The Vision
The Market and Emerging Trends
The Model
The Competition
The Partnership
The Financials
The Conclusion
One that endeavors to be different is a site called myPotential.com. MyPotential.com is the brain child of Mallika Chopra, the daughter of acclaimed writer, Deepak Chopra. With Deepak Chopra's assistance, the start-up has raised $5 million in its initial round of funding and intends to offer tools for spiritual growth and awareness by offering books, a few products like myPotential.com t-shirts, and access to over 50 authors and teachers in the world of spiritual growth through online chat rooms, and message boards. Although their stated mission is to unlock the potential in everyone, their primary focus appears to be promoting the works of Deepak Chopra and several other authors from the world of traditional publishing into the world of electronic publishing, films and television. While this is a potentially lucrative arena, the market for this type of product is currently very small. Besides the very profitable Oprah Winfrey show, there is little else that appears in a mass medium that could be considered dedicated to personal growth. And while films, television and publishing are certainly areas in which we could eventually be successful, right now there are too many who can do it better, are better established, and already have the necessary strategic relationships in place.
One Wall Street analyst when asked about myPotential.com criticized them noting, "In general, New Age audiences are fickle and cheap. They go from site to site just to save a few pennies on their ginkgo leaves." But is this really true? Or could it just be that no one has yet figured out how to effectively tap into this growing market? It has been my experience that these innovators and early adopters will pass up grocery stores closer to home often traveling twice as far just to find a store that carries organic foods so that they can pay almost twice as much for them. Is this fickle or cheap? Or is it more likely that this audience shops around because they don't perceive any difference between the ginkgo leave purveyors other than price? It is true, myPotential.com will have some difficulty given their focus, but not because of their audience.
A significant number of the other 32,000 sites listed by Yahoo instead of being considered competition, are in fact an opportunity for growth. By showing the authors of these varied sites how they can benefit themselves and help others by taking advantage of a connection to us, we have the potential to spread quickly through a segment of the market that has already exhibited its penchant for being open to new ideas and new thought.
Health/natural specialty retailers. The health/natural specialty retailer category is highly fragmented and includes local, regional and national chains selling through a variety of channels. The largest participant in this sector is General Nutrition Centers (GNC), which has a nationwide retail presence and a Web site, GNC.com, which is part of Drugstore.com's online operations. Other large competitors include NBTY and Vitamin Shoppe which sell their private-label products through catalogs and retail stores while Rexall Sundown a large manufacturer of vitamin supplements and minerals sells directly to consumers through both catalog and direct mail operations. Competitors focusing exclusively on online operations include Vitamins.com and VitaminShoppe.com. While offering a wide variety of vitamins and nutritional supplements, these enterprises are typically focused on quantity rather than quality, and rarely act to move the markets to them instead relying on consumers to come to the realization on their own that they need the vitamins and nutritional supplements that they offer. These companies may provide some independent information on the products they carry, but most do so simply as an after-thought or with the simple goal of positioning a product they manufacture ahead of similar products from other manufacturers.
Drug stores. The drug store category is dominated by chains, such as Walgreen's, CVS and RiteAid. The national chains are expanding their online presence while other online-only entrants include PlanetRx.com, healthcentral.com and Rx.com. This category typically offers a moderate selection of vitamins and supplements, but their main concentration is on prescription sales and over-the-counter products. Their focus is typically not holistic in nature, and their vitamins and supplements are typically not all-natural products.
Supermarkets and grocery stores. The supermarket and grocery store category includes traditional supermarkets, such as Safeway and Albertson's, and natural-food markets such as Whole Foods and Wild Oats. Some of these companies have entered the online market with limited offerings while others, such as Webvan, are focused solely online. These companies generally offer a limited selection of nutritional supplements and minerals concentrating instead on groceries which are the bulk of their revenues.
Mass merchant retailers. Mass merchant retailers are dominated by companies such as Wal-Mart, Kmart, and Target. These competitors offer attractive pricing on vitamins and nutritional supplements, but have limited selection and almost no product information.
Both online and offline purveyors of nutritional supplements typically offer little beyond a catalog or its equivalent. Often selling their own products alongside other brands, they have little incentive to provide real information about quality let alone whether the supplements in question should be taken at all. VitaminShoppe.com and a few other online retailers have attempted to marry sister sites that supply some third-party information, but these typically take a back seat to the perceived profit-making potential of the e-commerce site often leaving them without substance and/or cutting edge information.
