Quixtar

Quixtar

Quixtar is a multi-level marketing (MLM) or network marketing company, founded on September 1, 1999 in Ada, Michigan. It is privately owned by the families of Rich DeVos and Jay Van Andel through Alticor which is the holding company for businesses including Amway, Quixtar, Fulton Innovation, Amway Hotel Corporation, Gurwitch Products and manufacturing and logistics company Access Business Group. After the launch of Quixtar, it replaced the Amway business in United States, Canada and the Caribbean, with the Amway business continuing to operate in other countries around the world. Company officials confirmed in June 2007 that, over the subsequent 18 to 24 months, Quixtar will merge with its sister companies of Amway organizations around the globe to form under one new name Amway Global. .

Quixtar is also a member of the Direct Selling Association and the Better Business Bureau.

Definitions

IBO - Independent Business Owner is a business partner of Quixtar who is authorized to market and distribute products and services available at Quixtar's website.

PV - Point Value is the value assigned to each product or service sold at Quixtar. All bonus bracket depends on total PV in a month. This number is 29% of the retail value.

BV - Business Volume is typically the wholesale cost of the product or service sold at Quixtar. Performance bonuses are multiplied by the groups total BV.

Performance bonus is the reward paid by Quixtar to IBO's who generate sales for Quixtar worth 100 PV or more in a month. The higher the PV, the greater the percentage.

Sponsor is an IBO who refers (sponsors ) a new IBO to Quixtar.

Upline is the term used to refer all the IBOs up in the line of sponsorship of an IBO.

Downline is the term used to refer all the IBOs down in the line of sponsorship of an IBO. They are collectively also known as group

History

Rich DeVos and Jay Van Andel initially founded the Ja-Ri Corporation, a multi-level marketing distributorship for Nutrilite products, in 1949. Ja-Ri was incorporated in 1959, and changed its name to "Amway" in 1963. As of 2007, Amway operates in more than 80 countries around the world. In 1999, the founders of the Amway corporation launched a sister Internet-based company named Quixtar. The Alticor corporation owns both Amway and Quixtar, plus several other concerns. Quixtar replaced the North American business of Amway in 2001 after the majority of the distributors moved to Quixtar, with Amway operating in the rest of the world.

On June 13, 2007, it was confirmed by the Associated Press that over the next 18 to 24 months, the Quixtar business will be under global Amway brand in North America. According to Chairman Steve Van Andel and President Doug DeVos, "We are going through a global transformation of our business; this includes rethinking our global approach to products, training, brands, and how we operate in all the countries in which Alticor operates. As part of that, in 18 to 24 months, we're planning to begin using the Amway name in North America to unite our business opportunity under a single global brand."

Products

Quixtar is the exclusive distributor of Alticor products in the United States and Canada, including Nutrilite dietary supplements, XS Energy Drinks, personal care, home care, air and water purifiers and Artistry cosmetics.

Quixtar also markets through their website products from partner stores whose list can be found at Quixtar website. Quixtar utilizes the Employee & Affiliates Purchase Program discount pricing structure for purchases from most of these third-party partner stores. Purchases from some of them (generally called discount-only partner stores) may not gain the P/V & B/V (measures of sales volumes, used for calculating bonuses to be paid) normally associated with an IBO's purchases.

Business model

Quixtar relies primarily on person-to-person referral rather than advertisements for sale of products; however, Quixtar has recently announced the launch of a multi-million dollar ad campaign.. A large part of the marketing budget is spent on paying bonuses to distributors. IBOs were paid more than $370.1 million in bonuses and incentives in fiscal year 2006. Bonuses are paid for individual sales and sales generated by people one sponsors but not for sponsoring itself. This is one of a number of characteristics which distinguishes this model from illegal pyramid schemes.

In 2001, after the majority of Amway Independent Business Owners (IBOs) had transferred to the new company, Quixtar completely replaced Amway as the marketing venture for Amway/Alticor products in North American regions. The Quixtar business model differs from the earlier Amway business model in many aspects, such as the way distribution is performed as well as the products and services offered through partner stores. Rather than ordering product from a distributor who delivers them in person, Quixtar customers can place orders online and have the products shipped to them directly. In mid-2007 however, Quixtar announced they were phasing back in the Amway name over two years and discarding the Quixtar name. They have not announced any changes to the compensation model.

