Their first product was called Frisk, an 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).[17] 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.[18] 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.[19] In 1964, the Amway Sales Corporation, Amway Services Corporation, and Amway Manufacturing Corporation merged to form the Amway Corporation.[20]
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.[29]
Amway's product line grew from LOC, with the laundry detergent SA8 added in 1960, and later the hair care product Satinique (1965) and the cosmetics line Artistry (1968). Today Amway manufactures over 450 products, with manufacturing facilities in China, India and the US, as well as Nutrilite organic farms in Brazil, Mexico and the US (California and Washington state).[citation needed] Amway brands include Artistry, Atmosphere, Body Blends, Bodykey, Body Works, Clear Now, eSpring, Glister, iCook, Legacy of Clean, Nutrilite, Peter Island, Perfect Empowered Drinking Water, Personal Accents, Ribbon, Satinique, Artistry Men and XS.
Amway is best known in North America for its original multi-purpose cleaning product LOC, SA8 laundry detergent, and Dish Drops dishwashing liquid. In the January 2007 issue of Consumer Reports, SA8 with Bioquest was rated the best-performing laundry detergent.[40] Consumer Reports did, however, criticize SA8's pricing, a situation which was disputed by Amway.[41] Consumer Reports conducted blind testing of detergents in 2010 and ranked versions of Amway's Legacy of Clean detergents 9th and 18th of 20 detergents tested. Consumer Reports program manager Pat Slaven recommended against buying the products because consumers can "go to the grocery store and get something that performs a whole lot better for a whole lot less money".[42][43]
In January 2009, Amway announced a voluntary recall of Nutrilite and XS Energy Bars after learning that they had possibly been manufactured with Salmonella-contaminated ingredients from Peanut Corporation of America. The company indicated that it had not received any reports of illness in connection with the products.[51]
In 2012, the Center for Science in the Public Interest (CSPI), accused Amway of making unsubstantiated and illegal claims about Nutrilite Fruits & Vegetables 2GO Twist Tubes and threatened to launch a class action lawsuit against the company unless it took remedial action.[52][53] Amway responded that the claims made about the products were properly substantiated and that they did not plan to change the product's labeling but nevertheless would review the statements that CSPI has questioned.[54] CSPI later reported that Amway had agreed to changing product labels by the end of 2014.[55]
eSpring was the first commercial product which employed Fulton Innovation's eCoupled wireless power induction technology.[59] In December 2006, Amway sister company, Fulton Innovations, announced that it would introduce eCoupled technology in other consumer electronic products at the 2007 Consumer Electronics Show.[60] Companies licensing this technology include Visteon, Herman Miller, Motorola and Mobility Electronics.[61] Fulton was a founding member of the Wireless Power Consortium which developed the Qi (inductive power standard).[62]
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.[2] 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]
Studies of independent consumer watchdog agencies have shown that between 990 and 999 of 1000 participants in MLMs that use Amway-type pay plans in fact lose money.[114][115] According to The Skeptic's Dictionary, "In the United States, the Federal Trade Commission requires Amway to label its products with the message that 54% of Amway recruits make nothing and the rest earn on average $65 a month."[116]
In September 2006, following a public complaint, Andhra Pradesh and Telangana 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.[117] They shut down all corporate offices associated with the Amway organization including the offices of some Amway distributors. The enforcement said that the business model of the company is illegal.[9][118] The Reserve Bank of India (RBI) had notified the police that Amway in India may be violating certain laws regarding a "money circulation scheme" and the IB Times article writes that "some say ... Amway is really more about making money from recruiting people to become distributors, as opposed to selling products".[9] In 2008, the state government of Andhra Pradesh enacted a ban on Amway media advertisements.[117]
In 2007, Amway's operations were halted in the United Kingdom and Ireland following a yearlong investigation by the UK Department of Trade and Industry, which moved to have Amway banned on the basis that the company had employed deceptive marketing, presented inflated earnings estimates, and lured distributors into buying bogus "motivation and training" tools.[148][149] In 2008, a UK judge dismissed government claims against Amway's operations, saying major reforms in the prior year (which included banning non-Amway-approved motivational events and materials) had fixed company faults that favoured selling training materials over products and misrepresented earnings. However, the judge also expressed his belief that Amway allowed "misrepresentations" of its business by independent sellers in years past and failed to act decisively against the misrepresentations.[150]
In March 2004, TV personality Phil McGraw (a.k.a. Dr. Phil) pulled his "Shape Up" line of supplements off the market in the face of an investigation by the U.S. Federal Trade Commission (FTC). The supplements were manufactured by CSA Nutraceuticals, a subsidiary of Alticor's Access Business Group.[160] The FTC later dropped the probe, but in October 2005 a class-action lawsuit was filed against McGraw by several people who used the products and claimed that the supplements, which cost $120 per month, did not stimulate weight loss.[161] In September 2006, a $10.5 million settlement was reached, in which Alticor agreed to provide $4.5 million in cash and $6 million in Nutrilite products to disgruntled users of Shape Up.[162][163][164][165]
Nutrilite was different from most companies of its time because it offered both commissions from sales and incentives for signing up other people as distributors. Nutrilite focused on selling dietary supplements and later added cleaning products, like Liquid Organic Cleaner, to their business line. Jay Van Andel and cofounder Richard DeVos had finally found a business model where they could succeed.
Today, Amway is the most popular multi-level marketing (MLM) company in the world. On the surface, they appear to offer a plausible path to wealth. The company sold $8.4 billion worth of products in 2019; why not get a piece of that?
A study from 2008 looked at 33,000 people selling Amway products. Of these, only 90 people made enough to break even, much less earn extra money. The math works out to less than 1% of Amway distributors even breaking even.
Many of the top Amway business owners also make money selling the dream of wealth rather than the sale of products. They may appear wealthy, but most of this wealth does not belong to the Amway direct selling association.
In 1979, the Federal Trade Commission found that Amway is not illegal because it does sell physical products and pays for recruitment. Generally, United States laws only ban pyramid structures when no products or services are sold in an MLM business model.
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