Quixtar takes Amway family online
Move to Net may spell end to traditional sales
USA Today, May 30, 1999
By Melanie Wells
ASTORIA, N.Y. -- At Riccardo's Catering Hall, Bert Gulick is spreading the gospel of Amway's future.
"Don't be threatened," he tells about 125 mostly middle-aged men and women sitting in a small meeting room. "The Internet is going to be something to make your lives better."
These gung-ho Amway distributors have come to this New York City neighborhood to hear of good money and a richer life. The come-on is similar to the one that first lured them into the Amway family: Achieve your financial dreams by peddling everything from coffee to car wax to your family and friends and by recruiting them to sell, too.
But Gulick's spiel isn't really for Amway, the 40-year-old Ada, Mich.-based direct-selling behemoth known for its evangelistic distributors. It's for Quixtar, Amway's new company that will open for business on the Internet on Sept. 1. Like Amway, it will sell hundreds of consumer products at volume discounts through distributors. Also like Amway, those distributors will earn commissions on their sales and bonuses from the sales of distributors they recruit.
But there's one big difference: Quixtar (pronounced Quick-Star) is the marketing equivalent of a fresh start. It won't make use of the Amway name. Selling in cyberspace is the boldest move in Amway's history. It could eventually spell the end of its traditional business, experts say.
"It won't be immediate, and it depends on the success of Quixtar, but 15 or 20 years from now will be the end of the Amway protocol," said marketing consultant Ken Harris of Cannondale Associates.
Amway president Dick DeVos says there will be a market for both companies long-term. But, "eventually, Quixtar ought to be larger than Amway."
The timing is crucial. Amway gets 70 percent of its sales outside the United States, but last year worldwide sales fell 18.5 percent, to $5.7 billion. That was largely because of the faltering Asian economy and a three-month ban on direct selling by the Chinese government. It was the first decline in more than 10 years of steady growth.
In the United States, Amway's name often brings to mind salespeople who peddle Amway products to friends and try to recruit them.
"The Amway name is often a hindrance when it comes to recruiting other people, because of a preconceived notion," said Rebecca Schmitt, a 28-year-old distributor and office manager in Chicago. "They expect a little old lady in green sneakers knocking on doors."
It takes some prodding, but DeVos admits he's frustrated by Amway's image in the United States.
"The imagery that some people have around Amway -- the erroneous imagery -- does bug me," he said during an interview at Amway headquarters. "It's slick and pushy and aggressive. I look at that and then look in the mirror and think, 'I don't think that exactly fits.' I think we get really shortchanged with the image that has been perpetuated."
DeVos, who speaks carefully and punctuates his sentences with an Ultra-Brite smile, runs the company with Steve Van Andel, its chairman. Both 43, they are the sons of Amway founders Richard DeVos and Jay Van Andel.
One issue that doesn't help Amway's image is a long-running spat with rival Procter & Gamble. In the most recent lawsuit between them, P&G alleged Amway distributors used a voice-mail system in 1995 to tell customers that P&G's profits were directed to satanic cults. Earlier this month, a federal judge in Houston dismissed the lawsuit.
Amway executives don't come right out and say they're trying to leave behind Amway's image by giving their Internet venture a new name, but only Amway's founding DeVos and Van Andel families "who own and operate numerous successful business ventures worldwide" are mentioned on Quixtar's Internet site, www.quixtar.com.
"They're doing their level best to distance themselves from Amway, because it has incredibly negative overtones to people who aren't involved with it," Harris said. "And it's going to work. I believe Quixtar will be a $3 billion to $5 billion business in its first year."
David Rush, a retail consultant with Kurt Salmon Associates, agrees: "Externally, I see nothing but wins here. If they can leverage their large Amway sales force to drive more traffic to the Web, that keeps their administrative cost to a minimum while being a great marketing vehicle to drive sales. One of the challenges in marketing on the Web is getting the traffic there."
Amway isn't the first big company to sell products under another name. AT&T and MCI, for instance, offer discount dial-around services that don't identify their affiliations.
DeVos and Van Andel won't discuss sales anticipations. They do admit Quixtar will help them attract younger distributors. Amway's average distributor is in his or her 40s. Quixtar's will be 30-something, said Dave Van Andel, Steve's brother and Amway's senior vice-president of Europe and the Americas.
Indeed, at the Astoria meeting, there were several hip-looking young people among the mainly older, conservatively dressed attendees.
"The average age of the new people looking at Quixtar for the first time has been under 30," Gulick said. "That's great."
Although final plans are still being made, as of now Quixtar customers are supposed to enter a distributor's ID number when they buy something. If they don't, a randomly chosen distributor in the customer's ZIP code will get the commission.
At the Astoria rally, Gulick told listeners that prospective Quixtar distributors are being told they can make $200 a month or as much as $45,000 a year, depending on how hard they work.
Top Amway executives, however, won't discuss potential income for Quixtar distributors. For regular Amway customers, Quixtar could be a better deal because they may qualify for deeper discounts. Those discounts could cut into distributors' commissions, DeVos admitted. He said he thinks that will be offset by the reduced amount of time it will take to manage a Quixtar distributorship.
Amway distributors typically order, store and deliver products to customers and to distributors they recruit. Quixtar distributors need only refer people to the site, where they'll place orders with Amway.
Amway expects about half of its 750,000 U.S. distributors to join Quixtar.
"The word is change, and everybody fears it," said Theodore Pritchett, 41, an engineer and Amway distributor in Asheville, N.C. "Either we get on the Web and take full advantage of it, or we let someone else do it, and we play catch-up."
Others are more reticent. Even Gulick, 51, who has been host of more than 80 rallies for Quixtar around the country, hasn't decided if he'll join Quixtar immediately. He said he makes more than $200,000 a year from Amway distributorships around the world.
"We're making a decision without even seeing how user-friendly the site is," he said. "All of the new people who are seeing presentations are making a decision based on Quixtar, but there are a large number of existing distributors who will probably stay with Amway now and move over to Quixtar later. I've got people in my business who have no comprehension of computers and the Internet."
Amway doesn't sell many types of products that consumers can't get elsewhere -- sometimes for less money. Amway lists suggested retail prices on its products, but distributors can discount them. Customers like the convenience and personal attention.
"The personal contact is pretty powerful," Harris said.
With Quixtar, the company plans to spend much more on marketing. It recently hired two ad agencies, Ogilivy & Mather and Campbell-Ewald, and TV commercials, billboard and print ads are being tested. While P&G, the United States' second-largest advertiser, spends $1.5 billion a year on advertising, Amway has spent just $10 million, Competitive Media Reporting said.
"You're going to see a far more aggressive Amway in terms of marketing going forward," DeVos said. "We may be a little late, but we see clearly that that has to change. Reinventing a 40-year-old organization is a whole lot more challenging than just starting over."