Individuals may only buy products through Quixtar's web site with a referral number from an IBO. Quixtar also gives IBOs the option to create free personal websites that can be personalized to focus on health, beauty, health and beauty, and/or gift and incentive products. The referring IBO then receives the retail/wholesale profit (usually 30%), and a percentage ("bonus") of the cost of the sold goods (from 3% up to 31% depending on total PV generated), with Quixtar-exclusive products yielding a higher bonus per dollar in Point Value and Business Value (PV/BV). Quixtar offers a wide range of products for its IBOs to purchase for personal use and/or to sell to customers through Quixtar.com and IBO personal e-commerce sites.

IBOs pay a registration fee and build their businesses through retail sales to customers, referring business to Quixtar.com, and by helping other IBOs build similar businesses. Their earnings are based on their business' sales and the volume of sales and purchases of IBOs registered by them.

The structure of a Quixtar's IBO organization is hierarchical, but an individual can earn more than those who bring them into the organization. Pin levels are similar as in Amway. There are several major pin levels in the model denoting particular level of success in building their IBO business.

Income of Quixtar IBOs

Quixtar IBOs earn income in different forms in various categories including IGP (Immediate Gross Profit), Performance Bonus, Leadership Bonus, and other Growth incentives. IGP is the profit made when customers of an IBO buy products and services from Quixtar at retail price. A majority of IBOs who make income in the beginning are in this category only . Performance bonus on a scale of 3% to 31% of the group volume (total BV of the sale made by the group) is paid if the PV level of the IBO is more than 100 PV in a month. Leadership bonus is paid at 4% of BV of each qualified leg who is at 25% or 7500 PV. Growth incentives are announced by Quixtar every year in the form of bonuses and paid trips at various levels. These bonuses are awarded to IBOs who are at Platinum or higher achievement levels.

Quixtar reports that the average income for an "active" Quixtar IBO in 2005 was $115 a month ($1,380 annually), as documented in The Quixtar IBO Compensation Plan and on a Quixtar website.. The average annual Quixtar income for an IBO that qualified at the Platinum level in 2005 (0.1683% of IBOs) was $47,472 and for a Diamond (.0120% of IBOs) it was $146,995. The largest single annual bonus (in addition to monthly incomes) for a Diamond was $1,083,421.

An "active" IBO is qualified on the IBO Registration form: Based on an independent survey during 2001, “Active” means an IBO attempted to make a retail sale, or presented the Independent Business Ownership Plan, or received bonus money, or attended a company or IBO meeting in the year 2000. Approximately 66% of all IBOs of record were found to be "Active."

IBO Association International

The IBO Association International (IBOAI) was founded in 1958 as the American Way Association with the goal of "serving the common interests of Independent Business Owners throughout North America." Members are served by an 18-member Board of Directors who are supported by six full-time staff. The Association's board members are "elected by its voting members", who must be "Qualified Platinums and above.

Accreditation

In 2006, Quixtar, in partnership with the IBOAI (IBO Association International) launched the "Quixtar Accreditation" program in order to address concerns about the companies that provide Business Support Materials to Quixtar IBOs. North American Diamonds (high-level IBOs) and their associated training companies may apply to Quixtar to be accredited by the corporation. Among other things, accreditation specifically states that promotion of particular religious or political viewpoints is unacceptable. Additionally, accredited programs must agree to a range of other guidelines, including "full" transparency in any compensation paid for Business Support Materials. The "full" transparency only applies to the IBO's who are participants in the BSM income, for most groups this means Platinums and above, representing a very small percentage of IBO's. Accreditation lasts two years and is enforced through reviews of materials and surveys of IBOs. The full guidelines are listed in the IBO Communications Platform. In April of 2006 eFinity became the first Quixtar affiliated support organization to receive accredited status.

Sales and ranking

Forbes ranked Alticor, as America's 27th largest privately owned company with estimated revenue of $7.29 billion . In 2006, Internet Retailer ranked Quixtar.com as the number one site in the "health and beauty" category and 18th largest e-commerce site (for revenue) overall. In a survey of the top 40 e-commerce sites, ForSeeResults ranked Quixtar.com equal 5th for customer satisfaction.

Since 1999, IBOs powered by Quixtar have earned more than $2.2 billion in bonuses and other incentives by generating sales of more than $6.8 billion at www.quixtar.com, and another $500 million for Quixtar Partner Stores.

