Satan.)[79] Procter & Gamble alleged that several Amway distributors were behind a resurgence of the urban legend in the 1990s and sued several independent Amway distributors and the parent company for defamation and slander.[80] The distributors had used Amway's Amvox voice messaging service to send the rumor[citation needed] to their downline distributors in April 1995. After more than a decade of lawsuits in multiple states, by 2003 all allegations against Amway and Amway distributors had been dismissed. In October 2005 a Utah appeals court reversed part of the decision dismissing the case against the four Amway distributors, and remanded it to the lower court for further proceedings.[81] On 20 March 2007, Procter & Gamble was awarded $19.25M by a U.S. District Court jury in Salt Lake City, in the lawsuit against the four former Amway distributors.[82][83] On November 24, 2008 the case was officially settled.[84] [edit] Other issuesA Dateline NBC report from 2004 picked up the criticism against some Amway distributor groups.[85] Amway subsequently published a website with a response to the Dateline report.[86] Some Amway distributor groups have been accused of using cult-like tactics to attract new distributors and keep them involved and committed.[87][88][89][90] Allegations include resemblance to a Big Brother organization with paranoid attitude to insiders critical of the organization,[90] seminars and rallies resembling religious revival meetings[87][90] and enormous involvement of distributors despite minimal incomes.[87][89][90] An examination of the 1979–1980 tax records in the state of Wisconsin showed that the Direct Distributors, comprising less than 1% of all distributors, reported a net loss of $918 on average.[89][91] Sociologist David G. Bromley calls Amway a quasi-religious corporation having sectarian characteristics.[91][92] Bromley and Shupe view Amway as preaching the Gospel of Prosperity.[93] Economists Bhattacharya and Mehta propose an alternative economic explanation to negative claims, concluding that distributors' continued involvement despite minimal economic return results from social satisfaction compensating for less economic satisfaction.[94] Amway disputes stigma charges, and states that meetings with enthusiasm, excitement and energy are a proven way to motivate salespeople.[95] [edit] See also
[edit] References
[edit] Books
[edit] Documentaries
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[edit] Government documents[edit] Profiles
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