Named after the expression “American Way”, this company has already been one of the top-performing businesses in the world, also featured in the Forbes Magazine. The Amway business model is currently based on direct selling and multi-level marketing and has faced some controversies in the past.
Let’s go a little deeper into the Amway business model, which starts back in 1959.
A brief history of Amway
Amway was founded in 1959, by two childhood friends: Richard Devos and Jay Van Andel. Before that, they had already been partners in other businesses, and their Amway history starts with the introduction of Nutrilite products.
Neil Maaskant, a cousin of Van Andel’s had introduced Nutrilite to the duo, and, despite both of them hadn’t shown any interest, Maaskant was able to convince them to attend a meeting in Chicago, and they then decided to move on with the brand, thus making him his sponsor. Devos and Van Andel became Nutrilite distributors, and they enjoyed the way they did business since they made a profit not only by selling their products but also through commissions that they earned on the sales of other distributors, that they had introduced to Nutrilite — it is what, today, is called multi-level marketing.
Van Andel and Debos built a successful organization with over 5,000 distributors. So, in 1958, along with those distributors, they formed the Amway association.
After that, they got the rights to manufacture an organic cleaner, one of the world’s first biodegradable multipurpose cleaners, which became a high-seller and established a secure base.
Three years later, Amway acquired the Nutrilite brand, and, in the next decade, they would begin its expansion worldwide.
Nowadays, Amway is one of the largest private American companies, with an estimated revenue of 8 to 10 billion dollars annually.
Who Owns Amway
Amway, which is officially called Amway Corporation, Inc., is still up today, owned by one of its founders, with Steve Van Andel being the Chairman. Since January 2019, the CEO position is occupied by Milind Pant, a businessman that was the former president of Pizza Hut International for about 10 years.
Amway’s Mission Statement
To help people live better lives, by offering people a business opportunity that allows them to succeed through their own hard work.
How Amway makes money
Amway sellers are not called contractors or distributors, but Amway Business owners. Anyone that wishes to become an Amway business owner must pay a registration fee to start. This fee varies according to the country that which it is held.
Amway manufactures more than 450 products and the majority of its revenues comes from the sales of these products, through multi-level marketing. The ABOs (Amway’s business owners) make money in three ways: one by selling products directly to the customers, another when they get bonuses if the sales volume is high, and the last one through incentives when the business grows.
Currently, nutrition and wellness products are responsible for approximately 52% of total sales, and beauty and personal care products are responsible for around 26% of total sales. Nutrilite, Artistry, eSpring, and XS are some of the top-performing brands of Amway.
Amway’s Business Model Canvas
Let’s take a look at the Amway Business Model Canvas below:
Amway’s Customer Segments
Amway’s customer segments consist of:
- Independent contractors (Amway’s business owners)
- The general public (consumers)
Amway’s Value Propositions
Amway’s value propositions consist of:
- For ABOs: To choose their own hours and earning potential, and to earn money through commissions;
- For consumers: Well-known, trustful, and respected brand; quality products.
Amway’s channels consist of:
- ABOs network
- Website and app
- Social network
Amway’s Customer Relationships
Amway’s customer relationships consist of:
- Customer support
Amway’s Revenue Streams
Amway’s revenue streams consist of:
- Direct sales
- Registration fees
Amway’s Key Resources
Amway’s key resources consist of:
- Intellectual property and formulas
- Sales network
Amway’s Key Activities
Amway’s key activities consist of:
- Product manufacturing
- Marketing and sales
- Inventory management
Amway’s Key Partners
Amway’s key partners consist of:
- ABOs network
- Distribution network
Amway’s Cost Structure
Amway’s cost structure consists of:
- Raw materials
- Manufacturing and operations
- Labor force
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- Avon: The giant retailer founded in the 19th century (1886) is a worldwide manufacturer and marketer of beauty, health, cosmetics, and other related products;
- Walker & Company Brands: As the company itself states, this retailer founded in 2013 aims to “make health and beauty simple for people of color”;
- Oriflame: With over 50 years of existence, this company manufactures and distributes consumer goods, mainly cosmetics, health, and beauty products;
- Purplle.com: An online portal, founded in 2011, that sells consumer goods, including cosmetics, skincare, haircare, health, beauty, and fragrances.
Amway’s SWOT Analysis
Below, there is a detailed swot analysis of Amway:
- Presence: Amway is one of America’s largest privately held companies, and it is present in more than 80 countries with over 3 million business owners;
- Range of customers: Its consumers encompass the mass market, from babies to the elderly.
- Awards: such as the Year Award for Asia Pacific Frost & Sullivan Filtration Company, LEED gold certification, and more;
- Range of products: It manufactures and sells products in five categories, including personal care, home care, diet and wellbeing, cosmetics, and gift catalogs. Some of the products are very famous;
- Financials: Amway has an extremely strong financial position.
- Restricted availability: Amway products can be only acquired through direct sellers or online sellers of the company, which lowers its market share;
- Cost: Its products are relatively expensive, thus confining the target market to the luxury category;
- Advertising: The brand does not advertise on TV or similar mass media, depending exclusively on word of mouth ads.
- Expansion: The company can increase the availability of products in international markets;
- Online market: Online shopping can be a good way to reach a global market;
- Partnerships: The company can partner up with chains of beauty salons and health experts;
- Media: Amway can invest in communication and explore opportunities for advertising, such as digital marketing.
- Competition: There is increasing competition in both national and international markets, with very low switching costs, also being easily replaced by local products;
- Rising costs: The rising technology and raw material costs may pose a potential threat.
National and international rules and regulations: governments’ rules and regulations may affect and restrict the business of Amway.
To end the conversation about the Amway business model, it is important to say that the company and its board have been subject to several controversies during the brand’s history because their business has been mistakenly confused for a Pyramid Model.
However, in a pyramid model, people can make revenue by simply recruiting new members. According to the brand, participants of Amway, unlike that, rely on a granted hierarchy of members who purchase, retail, and further spread out this sequence, characterizing more of a network than a pyramid itself.