Quixtar-powered IBOs generated revenues of $1.118 billion for Quixtar for the fiscal year ended December 31, 2006, the fourth consecutive year in which the company surpassed the billion-dollar mark. IBOs also generated record $84.6 million in revenues for Quixtar’s Partner Stores in 2006.

Promotion

Athletes who have promoted Quixtar or its products include Jamaican Olympic sprinter Asafa Powell, American pole vaulter Jennifer Stuczynski, American Olympic sprinter Sanya Richards, Chinese Olympic hurdler Liu Xiang; Brazilian soccer player Ronaldinho, heavyweight boxer Evander Holyfield, NFL player Emmitt Smith and Heisman Trophy winner Ron Dayne. Tim Foley, a member of the undefeated 1972 Miami Dolphins, is a Quixtar Founders Crown Ambassador.

Author John C. Maxwell, who writes leadership books including The 21 Irrefutable Laws of Leadership, is known to support Quixtar affiliated organizations such as Worldwide DreamBuilders and co-authored a book, Becoming a Person of Influence, with Jim Dornan, Quixtar Founders Crown Ambassador and founder of Quixtar support organization Network TwentyOne. Orrin Woodward and Chris Brady, both former IBOAI board members for Quixtar, co-authored the #1 bestseller, "Launching a Leadership Revolution." Both Woodward and Brady were terminated by Quixtar and participated in a class action lawsuit against Quixtar alleging that Quixtar operated as an illegal recruitment scheme. Paul Harvey, a radio broadcaster, known for his 'The rest of the story' tagline, has long been associated with the Quixtar program that is advertised on his show.

As a guest speaker at the Quixtar LIVE! conference in 2003, Phil McGraw ("Dr. Phil") reportedly described Quixtar as "one of the greatest success stories in American business history." In a 2006 settlement involving a class-action lawsuit brought against McGraw and his Shape-Up diet products, plaintiffs could receive a share of $6.0 million in Quixtar-brand Nutrilite vitamins and $4.5 million in cash.

Controversies

Litigation

For several years Quixtar was involved in litigation with the tools businesses of former Crown Distributor Kenny Stewart and Double Diamond Brig Hart.. In February 2008 a federal judge dismissed the case .

A class action lawsuit was filed in 2007 against Quixtar, Britt World Wide and World Wide Dream Builders in California, alleging that the products business and the tools business are pyramid schemes. A similar case filed in California in August 2007 by TEAM affiliated IBOs whose contracts had been terminated was dismissed.

In his online book "Merchants of Deception", former Quixtar IBO Eric Scheibeler stated that he and his family received death threats from his uplines during a business meeting and from an anonymous phone call. In 2006, a Swedish Newspaper published statements attributed to Scheibler which implied that Amway/Quixtar employees were responsible for these threats. Amway and Quixtar sued Scheibler on February 27, 2007 for defamation . In July 2007, Scheibeler wrote a letter to an attorney for Amway and Quixtar clarifying among other things that, to his knowledge, Dick DeVos or Amway/Quixtar employees never made any death threats to him. . He apologized for any misleading statements attributed to him in printing publications.

In July, 2007, a lawsuit was filed by IBS (Internet Business Solutions), owned by Quixtar Emeralds Henry and Sue Skaggs, naming Bill and Peggy Britt, Paul and Leslie Miller, Rocky Covington, Kevin and Beth Bell, and Britt World Wide, all of whom are Emeralds and above in Quixtar, as defendants. The suit alleges that the Skaggs, having developed a software system to allow for direct order fulfillment of tools to their downline, received approval from Britt to continue the development of the software program for eventual rollout to all of BWW (a tool system within Quixtar). During this time, the Skaggs state that they carried the burden of the development costs. According to the lawsuit, Bill Britt stated in 2005 that the program would not be rolled out across BWW. The Skaggs then claim they were de-edified by their upline. The suit alleges breach of contract, racketeering, and intentional interference with economic relations.. In response, the defendants claimed that no contract was entered into and challenge the lawsuit on various other legal grounds.

FTC investigations

The Federal Trade Commission offers advice for potential MLM members to help them identify those which are likely to be pyramid schemes.

In the 1979 ruling In re. Amway Corp., the Federal Trade Commission determined that Quixtar predecessor Amway was not an illegal pyramid scheme because no payments were made for recruitment. In addition, Amway (and later Quixtar) rules required distributors to sell to at least 10 retail customers per month, or have $100 in product sales, or a total of 50PV from customer purchases in order to qualify for bonuses on downline volume. Quixtar IBOs are required to report this customer volume on Quixtar.com or they do not receive bonuses on downline volume. Furthermore, an IBO must also personally sell or use at least 70% of the products personally purchased each month. The FTC established that these rules help prevent inventory loading and other potential abuses of the marketing model.

