Amway Goes Astray in China

“Amway” Goes Astray In China

Amway is a multi-level marketing (MLM, also known as network marketing) company founded in 1959. The company's name is an abbreviation of "American Way. Its product lines include personal care products, jewelry, dietary supplements, water purifiers, air purifiers and cosmetics as well as other products from top brands.

Amway is one of the largest international direct selling companies and entered China in 1995. Their entry into the Chinese market resulted in big profits and high potential for future growth. However, in 1998 the Chinese Government declared a ban on direct selling which threatened a substantial market for Amway. The reason the Chinese government decided to prohibit direct selling is because they believed Amway's direct-selling techniques could spread heretical religion and the start of secret societies. Chinese officials believed the ban was totally necessary because Amway’s distribution and marketing policies were indicative of illegal activities.

The original intent of Amway's founders was to create a business using a novel means of product distribution that facilitates entrepreneurialism, understanding of economic management, and economic independence among its associates (i.e. distributors; the term currently in use is Independent Business Owners, or IBOs).

Amway's marketing structure is based on personal connections in order to recruit new salespeople, called distributors. These are independent agents who rely on close connections such as family, friends and co-workers as customers. To move up the hierarchical ladder, a successful agent will sell more and more products through this network of people. The circle gets bigger and bigger as one distributor is suppose to recruit others to join Amway. The pyramid and recruiting method which Amway distributors use has been branded for cultic recruitment.

The Chinese government became frightened of the potential chaos Amway's direct selling technique could cause in China. The Chinese government's concern involves Amway's system of independent networks and door to door sales techniques. Amway's emotional motivation meetings scared Chinese officials of possible social chaos.

The government's opposition toward direct-sales businesses also originated from the concern that giant mass organizations could become alternatives to China's Communist Party and could challenge loyalty to the party.

This fear may possibly be justified given the fact that Chinese society was standardized under the communist party for many years and Chinese people were already prone to become homogenous under a new concept as the one that Amway suggested.

In addition, in the Chinese society where "face" is almost everything, a business that relies on connections can be complicated. The Chinese invented the phrase, "It's not what you know; it's who you know”, so the fact that connections and personal relations serve such an complex part of Chinese culture, could explain why China's officials took such drastic actions in April of 1998 by cutting off all direct Amway sales and recruiting methods.

There have been severe criticisms of Amway's multilevel business model. Although, its promoters claim that it is a business model that is growing in acceptance, and that success will come to anyone who believes in the system and adheres to its methods, it is mostly based on deceptive marketing that plays upon social and personal needs rather than its ability to meet any consumer needs.

This market grows significantly in times of economic transition and globalization. Promises of quick and easy high income, low time requirements, small capital investments and the linking of wealth to happiness also play in this market setting.

Retailing directly to friends on a one-to-one basis requires people to drastically change their buying habits. They must restrict their choices, often pay more for goods, buy inconveniently and engage in business relationships with close friends and relatives.

Multilevel marketing's growth does not reflect its value to the economy, customers or distributors, but the high levels of economic fear, insecurity, wishes for quick and easy wealth.

The commercialization of family