Amway to Meld Its Multilevel Marketing With E-Commerce : Online: The firm plans to launch Web unit Quixtar on Wednesday. It says its strategy won’t harm distributors.
Amway Corp. will make its long-anticipated foray into e-commerce Wednesday, launching an online version that will test multilevel marketing’s ability to survive in a medium that makes its person-to-person sales strategy seem as quaintly old-fashioned as a Model T.
Called Quixtar Inc., the new subsidiary will allow consumers to buy Amway cleansers, cosmetics and other products online. Amway’s distributors who sign up for Quixtar also will be able to recruit new members electronically and generate commissions through online sales of brand-name products offered on the site or via links.
Ada, Mich.-based Amway, which has about 3 million distributors worldwide, is the nation’s largest multilevel marketing company.
But like other so-called MLMs, Amway has struggled to expand its sales force as unemployment remains low and the Internet provides would-be entrepreneurs with other ways to build businesses. Coupled with the Asian economic downturn and a temporary ban on direct selling in China, Amway’s sales fell 18% to $5.7 billion in its last fiscal year.
“It was enough of a concern for us to come up with a bunch of strategies for growth, including this one,” said Clair Zevalkink, director of marketing for North America.
Amway executives hope the new name and medium can re-energize their business, which depends on a steady stream of new recruits to generate commissions for previous generations of distributors.
But few other direct sellers have solved the conundrum of creating Web sites that purvey products more efficiently and help distributors generate commissions and recruit newcomers.
“There’s a continuing struggle between channels of distribution,” said Bob Wientzen, president of the Direct Marketing Assn., a trade group of about 4,600 firms. “The companies depend on distributors to get out the products, so they have to figure out a way to do this without compromising the network even though they could sell directly to consumers.”
Other big direct sellers have struggled to strike a balance.
Tupperware enraged its distributors by opening an online store after dissuading sales-force members from starting their own sites. Nu Skin, another industry giant, charges customers an extra 5% if they buy its products online without being referred by a distributor.
“We don’t want our distributors to go out and get customers who then bypass them by going to the Internet,” said Corey Lindley, chief financial officer for the Provo, Utah, seller of health products, which last year earned $103.9 million on sales of $913.5 million.
Good strategy for boosting Nu Skin distributors’ commissions--bad way to maximize the potential of Internet sales. So far, online sales account for just 1% to 2% of Nu Skin’s revenue, although the company expects that figure to grow to 10% within five years.
Amway executives said Quixtar will align the company’s interests with those of its sales force.
The site will offer not only Amway products but a catalog of 900 brand-name items and links to partners’ stores, including IBM Corp.’s computer shop, Paul Fredrick’s men’s clothing and Landscape USA’s gardening supplies.
“No question, it expands the profit potential and appeal,” said Lee Kessler of Glendale, who has run an Amway distributorship for 17 years. Come Wednesday, Kessler said, she will switch her business primarily to Quixtar. No matter which part of the site customers shop, distributors receive commissions on their purchases.
Distributors’ personal connections to their customers--who often are friends, relatives and neighbors--will be what distinguishes Quixtar from other shopping sites, Amway executives said.
The firm will bypass the expensive billboards, TV commercials and Web site banners that other e-commerce ventures have used to spark interest, relying instead on word of mouth.
“We still believe there is tremendous benefit in that one-to-one connection,” Zevalkink said.
Wientzen criticized that approach, warning it would limit the number of Quixtar users.
“It may keep some of their existing customers from being cannibalized, but it’s going to give them a very limited ability to expand beyond them,” he said.
Amway executives declined to say how large they expect Quixtar’s sales force to be or how deeply the virtual network may cut into the firm’s traditional distributor base.
* EMOTIONAL MESSAGE: The Times interviews producer of Emmy-winning ad. C4
