by Robert L. FitzPatrick, Author of PONZINOMICS, the Untold Story of Multi-Level Marketing
From the outside or if you just drive by, the enormous facility in Ada Michigan would look like any large corporate center. There is a huge globe on display by the road and a row of national flags, signifying the worldwide reach of this company, whatever it is.
There is no other indicator of the nature of the company, its products, where they could be purchased or who buys them, whatever they are.
The company offers a “self-guided” tour to visitors that walks you through a short circular hallway toward the back of the lobby area. Everywhere else is closed to the public without appointment. The “tour” offers wall displays about products that Amway apparently sells. They appear to be the most ordinary of consumer goods that one sees in grocery, convenience, health food stores, malls, or online. But most people have never heard of or would remember the brand names of any Amway products, and no one has ever seen them in a retail store of any kind.
Have you heard of “Glister” brand toothbrushes? They are highlighted on the Amway tour. A package of four of the Amway/Glister toothbrushes sells for $12.50 or $3.13 each. They look like any toothbrush. Are they special or different? The Amway website states, “Soft and medium bristles help remove plaque even between teeth, and gently massage gums. Flexible neck eases pressure on teeth and gums. Reach hard-to-brush areas with tapered head.” Yes, that’s pretty much what toothbrushes do.
A quick search on Amazon.com turns up a package of six Colgate branded toothbrushes with the typical traits of toothbrushes. It sells for $4.44, or $.74 a brush. Amway’s toothbrush cost four times (400%) more!
Okay, how about the “Atmosphere Sky” home air purifier. Heard of it? It’s the one Amway sells – for $1,590.
Shopping on Amazon, it’s hard to find an air purifier anywhere nearly this expensive. For New Yorkers in one of the most densely populated cities in America and recently suffering from thick smoke of Canadian forest fires, New York Times recently tested 50 different air purifiers and recommended one that sells for under $200.
So, questions normally arise: how do Amway’s extremely high priced commodities get sold? Where? In today’s hyper-competitive, globally-sourced market, why would anyone buy these unknown products over so many other well-known brands in stores and online and pay these exorbitant prices?
The largest section of the display highlights vitamin pills branded “Nutrilite”, which, despite not being sold in stores, the display claims are the most “popular” of all vitamin brands in the world – without explaining how this could be. A bottle of 60 capsules of Nutrilite Vitamin C, 500 mg., time-released sells for $20 or $.33 a pill. Taking Amway Vitamin C daily costs $120 a year. Amazon.com offers the well known and respected Nature’s Bounty Vitamin C, same mg. and time-released for $.07 a pill, $25 a year. Amway’s cost nearly 5 times (500%) more!
Perplexing Questions, No Clues, Paranoid or Real?
These product and sales questions lead to the most perplexing question of all: how could such an enormous facility exist that produces and sells ordinary products that few people have ever heard of, can’t be found in any store, and are uncompetitively priced?
The displays offer no clues to these questions. Billions are claimed in sales with no mention of retail outlets, prices, marketing strategies or product differentiation. To anyone in marketing, sales or distribution, Amway would be an economic mystery. Taking the self-guided tour would undo everything learned.
Without any background on what Amway is and with so little substantive information offered, one could even be forgiven for suspecting the entire presentation and the large buildings on the “campus” are fake, maybe an elaborate front for a giant money laundering scheme, like Madoff’s “hedge fund” operations that never did stock trades and issued fake quarterly reports.
That would not be paranoia. It is precisely what Amway is being accused of now by federal regulators in India that sued Amway. The products, the suit claims, serve as a mechanism for laundering money obtained in a giant Ponzi scheme, and all its “profits” and “commissions” are therefore illegal. Essentially, the same charges were brought against the company in the United States by the FTC in 1975 and have been brought by “distributors” in civil lawsuits.
But, if you don’t know what Amway is, that shocking information would also be unknown. So, back to the perplexing “self-guided” tour…
Founders, Famous for What?
Besides the incredibly high priced but utterly ordinary products, there is another prominent presence in the lobby and on the tour. Two men, both deceased, heralded as the founders of Amway, are depicted in life-size photos and cardboard cutouts like legendary historical figures. The lobby is almost a museum dedicated to their work, whatever it was. But, if you don’t know what Amway is, you will likely never have heard of them, any more than you would the brands of the products on display. Strangely, Amway’s current company leaders are not referenced at all.
Why would these two departed people be so exalted for a business selling such ordinary commodity products? Apparently, they did not invent anything, no breakthrough technology, no innovation that changed how we live or shop. They are not a Steve Jobs, Thomas Edison or even Bill Gates. If what they did is historically or economically significant, why does the tour not explain plainly what the company is and what it does?
