Amway set to launch Internet site -- but not as Amway

The Associated Press, August 29, 1999
By Lisa Singhania

ADA -- The soaps, cosmetics, vitamins and friendly neighborhood sales force that made Amway Corp. into a billion-dollar success story are headed for the Internet.

But customers won't see the "Amway" name when the new e-commerce site launches on Sept. 1.

For the first time, Amway products will be sold by a company without the name Amway. The direct-selling giant is calling its new site Quixtar, and is starting a sister company with the same name to manage it.

Quixtar will sell more than just Amway products: Consumers will be able to use their credit cards to buy computers, men's clothing and other products.

"We're looking at the biggest change in 40 years" since Amway was founded, said Ken McDonald, Amway's senior vice president of the North American business region. "We're going to have the ability to combine high-tech ... with high-touch, which is what the independent business owners provide."

In many ways, the new site is still classic Amway.

The company's freelance sales force, which Amway calls independent business owners, will continue to sell products to their friends and families as they always have, but with option of selling products online for Quixtar.

Online customers will be asked who their Quixtar independent business owner is so commissions are credited. Those who come to the site without a dealer will pick or be assigned one.

Amway's online strategy should capitalize on the loyalty of existing Amway customers and dealers and potentially attract new ones, according to Chris Merritt of Kurt Salmon Associates, an Atlanta-based retail consulting firm.

The challenge, he said, will be whether the one-on-one salesmanship central to Amway's success can make the transition to e-commerce.

Scott Moore, a University of Michigan School of Business professor, said Amway's decision to use a different name for its e-commerce site is similar to one by Bank One, which earlier this year launched WingspanBank.com, an online banking service.

The idea, he said, is that a new name will attract customers who might have been put off or less intrigued by the old name.

"With the name Quixtar, you wonder who is it? You don't walk in to this thinking Amway," Moore said. "This could appeal to ... someone who doesn't like Amway or has a negative feeling about Amway."

McDonald said the Quixtar name is not intended to distance the Web site from Amway. Rather, he said, it's an effort to reflect the breadth of non-Amway products that will be available.

"We're convinced we can make more money ... by building two businesses that are different than just by tweaking one business," McDonald said when asked if Amway's image played a role in the decision to name Quixtar.

The Federal Trade Commission cleared the company 20 years ago of charges that its sales structure was a pyramid distribution scheme. But the controversy about direct selling persists.

Last year, China banned all direct selling because of general concerns that such operations promoted illegal activity. Amway has since set up special retail stores there, but is still prohibited from direct selling.

Amway is not the only direct seller looking to the Internet. Cosmetics giant Avon and food-storage products maker Tupperware also sell online.

Quixtar's features include something never available to Amway customers before: "Hot Buys," which are name-brand products ranging from electronics to clothing that change every few days depending upon what's available.

"It looks cool and it will ... help drive traffic to the site," McDonald said.

In addition, Quixtar is working with several other companies with existing e-commerce sites, including IBM, to sell their products online.

"What this opportunity really gives us is another channel to reach out and offer our products and our services," said Andrew Hayden, a spokesman for Armonk, N.Y.-based IBM. "E-commerce is becoming more popular. We are looking at partners who can really utilize e-commerce efficiently."

McDonald said Amway is entering e-commerce now because there is strong demand for its products on the Internet from its existing customers, as well as from dealers.

Initially, Amway expects existing dealers and customers to make up most of the traffic on the Quixtar site, but recruitment of new independent business owners to Quixtar will be a top priority.

Dealers will have a choice of remaining traditional Amway independent business owners or joining Quixtar, where they can use the company's Web site as a platform to build their own e-commerce site.

"The way people are so busy with time, what we're seeing is with e-commerce is that's where people are going," said Paul Miller of Raleigh, N.C., who has been selling Amway for 25 years and plans to switch to Quixtar.

He said interest in joining Amway is up 200 percent to 300 percent at the meetings he hosts to recruit independent business owners -- an increase he attributes to e-commerce.

"It's the same company but a different look. This is sort of an upscale version," he said. "You can already go shopping on the Internet. Now you can make money on the Internet."

Those who want to shop at a dealer's discount without selling Quixtar products can pay an annual fee to become a member, and essentially purchase the products wholesale.

Amway is privately held, and won't release start-up costs for Quixtar. But McDonald said he expects Quixtar will start to turn a profit immediately.

Visitors to Quixtar can make it their own home page, complete with hourly weather and news updates and custom stock quotes -- and even sign up for Internet service. And it is possible Quixtar might some day have search-engine capabilities.

Quixtar is aimed at the North American market, but similar e-commerce sites could later be developed in the more than four dozen Amway affiliates internationally.

McDonald sees a bright and broad future for Quixtar, where Amway products represent only a portion of the offerings.

"You're much more likely to shop at a Web site when your friend, neighbor, relative or co-worker tells you about it, than if you just hear about it," he said. "That's our biggest strategic advantage."

Some Facts About Quixtar

Quixtar consists of four primary areas designed to showcase Amway Corp.'s products, as well as other goods. The Web site, which caters to North America, will be available in English and French.

• "Quixtar Exclusives" will feature cosmetics, skin care, nutrition and other products traditionally sold by Amway. Water treatment systems and special deals for energy, Internet or telecommunications services are also available.

• "Store for More" features hundreds of brand-name items ranging from apparel and over-the-counter medications to furniture.

• "Hot Buys" consists of what Quixtar touts as the best deals on many brand-name products. The offerings will change weekly or daily depending upon availability.

• "Partner Stores" will provide links to existing e-commerce sites run by other companies.

Friendship Laid Foundation for Amway Corp.

• Amway Corp. and its sister companies had worldwide annual sales of $5.7 billion last year, but the company's origins are modest.

• Two friends, Richard DeVos and Jay Van Andel, founded Amway Corp. 40 years ago in the basements of their Ada, Mich., homes.

• Today, DeVos and Van Andel are billionaires, and ranked among the world's wealthiest men. Their children run the business they started and retired from.

• Worldwide, there are more than 50 affiliate operations. More than 3 million independent business owners sell its products.

• About 70 percent of Amway's sales come from outside North America.

• Amway Corp. is held privately, but Amway Japan Ltd. and Amway Asia Pacific Ltd. are publicly traded.