Multi-level marketing (MLM), also known as network marketing or pyramid selling refers, to a marketing method for retailing various products or services where the revenue of the company is obtained from non-salaried team members. The workforce is responsible for selling the firm’s products or services while the income for the participants is obtained from a binary commission scheme (Luke, 2020). Most of the time, people recommend others to join so that they can earn from the creation of a wider network. MLM strategies have been frequently regarded as illegal due to the aspect of pyramid compensation. An example of an MLM company is Amway Global which was formed to sell health and beauty products together with other goods. This paper explores the history, products, hiring, and legality of MLM business strategy by using Amway as the case example.
MLM business started in the early 20th century and the concept is believed to have originated from California Vitamin Company which produced food supplements. Generally, the familiarity of the strategy emerged when distributors realized they were generating huge income by referring other individuals to the opportunities that existed with the food production company. Amway was founded on November 9, 1959, by Richard DeVos and Jay Van Andel. The firm is headquartered in Ada, Michigan, and has opened other branches in the entire world (Luke, 2020). The current revenue is anticipated to be $8.4billion as of 2019 data and Amway Global has over 17,000 employees (Tighe, 2021). Amway’s first product was known as Frisk, a concentrated chemical compound for general cleaning that had been developed in Ohio. The company purchased the rights to produce and supply Frisk hence forming Amway Services Corporation.
The products for the company include categories such as nutrition, beauty, personal care, and household detergents. Nutrition products consist of weight management and energy drink goods. The beauty assortments include fragrances, makeup, and skincare. Personal care goods include shampoos, bath soaps, and oral care products. There are many other products that the company is alleged to offer under one portfolio. Amway has strongly objected to the perception that it has a pyramid scheme strategy and has been recognized by the US Federal Trade Commission as a legitimate direct selling company. The ruling which was made in 1979 stands even today and the statement regards any income to come from the selling of products.
The hiring or recruitment for Amway MLM is mostly through referrals in social media. Anyone willing to join the company has to attend a training somewhere and they pay a registration fee as per the requirements. Afterward, they are required to invite other people to join so that they can earn from the chain of individuals who come later. The people who market the company use appealing messages such as enticing people by telling them they would work part-time if they want it to be a side hustle. As a result, many persons join and for one to earn any income, they must invite others alongside marketing the brands manufactured by the company. Generally, almost 80% of people who register qualify to work with Amway and that brings criticism on the authenticity of the firm (Luke, 2020). The company hires people with college certificates or university degrees in any field but priority goes to business-related courses
The company has generated significant profit from the business strategy. In 2019, the direct selling giant firm announced sales of almost $8.5 billion. The total revenue comprised 65% profits from the business portfolios in Michigan, China, India, and other places where Amway has taken market share (Tighe, 2021). The revenue had decreased by 5% from the previous year 2018 and the company was ready to align with other global trends in distribution to bring more opportunities (Tighe, 2021). In 2020, the company’s revenue rose to $8.6 billion with 68% being profit (Tighe, 2021). However, from the nature of the company’s business, the profits were realized by involving field sales and marketing personnel to sell the products to the end consumers. The gross profit was calculated after deducting all the costs such as discounts, returns, and other expenditures. Amway has been playing a key role in the economy of the US despite the controversy on the pyramid scheme which is hard to justify for specific enterprises.
There have been issues on whether or not Amway is a scam and illegitimate entity. It is hard to prove either way due to the standing verdict in 1979 that concluded the company as a legal direct sales firm in the US. The controversy of Amway Corporation has been a popular subject by mainstream media especially on public sensitization programs (Luke, 2020). The proponents of the idea that Amway is a legal business firm argue that the company can be traced physically in many countries and has a range of products that can be seen and touched. Additionally, the company has employed workers in countries such as China, India, Thailand, and Canada.
The opponents have disregarded the company’s legality by saying it has frequently concealed information about the number of registered distributors it has in an official publication. In 2020, Wall Street hedge fund executive Bill Ackman insinuated that Amway’s easy-money generation was from the pyramid schemes that would lead to scam ventures in the world (Tighe, 2021). MLM companies exist and it is upon a person to decide wisely before joining one so that they account for any potential liability within the process. I would only join Amway if they hire me to only sell specific products but not to refer people.
References
Luke, R. (2020). Amway pyramid scheme – What you need to know. Web.
Tighe, D. (2021). Amway: Sales revenue worldwide 2020 | Statista. Statista. Web.