In 1986 Amway Corp. agreed, under a consent decree filed in federal court, to pay a $100,000 civil penalty to settle Commission charges it violated a 1979 Commission order that prohibits Amway from misrepresenting the amount of profit, earnings or sales its distributors are likely to achieve. According to a complaint filed with the consent decree, Amway violated the 1979 order by advertising earnings claims without including in it clear and conspicuous disclosures of the average earnings or sales of all distributors in any recent year or the percent of distributors who actually achieved the results claimed.

The FTC has required the information on average income to be provided to all prospective Quixtar business owners since the above 1979 FTC ruling clearing the Amway business model as legal.

Income from tools and business support materials

In 1983, Rich DeVos, one of Amway's founders, made recordings which, among other things, communicated his displeasure with several issues regarding some of the high ranking distributors/IBO's. These recordings are entitled "Directly Speaking and were addressed to Direct Distributors (now called Platinums), who are considered leaders with various responsibilities for their downline group. In January 1983 Rich DeVos announced that Amway would pay BV on Amway produced tapes. He expressed concern about the level of income on BSM's (tapes, CDs, books, and functions) compared to the income on Amway products that the high level distributors were making. He stated his legal team was concerned if the tool income exceeded 10% of their Amway income, and stated that BV payouts on tapes can never exceed 20% of the distributor's total Business Volume.

A 1985 Forbes magazine article quoted Dexter Yager, an IBO, as stating that about 2/3 of his income is from BSM's.

In 2004, Dateline NBC aired a report, alleging that some high-level Quixtar IBOs make most of their money from selling motivational materials rather than Quixtar products. Quixtar published an official Quixtar Response website where it showed '"Interviews Dateline Didn't Do"'. Quixtar also states on its response site that Dateline declined their request to link to the site.

During the registration process for a new IBO, Quixtar contracts clearly inform prospective IBOs that BSM are optional and that the producers and sellers of the BSM may make profit or loss from their sale (like any other business). This is also publicized on Quixtar websites. Quixtar's Business Support Materials Arbitration Agreement (SMAA) requires the immediate seller of BSM's to buy-back materials, which were purchased only for personal consumption within a 180 day time frame, on commercially reasonable terms, upon request of the purchaser. BSM's purchased for inventory or to be sold to others downline are not covered by the buy back policy.

Disputes with TEAM

On August 9, 2007, a group of Quixtar distributors, including founders of the TEAM training organization filed a lawsuitseeking to enjoin Quixtar from enforcing its distributor contracts, including the non-competition and non-solicitation provisions. The plaintiffs alleged that the company knowingly operates as a pyramid scheme, and prevents its distributors from leaving the organization through the aforementioned provisions.

On August 10, 2007, Quixtar announced that it had terminated the businesses of fifteen of the plaintiffs involved in the lawsuit, and sought and received a temporary restraining order and preliminary order of injunction in a Michigan court preventing them from interfering with the LOS, soliciting IBOs for their new company, or disparaging Quixtar or the business in any way. In mid October 2007, Quixtar argued that the former distributors were in violation of the court order since Team continued to have meetings and sell motivational materials. In Grand Rapids, Michigan, Quixtar argued that Team was using Quixtar's proprietary information to promote its meetings and sell materials. The court held in favor of Woodward and Brady and allowed Team to continue to operate. Specifically, the court held, "The Court finds particularly noteworthy the steps that both Mr. Orrin Woodward and TEAM took to make a good faith effort to comply with the preliminary injunction."

In an effort to ensure its injunction wasn't being violated, Quixtar filed an action against 30 anonymous bloggers Specifically, Quixtar is seeking to discover if Woodward and Brady are involved in a blogging campaign to disparage the company. The California lawsuit was dismissed on October 5, 2007.

In the summer of 2004, some Quixtar leaders and IBOs allegedly launched a Web initiative designed to make their web pages more prominent in search results, aka Google Bombing. Quixtar denies wrongdoing and states that its practices are in accordance with search engine rules.

Quixtar's response to many of these criticisms can be found at their websites http://www.ibofacts.com and http://www.quixtarfacts.com.

References

See also

External links

Corporate Site

Media articles

Government documents

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