FEBRUARY 15, 2012
Inside the Amway Sales Machine
Wall Street Journal
By DENNIS K. BERMAN
LAS VEGAS—Holly Chen is a former first-grade teacher, just over 5 feet tall, with a taste for sequins. You wouldn't know it by looking at her, but this 68-year-old grandmother is one of the most prolific salespeople on Earth.
Late on this January night, in a cramped casino ballroom, some 1,100 people rise to greet Ms. Chen. Cameras flash as she strides across stage in black patent-leather boots. The mood takes an unexpected turn when she starts by talking about her late mother. Soon she is in tears.
"The most powerful weapon is to move somebody emotionally," she says later, speaking Mandarin throughout. "So if you send out a signal as love, you will receive the same signal back."
Ms. Chen is a kingpin of the emotions business. Over three decades, she and her husband have become the single largest Amway Corp. distributor in the world, motivating a commission-based army of some 300,000 salespeople. As members have recruited new reps, the network has spread from Ms. Chen's base in Taiwan across Hong Kong and mainland China to Chinese immigrant communities in the U.S., France, Spain and Russia.
Holly Chen is a former first-grade teacher. But she's also become one of the largest Amway distributors in the world, with an army of some 300,000 salespeople and a loyal following within the organization. The Game columnist Dennis Berman reports from an Amway gathering in Las Vegas.
They call this multilevel network chao fan, which means "extraordinary." It has grown more than 30% each year since 2009. Today, Ms. Chen directs one in every 10 Amway reps—getting a cut along the way.
Her total haul is estimated by one direct-sales magazine at $8 million a year. "I don't even know how much I make," she says to the group gathered in Las Vegas, part of the U.S. branch of chao fan.
Turns out these are flush days for Michigan-based Amway, which sells its own brands of cosmetics and personal products. Across developed economies, the recession has brought in a new wave of moonlighting Amway reps. Growth is much stronger in Latin America and Asia, where emerging consumers are keen to make a few extra dollars. Today, Amway derives 90% of its sales outside the U.S.
Sales last year for the closely held company, to be released Feb. 23, are expected to top $10 billion for the first time, a person familiar with the matter says. That is up more than 10% from 2010.
The times have also brought an unexpected endorsement for Amway's long-controversial ways of direct selling. Across industries, companies are rushing to link directly to customers via Facebook. They're now experimenting with how to turn those connected groups into a shadow sales force, paying commissions for referrals.
So it is here in Las Vegas, amid the buzz of Mandarin and Ms. Chen's exhortations about the value of making friends, when the jarring realization sets in: Of all things, of all places, perhaps the future of business looks like an Amway convention.
It is an elaborate ritual, choreographed to inspire longing. The lights are dimmed, and a video shows Ms. Chen and her husband, Barry Chi, riding in a red Cadillac convertible at a parade in their honor. In another clip, Ms. Chen, who boasts of being one of Chanel's top 50 customers, steps from a private jet. In others, she leads massive rallies across Asia, at one point filling a 21,000-person arena in Taiwan last fall.
Eleven years as a grade-school instructor have given Ms. Chen a tough but motherly tone. Her flock calls her laoshi, Mandarin for teacher. And it is her job to turn their longing into action.
Amway is 'designed by God, only for me,' Holly Chen says.
Glamour makes scant appearances in the lives of most Amway reps. The average North American salesperson grosses—not nets—about $200 per month, according to the company. Amway has agreed to a $155 million class-action settlement with former U.S. reps who alleged the company used deceptive practices and misled them about profits. Amway didn't admit wrongdoing but vowed to "transform" how it does business, focusing less on recruiting new salespeople and more on actually selling products.
If there are any such doubts for Ms. Chen, she has long since erased them. "I always think Amway is a system that's designed by God, only for me," she says.
Success begins with raw belief. "So when you're in the Amway business, of course you change your mindset, you change your attitude, and your outcome will definitely change with it."
The message registers with Paul Chen, a Canadian distributor who is in the front rows of the Las Vegas talk,. The key step is to "open your mind, forget your past, your profession, your job…and come here and learn about it," he says.
Ms. Chen favors simple stories and homilies, which the attendees scribble down in earnest. Her hours-long lecture is a mesmerizing romp of set pieces and extemporaneous patter, jumping from Christopher Columbus, to Egyptian pyramids, to the Great Wall, to Bill Gates. She loves Ronald Reagan stories, telling how he gained goodwill by serving as head of the Screen Actors Guild. "It's up to us to elevate ourselves to be givers," she says.
The talk is also dominated by Ms. Chen's own history. Life was so bad in her fishing village that even rice porridge was a luxury. Teaching eventually gave way to Amway. And it is there where Ms. Chen thrived, finding prospects at casino tables and in the line for the bathroom (talk to the people behind you, not in front of you, she advises).
The U.S. opened to her in 1986, when she appeared in an interview on Chinese-language TV in Houston. A former student spotted her, which led to the connection that formed the U.S. branch of chao fan. When mainland China approved direct selling in 1995, Ms. Chen says she made her first connection by asking for a restaurant recommendation on the street. "That is how we made friends. And then we told him about the business."
Her eyes sweeping the Las Vegas ballroom, Ms. Chen lays out her emotional proposition. The crowd takes it in, nary a doubt in mind. "You have to know the inside of people, rather than the outside of people," she says. "You've got to know their hearts."
