Quixtar's 'tool' trouble

The Grand Rapids Press/December 18, 2005
By Rob Kirkbride

Dallas -- They sell thousands of dollars of detergent, cosmetics and other products every year for Quixtar.

But more than 3,000 salespeople packed into the Gaylord Texan Resort in hopes of selling even more.

The Ada-based Quixtar, once known as Amway, booked nearly the entire luxury resort for its Achievers event -- a free bonus trip for high producers.

Between golf, shopping and elegant buffets, these independent business owners (IBOs) got an eyeful of Quixtar's new lines of makeup, soaps, energy drinks and water-treatment equipment.

But within the sales ranks, there is another, more controversial product being bought and sold not to customers but to fellow distributors: Motivational CDs, books, tapes and seminars.

Commonly called "tools" in the Quixtar world, most of these items are created by IBOs at the highest levels. They are designed to keep people selling and to recruit others into the business.

Critics claim the "kingpin" distributors make more money off the tapes, meetings and books than selling Quixtar products. They also complain that lower-level salespeople fork over a lot of hard-earned money for the materials.

Profits from those materials are at the core of a lawsuit in Missouri that has ensnared Quixtar and several large distributors.

Keeping the sales force motivated is big business among the distributors of Quixtar, the Web-based, direct-sales organization that morphed from the Amway business in North America six year ago.

At the heart of this controversy is this behind-the-scenes business within a business that operates mostly outside of Quixtar.

Distributors such as Orrin Woodward, of the Flint area, are known for their huge, inspirational gatherings.

Woodward leads a network of Quixtar dealers called "Team," and routinely packs thousands of distributors into venues such as the 10,500-seat Breslin Center in East Lansing and the 4,400-seat DeltaPlex in Walker.

Grand Rapids contractor Cody Dalenburg joined Woodward's Team line Aug. 1, and appreciates its motivation materials and events.

"The ones on the system have the most success," he said. "People who aren't on the system, they tend not to get results."

In Dallas, Hawaiian distributor Brad Bransford said he also gets a boost from them.

"If not for the business-support materials, I wouldn't be here right now," said the distributor from Mililani, Hawaii.

"Even if I weren't in the business, they would have been good for me and my wife," he said. "It gave us a common goal."

Selling motivation

Eric Scheibeler was a happy Amway and Quixtar distributor who built a substantial business and recruited many friends and family members into the organization, including his father.

The organization he built over nine years from his central Pennsylvania home included thousands of salespeople in his "downline," the group of distributors below him.

He was determined to succeed. And he was going to help his friends and family succeed, too.

But Scheibeler became disenchanted when he realized virtually every member of his downline was spending more on support materials than they were taking in from their Amway business.

"At the peak level, we were founders emeralds, and we were supposed to be making $100,000 to $150,000 a year," he said. "Before taxes, I found we were making $34,000 and that was through an unbelievable Herculean effort working seven days a week."

He said he left the business $100,000 in debt, mostly from the purchase of support materials.

Scheibeler, who walked away in 1999, now is an active opponent of Quixtar and its related tool systems.

He is involved in sales and marketing for a small electronics firm. In his spare time, he fields questions and collects testimonials about Quixtar.

He even wrote a book titled "Merchants of Deception" detailing his experiences with Amway and Quixtar. The electronic book is available for free at merchantsofdeception.com.

Scheibeler said IBOs are led to believe they must buy the CDs and attend the seminars to be successful.

"We were used as dupes to take millions of dollars from good people," he said of his years.

"I'm not doing this out of hate or revenge," he said. "I'm doing what Rich DeVos should have done 20 years ago and that's protecting the distributor force.

"I'm giving them a voice."

Quixtar rules are clear: No IBO may ever require another IBO to purchase any support materials.

"You are encouraged to buy the CDs," said Dalenburg. But "no one ever forces you to buy them. Absolutely not."

Dalenburg said he happily spends $6 a week on a motivational CD, $10 to $20 on a book of the month and about $25 for a monthly motivational seminar.

That can mount up for the average distributor, who, according to Quixtar, makes $115 a month.

'Nonstop' pressure to buy

Chip Minto, a former distributor from Philadelphia, said he spent as much as $800 to $1,000 a month on the motivational events and materials. He was earning, on average, $85 a month.

"It gets ridiculous," he said. "And it's nonstop. You're paying for something at least once a week. If you didn't have something to do (a business seminar) on a weekend, you were lucky."

On the other hand, every industry has motivational tools, and Quixtar is no different, said Steve Wiertsema, of Rochester, Minn.

Wiertsema, an Emerald level distributor, works full time for IBM and was the project manager on the computer chip used on Microsoft's XBox 360.

"At my level, any tool money that is made is used to cover the cost of the business," he said. "I don't think the tools are excessive. Do people think that we're too dumb not to know if that was happening to us?"

Quixtar acknowledges problems with the tools business.

Managing Director Jim Payne said Amway co-founder Rich DeVos left a long legacy as a motivator.

"When you look back at the history of the company, motivation and training have always been important elements of the business," he said.

"As we grew, we made mistakes with it," he said. "The last four to five years, we've done a much better job and set up safeguards to protect IBOs."

The company -- part of Ada-based Alticor -- is working to create "transparency" so new IBOs know what to expect and what the rules are, Payne said.

There are 48 pages of rules that outline the conduct of Quixtar IBOs, said Rob Davidson, vice president of sales and marketing.

Davidson previously served as the company's vice president of global business conduct, rules and business support materials.

"A high 90s (percentage of people) do things the right way," he said, adding the company has kicked out high-level distributors for rules violations.

Personal conduct

The company keeps a close eye on rules and ethics.

"Reputation is one of the keys to the Quixtar business," Payne said. "We are more interested in responsible sales than sales at any cost."

Quixtar has specific rules designed to protect against abuses.

Support materials are "entirely optional, and IBOs who choose to sell, purchase or utilize such (support materials) must comply with this rule," according to the company's Rules of Conduct.

The rules, available at Quixtar.com, also make it clear the company does not "endorse the representations made in any (support material)."

Furthermore, IBOs who sell them "shall not say, suggest or imply that the use of any such materials will guarantee success or that the corporation requires the use of any BSM."

The rules have teeth, Davidson said.

The first step in disputes concerning these materials is a warning.

In extreme cases, the company can suspend the business, withhold bonuses or terminate the business, he said.

"At any given moment, there is a number of arrows in our quiver," he said.

"We're not out there headhunting, but we're not afraid to make sure people are doing the right thing."