Amway: selling soap and business methods the American way

Press, 7 December 1985, Page 19

Amway: selling soap and business methods the American way

By

GARRY ARTHUR

> “Back-fence” selling has arrived in- New Zealand. A refinement of the old foot-in-the-door technique, it relies for its success on a salesperson’s ability to get friends and neighbours to try out the products — and recruit some of those satisfied customers as distributors themselves, from whose sale the “sponsor” gets a rake-off. ; The method has proved a goldmine for its originators, Jay Van Andel and Richard De Vos, smalltown businessmen from Ada, Michigan, who now preside over a business worth more than a billion dollars in annual sales, and have become two of America’s richest then in the process. | Amway is generally believed to stand for “the American way,” a|though the company says it is simply a coined word that has proved adaptable to the 25 countries in which it does business. ■ Whatever the case, the fact is that achieving the American dream of financial success through private enterprise without Government interference is the cornerstone of Amway’s philosophy. -The two owners of the private company are ultra-conservative religious fundamentalists whose missionary zeal embraces both business succcess and the widest possible dissemination of their philosophy. The recruiting zeal of Amway distributors often leads people to associate it with pyramid selling, in which those who get in early sell agencies to those below and the whole pyramid collapses when there are no more suckers to recruit. In such pyramids, the actual selling of the products is incidental to the real business of selling the right to be part of the organisation.

Amway is not a pyramid sales organisation, although it has a pyramid form of recruitment and commissions. Unlike true pyramids, however, nobody has to pay to become a distributor, and no-one gets any financial reward untir the products are actually sold. "Those fakes and bums were just selling paper; we’re really selling products,” is Richard De Vos’s succinct definition of the difference between his organisation and pyramid sellers.

Amway’s big attraction is that a new distributor pays only a few dollars for a sales kit, and the company guarantees to buy back any products that the distributors cannot sell. The Consumers’ Institute has examined Amway’s structure and also concluded that it is not a pyramid selling organisation. “It’s doing multi-level marketing,” says Mr David Russell, the institute’s assistant director.

He says there is more emphasis on earning through selling the product than on payment for recruiting more distributors, and those involved are paid on the sales performance of the people they recruit. “It’s a different form of selling, so it arouses suspicion,” he says, “because it is a method that’s been used by some spurious characters in the past. So they’ve set themselves a hard row to hoe.” He advises those who are considering joining Amway to look at it in a “hard-nosed business way,” to cut away the Amway “razzamataz,” and to consider whether they are getting a specific geographic selling area, whether they personally have any selling ability (“the vast majority of us don’t,” says Mr Russell), and to look closely at the financial position: the amount of work required in relation to the likely returns. The Consumers’ Institute will be testing Amway’s claims for its products against similar products on the market. Mr Russell advises consumers to be more alert when approached by an Amway salesperson because it is likely to be someone they know, and the customer will be at a psychological disadvantage. He predicts that there will be no revolutionary breakthrough with the products being offered, and advises consumers to strip away the superlatives used in the sales pitch and compare the products with similar ones available. “We don’t see them as baddies,” says Mr Russell. “We just want people to be aware of what they’re buying. Or, if they’re going into the

scheme, just what they’re letting themselves in for.”

Commissions start at 3 per cent, but can reach as much as 25 per cent for a distributor who builds up a big network of sponsored salespersons.

According to the American business magazine “Forbes,” fewer than one in a thousand Amway distributors ever makes more than $12,000 a year from the business. Former high school friends, Messrs Van Andel and De Vos began their business in their home basements in 1959, after learning the ropes as distributors for Nutrelite food supplements. Throughout their corporate history, Amway’s owners have marketed their own breed of conservatism hand-in-hand with the household cleaners that are the basis of their business.

At the national headquarters near Grand Rapids is a national educational bureau called “The Centre for Free Enterprise,” whose role is to promote Amway’s philosophy.