Facts and Figures
The economic mysteries that the Amway tour raises are answered once some basic facts and figures about the company are discovered. As an author and researcher of “multi-level marketing” and having been contacted by countless Amway distributors over a 20-year span, and having served as expert in court cases against Amway, I am all too familiar with these facts.
I know that 99.9% of all people, all over the world who have ever invested in the Amway “business” from when it started to today, never gained a net profit. Few remain active in the business more than a year or two. I know that Amway’s “compensation” plan sends most payments, per transaction, to the top 1-5%, dooming all others. I know the Amway pay plan and business model, based on “endless chain” recruiting, and some of its products were copied directly from the previous employer of the Amway founders, called “Nutrilite”. Amway’s future founders worked there for a decade before starting a directly competitive company and taking 5,000 of Nutrilite’s distributors. Later, they acquired what was left of Nutrilite.
I know Amway settled charges and paid the largest fine to date in a criminal tax evasion case in Canada and that Amway is being sued now by regulators in India for running a multi-billion dollar Ponzi and money laundering scheme. I’ve read all the books by former Amway recruits that dramatically detail cult accusations. I have been contacted by many former Amway “distributors” who told me of their ruined families, divorces, foreclosure and bankruptcies that they say stem from being Amway “direct sellers.”
I’ve researched the history of Amway and how it turned its pyramid recruiting model, promising “unlimited income” and “infinite expansion” into a religious crusade, branding those who criticize or quit the company as “pathetic losers.” I know Amway has sued critics. I learned how Amway’s political connections in Michigan were used when the congressman of their home district became president, just when Amway was being federally prosecuted as a pyramid fraud.
As for the marketing mysteries, Amway’s products, it turns out, are mostly sold only to the contract salespeople. Some of them may convince a few family and friends to buy them for a little while. Most never sell any goods to anyone. The company is supposedly based on millions of people gaining profits from retail selling, but I have never encountered anyone who claimed sustainable profits from “direct selling” of Amway goods.
Factoring lack of consumer interest or need for personal salespeople, the tiny retail profit margin offered to Amway “resellers”, the high prices of the commodities, the lack of product differentiation, the unlimited increase of “sales” people in every area, driven by the hyped-up, recruiting-based income promises and causing excess competition, it is clear that profitable and sustainable “direct selling” of Amway goods is an economic impossibility.
Nevertheless, it is indisputable and fully documented that all Amway recruits – tens of millions of people worldwide – buy Amway products, at least for the little while they are under contract. This fundamental piece of information – that the “salespeople” are the primary “customers” – answers the question of why there is no advertising. There are, effectively, no sustainable retail customers, no stable customer base, to advertise to. Salespeople are under contract to Amway as “distributors.” No company needs to advertise to their distributors.
But if nearly all the “distributors” don’t sell and gain no net profit from the Amway “business,” why do they buy, if only for a little while? Why would they pay so much more for Amway’s commodity toothbrushes, vitamin C and air purifiers? Why wouldn’t they just go to stores or shop online like everyone else and enjoy greater choice, much lower prices and more convenience? Without advertising, how do they even find out about these unknown Amway products?
Of course, I know the answer to these questions too, but only after much research and plowing through mountains of disinformation and overcoming my own bewilderment that what I saw could be true.
For those solicited by Amway recruiters and who want to understand what Amway is or anyone who ponders the mysteries raised in the self-guided tour, the questions about the “business” always lead to another set of mysteries. The new questions are not about economics and marketing. Rather, how is it possible that millions of people are induced not only to pay to become “direct sellers” of products that are virtually unsellable on a profitable basis, but to personally buy them.
Dark Corners, Disbelief, Extreme Irony
That deeper inquiry leads inevitably into areas of criminal law and the corruption and negligence of law enforcement regarding pyramid scheme frauds. It pulls the inquirer into Amway’s origins, its true history, prosecutions, lawsuits, promises of wealth and happiness, and shocking statistics on consumer losses and personal tragedies related to the “business.” It leads into the dark corners of undue influence, Big Lie deception, intimidation, shaming and brainwashing.
The inquiry into the fates and motives of Amway’s “direct sellers”, its main “customers,” takes one into the depths of extreme irony, disbelief, and confusion. Little wonder the “tour” seeks to distract the visitor with toothbrushes and vitamin pills and strangely offers so little about the substance of the company.
To know of Amway’s cult control leading to the separation of many Amway followers from family and life-long friends and their very own identities, and to be aware of the pain and despair of the millions of Amway “losers”, one must stand and ponder in utter amazement the words displayed over the founders’ images in the lobby: Freedom, Family, Hope, and Reward.