History Edit

Founding Edit Amway Japan Head Office Amway Vietnam (Hồ Chí Minh City) Jay Van Andel and Richard DeVos had been friends since school days and business partners in various endeavors, including a hamburger stand, an air charter service, and a sailing business. In 1949, they were introduced to the Nutrilite Products Corporation[15] by Van Andel's second cousin Neil Maaskant. DeVos and Van Andel signed up to become distributors for Nutrilite food supplements in August.[16][page needed] They sold their first box the next day for $19.50, but lost interest for the next two weeks. They traveled to Chicago to attend a Nutrilite seminar soon after, at the urging of Maaskant, who had become their sponsor. They watched promotional filmstrips and listened to talks by company representatives and successful distributors, then they decided to pursue the Nutrilite business. They sold their second box of supplements on their return trip to Michigan, and rapidly proceeded to develop the business further.[16][page needed] Earlier in 1949, DeVos and Van Andel had formed the Ja-Ri Corporation (abbreviated from their respective first names) to import wooden goods from South American countries. After the Chicago seminar, they turned Ja-Ri into a Nutrilite distributorship instead.[17] In addition to profits on each product sold, Nutrilite offered commissions on sales made by new distributors introduced to the company by existing distributors—a system known as multi-level marketing or network marketing. By 1958, DeVos and Van Andel had built an organization of more than 5,000 distributors. However, they and some of their top distributors formed the American Way Association, or Amway, in April 1959 in response to concerns about the stability of Nutrilite and in order to represent the distributors and look for additional products to market.[18] 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 Cleaner).[19] They subsequently formed the Amway Sales Corporation to procure and inventory products and to handle sales and marketing plans, and the Amway Services Corporation to handle insurance and other benefits for distributors.[20] 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.[21] In 1964, the Amway Sales Corporation, Amway Services Corporation, and Amway Manufacturing Corporation merged to form the Amway Corporation.[22] Amway bought controlling interest of Nutrilite in 1972[23] and full ownership in 1994. International expansion Edit Amway expanded to Australia in 1971, to parts of Europe in 1973, to parts of Asia in 1974, to Japan in 1979, to Latin America in 1985, to Thailand in 1987, to China in 1995,[24] to Africa in 1997, to India and Scandinavia in 1998, to Ukraine in 2003, to Russia in 2005, and to Vietnam in 2006.[citation needed] In 2014, a Russian loyalty card program called "Alfa-Amway" was created when Amway joined with Alfa-Bank.[25] Quixtar Edit Main article: Amway Global In 1999 the founders of the Amway corporation established a new holding company, named Alticor, and launched three new companies: a sister (and separate) Internet-focused company named Quixtar, Access Business Group, and 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.[26] The main difference was that all "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. After virtually all Amway distributors in North America switched to Quixtar, Alticor elected to close Amway North America after 2001. 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 (Amway Global) worldwide. 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.[27]

Global markets Edit

According to the Amway website, as of 2011 the company operates in over 100 countries and territories, organized into regional markets: the Americas, Europe, greater China, Japan and Korea, and SE Asia/Australia. Amway’s top ten markets are China, Korea, the United States, Japan, Thailand, Taiwan, India, Russia, Malaysia and Italy.[1][2] In 2008, Alticor announced that two-thirds of the company's 58 markets reported sales increases, including strong growth in the China, Russia, Ukraine and India markets.[28] Amway Australia Edit See Amway Australia Private Ltd. Amway China Edit Amway China launched 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.[29] After the negotiations, some companies like Amway, Avon, and Mary Kay continued to operate through a network of retail stores promoted by an independent sales force.[30] 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. However, the law forbids teachers, doctors, and civil servants from becoming direct sales agents for the company and, unlike in the United States, salespeople in China are ineligible to receive commissions from sales made by the distributors they recruit. In 2006, Amway China had a reported 180,000 sales representatives, 140 stores, and $2 billion in annual sales.[31] In 2007 Amway Greater China and South-east Asia Chief Executive Eva Cheng was ranked No.88 by Forbes magazine in its list of the World's Most Powerful Women.[32] In 2008, China was Amway's largest market, reporting 28% growth and sales of 17 billion yuan (US$2.5 billion).[33] According to a report in Bloomberg Businessweek in April 2010, Amway had 237 retail shops in China, 160,000 direct sales agents, and $3 billion in revenue.[34]

Brands Edit

Ditto Delivery Edit

Ditto Delivery is Alticor's automatic, monthly replenishment program that fills orders based on customers' predetermined needs. As of May 2001, Ditto Delivery accounted for 30% of Quixtar's North American sales.[67]

Business model Edit

Amway combines direct selling with a multi-level marketing strategy. Amway distributors, referred to as "independent business owners" (IBOs), may market products directly to potential customers and may also sponsor and mentor other people to become IBOs. IBOs 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 (IBOs they have sponsored) have generated.[4] People may also register as IBOs to buy products at discounted prices. Harvard Business School, which described Amway as "one of the most profitable direct selling companies in the world", noted that Amway founders Van Andel and DeVos "accomplished their success through the use of an elaborate pyramid-like distribution system in which independent distributors of Amway products received a percentage of the merchandise they sold and also a percentage of the merchandise sold by recruited distributors".[68]

Politics and culture Edit

Pyramid scheme accusations Edit

Other legal actions Edit

Other issues Edit

Cultism Edit Some Amway distributor groups have been accused of using "cult-like" tactics to attract new distributors and keep them involved and committed.[84][173][174][175] Allegations include resemblance to a Big Brother organization with a paranoid attitude toward insiders critical of the organization,[175] seminars and rallies resembling religious revival meetings,[84][175] and enormous involvement of distributors despite minimal incomes.[84][174][175] An examination of the 1979–1980 tax records in the state of Wisconsin showed that the Direct Distributors reported a net loss of $918 on average.[95][174] Edit In 2004, Dateline NBC featured a critical report based on a yearlong undercover investigation of business practices of Quixtar. The report noted that the average distributor makes only about $1,400 per year and that many of the "high level distributors singing the praises of Quixtar" are actually "making most of their money by selling motivational books, tapes and seminars; not Quixtar's cosmetics, soaps, and electronics". "In fact, about twenty high level distributors are part of an exclusive club; one that those hundreds of thousands of other distributors don't get to join. For years only a privileged few, including Bill Britt, have run hugely profitable businesses selling all those books, tapes and seminars; things the rank and file distributors can't sell themselves but, are told over and over again, they need to buy in order to succeed." The program said that a Quixtar recruiter featured in the report made misleading and inconsistent statements about Quixtar earnings during a recruitment meeting and had an outstanding arrest warrant for cocaine possession from the mid-90s. In a response to the Dateline report, Quixtar published a "Dateline Quixtar Response" on its official website.[177] In its response,[178] Quixtar, among others, stated: "We learned that two Dateline producers had registered as IBOs and for months had been conducting undercover research for the story, which included using a hidden camera to videotape meetings and conversations with IBOs. The producers did not identify themselves as working for Dateline, instead feigning interest in building a business powered by Quixtar." The site also stated that: "Dateline's story on Quixtar boiled down to the complaints of three former Independent Business Owners (IBOs) – one of whom is a competitor – and ignored the hundreds of thousands of IBOs powered by Quixtar who are achieving their goals."

See also Edit

References Edit