According to a report, in the magazine “Commonweal,” Richard De Vos has for years been “the quiet Godfather and financial angel of the Religious Right Movement — a loose coalition of fundamentalist religious groups which equate free enterprise with Christianity, and Christianity with anti-govern-ment, Right-wing conservatism.” “Commonweal” says the Religious Right Movement aims to politicise millions of church members into a highly conservative force in American politics. It works through Right-wing religious groups and the conservative political groups which support them. Believing that the welfare state is contrary to the Bible, it seeks reduced Government social services, no use of taxes for social reform, more military spending (against the Communist threat), and no support for the United Nations.

In 1975, says “Commonweal,” Mr De Vos and other conservative businessmen made a significant move to implant their Religious

Right views into elective politics. They took control of the Christian Freedom Foundation, as Mr De Vos said at the time, to elect conservative Christians to Congress.

Amway has developed an economics education programme for American high schools, pushing its fervent free-enterprise line, and it sells American distributors recruiting films and inspirational tapes featuring Mr De Vos’s attacks on socialism.

In the 1983 Canadian elections, Amway’s distributors caused a stir by becoming involved in the Progressive Conservative Party’s contest to pick a new leader. The party’s Right wing was known as “the Amway wing.”

At some party meetings called to pick delegates, Amway distributors turned up in force, often within a few days of taking out party membership. Their purpose was to help ensure that the leadership went to a Ring-wing contender. Amway denied that it was involved, saying that individual distributors were acting independently, but “Macleans” magazine said that some Tory party insiders believed the Amway intervention was too widespread to be uncoordinated.

Amway has been doing business in Australia since 1971. An earlier attempt to move into New Zealand was unsuccessful, but permission has now been granted. In its application to the Overseas Investment Commission, Amway undertook to provide management expertise from Australia for up to

two years, and then leave New Zealanders in control. It also agreed to have its products manufactured in New Zealand. Mr Peter Martin, the Australian executive sent to Auckland to be general manager for New Zealand, says this is the first time that Amway has gone into a new country on the basis of local manufacturing of all products sold. It has alreay registered more than 1000 distributors throughout the country.

Mr Martin says that most Amway distributors simply show the products to a few friends and relatives, word gets around, and they begin to build up customers. Most do not use the “party plan” method favoured by other American door-to-door sales organisations such as Tupperware and Avon.

A feature of Amway in the United States is its big “inspirational” sales meetings and conventions for distributors. Mr Martin has already held sales meetings in New Zealand, but says they were low-key affairs. Amway is already doing more manufacturing here, using local factories to make the products under licence, than it does in Australia. Mr Martin says import duty is fairly high on goods imported from America and it would be prohibitive to bring them in. So far it has launched four liquid household cleaners, with a furniture polish and window cleaner soon to join the list. Later, toiletries, skin care products, and cosmetics will be added.

Mr Martin acknowledges that only a few distributors make a lot of money. “Only a proportion of people are prepared to be sparetime salesmen and of them, only a proportion are prepared to get stuck in,” he says.

The majority do nothing at all; they have not had to pay to get in, so they have nothing to lose if they are lazy. “The people who enjoy the rewards work at it.”

In Australia, where Amway is a multi-million dollar business, Mr Martin says most of the active distributors work only part-time and make about $2OO to $3OO a month by putting in an afternoon or a couple of evenings a week.

A small proportion of distributors make it a full-time business and enjoy a “healthy full-time income” similar to that of a typical small business-person — somewhere between $15,000 and $40,000 a year. The top distributor was making “a couple of hundred thousand dollars.”

The bulk of those big incomes obviously must come from commissions on other people’s sales, but Mr Martin says it is one of Amway’s rules that everyone must sell at the retail level to a minimum of 10 customers a month. Each person in the network is required to submit a monthly report to his or her sponsor with a copy of sales dockets for those 10 retail sales. He notes that distributors can get to that position only by building up a big group of sponsored distributors over many years.

Mr Martin did not come up through the ranks. He has never been an Amway salesman, but was recruited into the management from the aircraft industry in 1980. Before that he was a regular Army officer.

“Amway is a very conservative company in every sense of the word,” he says, but he claims that the two founders and owners of Amway are “scrupulously careful” to keep their personal philosophies and politics apart from the company.

“the company stands for free enterprise and the rights of the individual. We make no apologies for that, but we’re not fanatical about it,” says Mr Martin.