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I don't know what would have happened if my oldest brother had not been there to help me deflect the brainwash. My brother's a guitar-picking truck driver with a taste for scientific and literary reading, and very little nonsense about him. Even so, I thought we'd never get rid of that Amway guy.
They are unrelenting in their attempts to convert new believers, shameless in their manipulation of friendships and any kind of emotional connection, and frighteningly rigid in their indoctrination.
I went through an Amway pitch once soon after I exited CUT @ 1980. I spent around 3 hours at his home--it took 2 hours before Amway ever came out of his mouth. I took some tapes home but returned them after listening to a few. The pitch as all about technique. There is a set-up with lots of "yes set" questions: Wouldn't you like a big house, more free time, extra money to give to your favorite charity, time to study at any college to improve your worth, the support of one of the finest companies in the world, a great art studio....blah, blah, blah. Then the self sell about how good he was doing, how much happier he was, etc.
But I did get emotionally caught up with it at first--very disturbing. Very much like Unification Church-Moonie indoctrination, same pattern, although the moonies will work on recruits for several days before revealing who they are and Rev Moon as messiah. Amway condenses the process but uses similar "religious" conversion techniques, much the same as evangelists are trained to do when witnessing.
We still have a friend in Amway she has been in since 1975, her Garage still full of products but she has stopped recruiting longtime ago, I remember going to many meetings at her place from 1975 to 1978, at that time the focus look to be more about Products and building a relationship with her Line then really brainwashing like it is today (my Nephew still in Amway) Joe you are right, I have seen him talk to someone and never mentioning Amway, he do not talk to us about it anymore
Under what category Amway falls. Is it a Cult ? Is it Scam ? What is it exactly?
I think that, as a job, it is somewhat exploitative. The products are often the focus, though, rather than recruiting. Too many reps may mean too much competition for the individual salesperson. They get families to buy every single household product from them, generating ongoing repeat business.
It worked for the first one because his community was somewhat remote, and people might have had trouble getting, say, enough laundry soap to last the winter. It doesn't work so well in a big city, where people can pop around the corner for a comprarable or better product, and don't need to form a relationship with a rep. The products I've tried are not bad, but will not change anybody's life in a dramatic way. And it is "relationship" selling. For people who feel isolated, I guess, the jugular they go for is that now there is a social contact who will become their new BF and hook them up with other 'friends'.
It is no worse or better than most big corporate entities.
The seminar was irritating to me. I wondered what the purpose was. The lecturer excused himself for a few moments, and looking around the room I noticed a giant poster of a beaming Sum Yung Moon. Aha, I thought. I blocked out the rest of the lecture. The guy went on for another 45 minutes. Then the nice hippies asked me to stay for lunch. I did. I felt sorry for them. Chat was pretty neutral. I made the mistake of signing their guest book, and providing my phone number. One of them called and asked if I wanted to jam with her (I played the flute). I politely declined. Another one called and said they were having a youth retreat, and it would be really fun, and would take place a few miles out of town that weekend. I pretended to consider attending. Then, the one who had wanted to jam with me called, and warned me not to go! She said they starve you, chant at you, don't let you sleep, and then after you fall apart they offer to put you back together again! Bless her, she was not as indoctrinated as they thought.
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A couple of years later, I got a mailing about a new "multi-level marketing" program, called Yurika Foods, which was just starting. I joined and used the Amway recruiting methods to start recruiting sales people, with the pitch that this was just starting, with room to grow, unlike Amway, and recruited a lot of the Amway people. Within 3 months I got a check for over $3000 for the month, but then it started to level out, and my check dropped to $700/ month, but still pretty good money for that time. Then the ones who started it took the money and ran, declaring bankruptcy.
Those type programs are nothing more than Ponzi schemes, made legal by selling products. The first ones in, in an area can build a group and make money, but it ultimately saturates, and the losers start dropping out and the whole thing must start over in a new area. Amway has lasted so long because they are all over the world, and can return to old areas after a new generation grows up.
you nailed it--a multilevel marketing scheme but with cultic features. The pyramid scheme applies to most any organization---wealthy owners, CEOs, ad major investors are at top and stooped labor, paycheck Jennies and Joes on the bottom. As long as the paycheck crowd is properly compensated, society can run fairly well.
The insidiousness of Amway is that it uses well-known manipulation techniques to recruit then "manage" a downline of cells of people working for you. iow, the scheme of MLMs has a built-in failure rate due to
1. rapid product saturation in any town or region
2. emotional conviction wears off on anyone who discovers after 5 to 6 months of hustling and doing exactly as you are directed, that suddenly you have a garage full of Amway or MLM crap.
(of course, a small percentage float to the top of this human heap, and those are the ones who shout the loudest, like gamblers who win)
The upline depends on brainwashing a large percentage of new folks to hoard product.
If all of America ran on the Amway system, this country would become a fascist state in short order but one that blamed the downline for not trying hard enough. The topline succeeds by "encouraging" downline to keep attending "training, workshops and rah rah rallies" until they got it "right." Many MLM leaders make their bucks not on product but on the expensive workshops or mass therapy intensives to learn how to get rich by "improving" yourself first..
The struggling downliner has to go to endless Tony Robbins-like seminars to keep up the positive energy that is supposed to magically bring the cash and happy heaven on earth thing into your life.