Business - CEO Q&A Amway CEOs talk global growth, fathers' lessons

By Emily Fredrix

AP Retail Writer

NEW YORK (AP) -- Steve Van Andel was a child when his father started direct selling giant Amway with childhood friend Richard DeVos in 1959. Doug DeVos, Richard's youngest son, wasn't even born yet.

Both men grew up watching -- and then helping -- their fathers run the business, which hit $8.4 billion in revenue in 2009. It relies on a network of independent salespeople to sell its products, which include vitamins, cosmetics and cleaning products, and recruit other salespeople.

Now the men, as co-CEOs, are pushing hard to build on the company's rapid overseas growth (China is already its biggest market), and improve its image at home with a national advertising campaign.

Business is changing as Amway, based in Ada, Mich., expands. Chinese laws on direct selling required it to set up storefronts for the first time. The storefronts worked so well, Amway plans to export the idea elsewhere, though it still doesn't plan to put its products, such as Nutralite vitamins and Artistry cosmetics, in traditional retailers like Wal-Mart.

The company is airing national TV commercials at home to reintroduce shoppers and potential sellers to Amway. Its reputation has suffered over the years over accusations that it recruits salespeople by selling them unrealistically big dreams and makes money by selling sales training materials and seminars, rather than products.

The Federal Trade Commission concluded it was not an illegal pyramid scheme after years of investigation in the 1970s. Amway says the average U.S. seller makes $115 a month. It also says the vast majority of its revenue is from sales of its products.

The company dropped the Amway name in 2000 in the U.S. and Canada, and instead went by Quixtar. But as its 50th anniversary approached, it decided to revive its original name, short for "American Way."

The rebranding came after DeVos' older brother Dick spent more than $35 million of his own money on an unsuccessful bid for governor of Michigan as a Republican in 2006. The family is a major Republican donor, and in the 2008 election cycle, Doug, his sister-in-law Betsy and other family members donated more than $25,000 each to the Republican National Committee.

Van Andel, 54, and DeVos, 45, spoke with The Associated Press about Amway's future and lessons from the past.

Q. Where are you focusing as you expand around the world?

VAN ANDEL: We certainly spend time in Asia, but part of that is for the future as well. ... Our business is based on people and how many people there are. Well, there's a lot of people in India and there's a lot of people in China.

But we've also shifted gears a little bit, too, because over the past couple of decades ... our focus has been on geographic expansion. (At) the end of the '80s, the beginning of the '90s, we were 70 percent U.S. business. We've now flipped that to a point where we're in 80 markets and territories and 90 percent of our business is outside the U.S.

We're available to most of the world's population, so now we've got to take a look at the markets we're in and try to figure out how to get better market share.

Q: How does the business differ in the emerging markets?

VAN ANDEL: In India, we recognized that our regular product, our bottle of soap, was way too expensive for people to buy there. So we had to figure out a different way to do it. We now sell products in little sachets that are (single-use) or just a couple of (uses). ... It's right along the lines of what they can spend on a weekly basis. They have a very difficult time spending that much on a large bottle of soap.

That whole concept of sachets -- we've taken from India and started using them all over the world. Some places like South Africa, they need it for the same reasons. Other places like (the U.S.), we use them for samples.

Q: How does a recession affect your business?

VAN ANDEL: When the economy turns down, we tend to find two things. ... Order size tends to shrink. That's exactly what's happened a little bit.

On the other hand, when people are looking for a different income, we tend to get more people coming into the business ... so they tend to offset each other. Sometimes it offsets enough. Sometimes it doesn't quite offset enough. But that dynamic is happening right now.

Q: What lessons did your fathers teach you?

DEVOS: It was always them together, and when they had a challenge in business it was always, 'We're never going to blame each other, and we're never going to say I told you so.' So they taught us to work together in a spirit of partnership that stands the test of time. ... If anything goes wrong we're going to fix it together and even if we disagree we're going to work through it together.

Q: Was there pressure to join the family business?

VAN ANDEL: From my father's standpoint it was always, 'I want you to do what you want to do, and if you'd like to go into the business, I fully support that. ... I'll help you do whatever it is you want to do, but if you end up in the business it's because it's what you as a person want to do.' So having that it was no pressure was wonderful.

Q: What advice do you have for entrepreneurs?

VAN ANDEL: The best advice is don't give up. Stick with it. ... Sometimes it looks like things are starting to fall apart and close down. But if you stick with it, ultimately you'll find a way through.

Q. Do either of you have any plans to run for office?

VAN ANDEL: Too much going on in the business.

DEVOS: We really like Amway.

Published: Tue, Jun 1, 2010