Trickling Down

E-commerce generates money for KU student

Kansan.com/April 29, 2003
By Danielle Hillix and Robert Perkins

Paul Kopecky will arrive in a Hummer stretch limousine to his graduation party in two years. He plans to invite everyone he knows to celebrate his simultaneous exit from college and the working world.

"I want 3,000 people at a big retirement, I mean graduation party," the Des Moines, Iowa junior said.

In fact, it will be a retirement party as well.

His extravagant celebration will be funded with the millions he expects to make through Quixtar, an e-commerce mall where a variety of products from computers to laundry detergent to vitamins are sold for what the company says are discounted prices.

Alticor, the company responsible for Amway, started Quixtar. A year and a half ago, Kopecky bought a multi-level marketing franchise from Quixtar. Now, instead of relying solely on the University of Kansas and his business degree, Kopecky plans to get both an education and a fortune from Quixtar.

"Success with Quixtar is determined on strictly ambition," Kopecky said. "Who can develop themselves into someone who can understand success principles and apply success principles. Because they´re not taught at a university. I´ll say that again. Success principles are not taught at a university."

Kopecky is one of the thousands of people who have bought into the multilevel marketing business craze and its promise of riches. More than 720,000 people joined Quixtar in 2001 with the thoughts of building their own fortune through the multilevel business plan.

Anyone can become an independent business owner, or IBO, through the Quixtar franchise. A one-time setup fee of $125 gives a member IBO status, as well as access to Quixtar´s Web site.

"This is a business concept most people aren´t familiar with," Kopecky said.

An IBO gets his first paycheck by purchasing items from this Web site themselves, Robin Luymes, manager of Quixtar public relations, said. Quixtar relates buying from its Web site to buying from your own businesses. For each product the IBO buys from Quixtar, a different IBO earns a commission, which is calculated using a point system. Each item available for purchase on the Web site carries a point value. When a member buys an item, they acquire its points. At the end of each month, Quixtar tabulates these points and sends the IBO a commission check. But, an IBO can´t make any money relying solely on its own purchases for a commission.

"You never make money off of people," Kopecky said. "You make money helping people develop a business and then this Web site - this supplier to a franchise model - pays you."

In a multilevel marketing operation like Quixtar, IBOs make money by convincing others to join the organization, Luymes said.

Kopecky got involved with multilevel marketing when his sister introduced him to Quixtar. Despite a skeptical first reaction, Kopecky researched the business and decided the opportunity was too good to pass up.

He then introduced Quixtar to Lawrence and the University of Kansas. In a year and a half, he has expanded his business chain to include approximately 250 people, including University students. Kopecky has formed personal relationships with many of these students.

These relationships are what Kopecky said he treasured most about Quixtar now. But that was not always the case.

"I got involved for one thing only: money. Incredible money," Kopecky said.

He wasn´t disappointed. Kopecky said last month he earned $6,000 from his Quixtar franchise. Such commission checks are not uncommon for Kopecky, whose quick success has earned him notoriety throughout the Midwest, he said. Kopecky said other IBOs look to him as an example of someone who can handle the rigors of college on top of a successful business.

That doesn´t mean he hasn´t questioned the validity of getting a college degree. Kopecky said it´s hard to stay in school when he did not expect to use his business degree after college. Because of Quixtar, he expects to be financially independent in a couple of years.

"I´ll make a six-figure income before I graduate school here. I´ll make more than any professor on campus, there´s no doubt in my mind," Kopecky said.

Kopecky´s confidence in future wealth comes from his faith in the Quixtar business model.

"It´s the most perfect business model - ever," he said.

Kopecky has found success through Quixtar´s multilevel level business model, but statistics show that he is in the minority. Many IBOs, like Carlos Borda, have not made a cent.

Four months ago, Borda, La Paz, Bolivia, sophomore, joined Quixtar through one of Kopecky´s downlines in a business class at the University. So far, Borda has spent more money than he has made. But he remains optimistic about his monetary future.

"Some nights I start thinking about it and I really think it´s unlimited - just completely unlimited," Borda said. "I was shooting for the millions, then I thought no, multi-millions. The more I think about it, you can really, really shoot for the billions."

But the statistics are against him.

Quixtar´s numbers have slipped after a strong start in 1999. According to a business analysis Web site of the company ran by Scott Larsen, the number of visitors to Quixtar´s Web site declined 60 percent, dropping from 1,679,000 visitors during September 1999 to 657,000 during May 2000. Larsen´s Web site also shows that Quixtar has had trouble with its IBOs. During the 2002 business year, 81.6 percent of IBOs had not registered a single person. In addition, more than 67 percent of IBOs registered in 2001 did not renew their membership with Quixtar in 2002.

This high dropout rate has raised eyebrows at the United States Federal Trade Commission and Better Business Bureau of Western Michigan, where Quixtar and Alticor, are registered.

Melissa Caldwell, consumer information specialist with the Better Business Bureau, said the Federal Trade Commission received repeated requests for Quixtar documents. So many, in fact, that the FTC added Quixtar to its Frequently Requested Records Reading Room. The online reading room offers 54 pages of complaints filed against Quixtar, ranging from false advertising to faulty products.

Caldwell said that Quixtar was a member of the Better Business Bureau and was listed in good standing. The bureau has processed 27 complaints nationally concerning Quixtar over the past three years. All but two of these complaints have been resolved. According to bureau documents, Quixtar made good faith efforts to resolve the remaining complaints.

While Quixtar holds a satisfactory record with the bureau, the bureau´s Web site on Quixtar does carry a caution urging consumers to investigate any business or franchise opportunity before investing money.

The bureau warns consumers to investigate Quixtar, but the bureau defends Quixtar against skeptics who call it a pyramid scheme.

"With Quixtar, there is an actual product being sold, be it radios, cleaning supplies, whatever," Caldwell said. "With a pyramid scheme there is no product. It´s just like you coming up to me and saying `Give me your money and you get somebody else´s money and it will all trickle down.´ With a multilevel marketing organization there is a product and a market."

While Quixtar is legal, Kissan Joseph, associate professor of business at the University, said the business had many faults.

"It has a very niche market," he said. "I don´t see much promise for this." Still, he said that Quixtar should be encouraged to promote diversity in the marketplace.

"It´s a fair form of distribution and in a free market we should respect it, but I personally wouldn´t get involved," he said.

People can doubt Quixtar if they want. That was the last thing on Kopecky´s mind last weekend at a conference in South Carolina as he spoke to 15,000 people, some of whom made millions through Quixtar.

"You don´t have to defend this business," he said. "It is so good. People can think what they want."