Business: Amway's Way

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Success in the school of light knocks

Jay Van Andel is an ardent advocate of the free enterprise system and fully enjoys its rewards. He is chairman and co-owner of Amway (a contraction of American way) Corp., one of the nation's most successful private firms, which is engaged in what he calls "in-the-home selling." In this its 20th year, Amway expects to retail $750 million worth of cosmetics, vitamins, jewelry, home-care products and some 4,000 brand-name appliances and other items direct to customers through catalogues by a network of 300,000 door-to-door salespeople. Amway's achievements are evident not only in its fleet of four corporate jets, its 119-ft. yacht (a 131-footer is on order) and its modern, saucer-shaped headquarters near Grand Rapids, but also in its founder's wealth. FORTUNE has estimated that Van Andel's personal net worth ranges from $300 million to $500 million.

Early in May, Van Andel, 54, the tall, sandy-haired grandson of an immigrant Dutch bicycle salesman, began a one-year term as chairman of the U.S. Chamber of Commerce (membership: 84,000 companies, organizations, state and local chambers and individuals). Voted in by the Chamber's board, Van Andel expects to fill his traditionally figurehead role by making speeches and TV appearances, attending White House meetings and testifying on Capitol Hill in behalf of business.

For the past four years, the Federal Trade Commission has been investigating Amway on a variety of charges that include fixing the retail prices that its independent salespeople could charge, allocating sales territories and misrepresenting the amount of money that distributors could earn. Last July an administrative-law judge in Washington threw out most of the FTC'S charges, but found that Amway was guilty of fixing prices. Amway officials contended that the practice had been discontinued in 1972. The judge's decision pleased neither Amway's nor the FTC'S lawyers, and both filed appeals. A ruling on the case by the four-member commission is expected soon.

Van Andel started Amway in 1959 with Richard DeVos, a Grand Rapids high school chum who is now president and the other co-owner of the company. The two had joined a number of small enterprises after World War II, including a restaurant, a flying school, a commercial air charter service and a distributorship for Nutrilite. The two left to start Amway, taking with them a number of discontented Nutrilite distributors. The first product that Amway marketed was an all-purpose liquid cleaner called Frisk, and today soaps and detergents remain the core of the business.

All items are sold by "distributors," who are in effect door-to-door salespeople and earn a 30% profit on volume. Usually people with other jobs, they join Amway for extra income. They buy their wares from higher-level "direct distributors," who also sell door to door. Regular distributors are urged to become direct distributors themselves, and they do so by recruiting, training and supervising new salespeople. Though the direct distributor is not paid for signing up these recruits, he does make additional money by selling Amway products at a slight mark up to the distributors under him. To keep sales expanding, the new distributors are then encouraged to sign up recruits of their own.