Amway: the surprising growth of a cult-like company in China

Multi-level marketing (MLM, 传销 chuánxiāo) or direct selling is a business model where a company relies on its own customers to sell its products. The customers make a commission not only on their own sales, but also on sales of their own customers who are recruited as salespeople. This is essentially the business model of a pyramid scheme, which is how some observers describe America’s largest MLM companies such as Amway and Herbalife.

• In August, the Chinese government began a crackdown on gangs running pyramid schemes. Shares in Herbalife tumbled.
• By the end of the month, armed police in southern Guangxi Province had arrested more than 1,200 people for having links to a 360 million yuan ($54.6 million) pyramid scam.
• In October, official announcements about the death of a young man who was involved in a pyramid scheme brought the topic back into public discussion.

That’s Beijing has now published a feature on the operations of Amway in China. Noelle Mateer writes that Amway has opened massive propaganda-style ‘experience centers’ across China (one just opened in the middle of Beijing’s Sanlitun area this year), partly to get around the country’s strict anti-MLM rules.

• MLMs were banned in China in 1998, but anti-MLM legislation passed in 2005 paradoxically cleared the way for Amway to re-enter China because it defined what the company needed to do to avoid being labelled a pyramid scheme.
• The legal workaround is the construction of show rooms or “experience centers” that allow MLM companies to sidestep rules against direct sales networks.
• U.S. Education Secretary Betsy de Vos is married to Dick de Vos, former CEO of Amway and son of one of the company’s founders.

• Geely Geely Bang Bang
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