Using this model, AmWay has built itself into a $6 billion debt-free company creating the impetus for other companies to attempt to do the same utilizing a myriad of variations on this theme. However, for every success story there are estimated to be 99 others who fail. This is largely because the focus of these other multi-level marketing companies is often on getting rich rather than on enriching lives thereby attracting people whose sole focus is to "get-rich-quick" or "get something for nothing". As such, the central theme of the enterprise becomes selling the "plan" rather than the products creating a dynamic where the company must require either a large minimum purchase (sometimes $5,000 or more) before financial benefits begin to accrue to the participant or a monthly minimum personal usage amount in order to create enough revenues to make it all work. It is no wonder that most people who are exposed to multi-level marketing believe it is merely an elaborate pyramid scheme because that is what most of them are.
AmWay has been more successful than most because they have focused on the products they offer more than most offering a small, but important benefit as well (i.e. their soap products, for instance, are concentrated making them cheaper to ship, making their packaging smaller and therefore less wasteful, and meaning there are no added fillers which can harm the environment and actually cause damage to whatever they were meant to clean). They have also done a better job than most of setting expectations by explaining the possible pitfalls while reiterating the 2 to 5 year timeline for success. Unfortunately for AmWay, that is where their successes end. In order for AmWay to continue to enrich the many multi-millionaires they have created and therefore attract new people with their own dreams of riches, they too require a minimum initial investment. To participate in Quixtar/AmWay each new participant must pay anywhere from $55 to as much as $500 to get started, then pay hundreds more each month for products in order to receive any income in return, and are reminded that the only way to insure their future financial success is by going to seminars regularly while pitching the AmWay/Quixtar business model at least two nights a week. They must also carry inventory, set up a separate checking account, take weekly orders, make weekly deliveries, and maintain a minimum of ten retail customers to insure that they receive potential tax advantages. In short, to fulfill the promise of more time and more money sometime in the future, participants must spend more time and more money now creating a huge barrier to success. It is no wonder each "active" participant in AmWay (41% of all participants are deemed active) makes an average of only $88 per month and that number includes some who make millions each month!
Another large challenge to Quixtar/AmWay and most multi-level marketing companies stems from the fact that they leave little reason to use their products unless one is doing so as part of a plan to get rich. Even though the number of people reaching adulthood far outstrips the number of people these companies could even hope to contact each year, there comes a point of diminishing returns where enough people can't be recruited to sustain continued operation of the company. And the tendency toward reaching this point of diminishing returns increases as negative publicity increases. For AmWay the past years of distributor abuse (today they repeatedly stress the importance of ethics) caught up with them. So as sales flattened, AmWay began to look for a way to re-invigorate growth. Rather than change a formula that was successful for more than 40 years and make it easier for new entrants to succeed, they instead decided to use the same business model, but with a different name. This would allow current AmWay distributors to pitch the business model to prospects who were turned off simply by the mention of the name AmWay. That is how Quixtar was born. Quixtar quickly tried to differentiate itself from AmWay by publicizing itself as the way the average guy could get in on the dot com explosion. It was touted as the perfect marriage of "e" and "commerce"; however, very little is actually done on the Internet. In fact, it actually costs a Quixtar participant 6% more to purchase his or her products online rather than off-line! In addition, they don't encourage the use of web-based information systems for communication relying instead on a proprietary system to which all participants are required to subscribe. They even go so far as to discourage the use of electronic ordering systems of any kind instead preferring what they describe as a "high-touch", person-to-person approach. Quixtar further endeavors to differentiate itself from AmWay by carrying name brand products alongside AmWay products; however, the name brand products can cost upwards of 150% of the regular supermarket price. The primary reason for carrying the name brand products is simply so Quixtar participants can point to them as a form of legitimacy for their enterprise, then switch the new participant to purchases of matching AmWay products which sell at lower prices. These "lower" AmWay prices, however, are not lower than and are sometimes even higher than a typical supermarket's prices without the convenience. It should be noted, however, that the Quixtar/AmWay participant is able to achieve discounts from the "retail" price that increase as the amount of money they and their recruits spend increases. But this too can take two to five years of hard work before significant benefits accrue and for most this barrier is just too high.
Although Quixtar posted impressive first year sales figures, the likelihood that they can continue to grow beyond their AmWay roots is diminished by the high barriers they have erected to entrants, their focus on greed as a tool of motivation, and their approach to the utilization of the Internet more as a "buzzword" than as an actual asset.
Working Assets services, however, do not always make the best financial sense. And political activism while carving out a nice niche for Working Assets also restricts their growth into more market segments by alienating people who are not yet ready to fully share these beliefs. This said, third-party branding such as with a World Service Organization credit card or quantumNEXT telecommunications services is an area in which we may eventually choose to become involved, but only if we can offer a distinct financial advantage, significantly increased convenience, or a significant opportunity for personal growth to our client-partners. It is important in terms of cultivating trust that all the products and services we offer our client-partners go above and beyond the mere difference of a brand name.
