Some very interesting and revealing information can be found in Amway Asia Pacific's 1999 Annual Report (link as at the end of this post). We've posted two paragrapghs of particular interest and although 8 years old, it's still very relevant to the business today.
"Our results are impacted by the actions of a relatively small number of distributors. Under the Sales Plan, our distributor leaders grow their businesses by developing lines of sponsorship through bringing others into their organizations. While these distributor organizations are large and complex, there are relatively few lines of sponsorship and distributor leaders. The distributor leaders often form organizations independent of Amway Asia Pacific that motivate and train the members of their lines of sponsorship. These distributor leaders significantly influence their organizations through motivational rallies and seminars; these activities positively impact our sales. Although, one of Amway Asia Pacific's primary business goals is to maintain strong and effective relationships with the distributor leadership, there can be no assurance that such relationships will be maintained. Amway Asia Pacific's sales could also decline if we lose a significant distributor leader and would decline if a large number of other distributors in an organization left as well.
"Our sales are affected by sponsoring levels; many factors, adverse publicity in particular, impacts sponsoring. Adverse publicity may result from certain distributor activities. In particular, some distributor leaders, through their own independent organizations, distribute motivational audio and video tapes and written material without our prior review and approval. Negative publicity may arise from the sales of such materials. While our prior review and approval is required in certain instances under the Sales Plan, we cannot closely monitor our distributors as we would our employees. We do communicate with distributor leaders and attempt to enforce the Sales Plan and the Amway Code of Ethics and Rules of Conduct to avoid circumstances leading to negative publicity. If necessary, we terminate distributors who violate our rules. It is possible that negative publicity will adversely affect our results."
So on one hand Amway says that there a few leaders and lines of sponsorship and then goes on to say that adverse publicity arises particularly from these distributor leaders. What a lame excuse them for them to then say that they cannot "closely monitor" the leaders....heck, they just said that there is only a few of them didn't they? This is a duplicatable business is it not? How hard could it be then to properly enforce it's own Sales Plan, Code of Ethics and Rules of Conduct to these very few leaders of the AMO's? At which, the teachings will then naturally flow through their organisations.
The newbie IBO doesn't make up his own Amway selling spiel and techniques, he's learn't it from his sponsor, who learn't it from his sponsor and so on and so on.....all the way til it reaches the person at the top of the pyramid. If the leaders are sprouting crap then so is the newbie IBO. So Amway, stop the leaders of the AMO's sprouting crap and your problem is solved. Your adverse publicity which you say adversely affects your sales and sponsoring (so true) won't be such a big pain the ass for you.
But hang on a minute......the only problem is that you need the AMO's as much as they need you, quite a symbiotic relationship it's become. So should you enforce your rules and then terminate these leaders for any violations, then poof! there goes a mighty chunk of your sales revenue. And as evident by the TEAM resignations/terminations in the USA and more recently in the UK, a large percentage of distributors would follow their leaders and leave as well. With only a few AMO's in Australia, it's not hard to see what would happen to the Australian Amway business should any of the leaders here leave or be terminated is it?
So your very much stuck between a rock and a hard place......on the one hand, you can clamp down on any offending AMO leaders and organisations who are breaking your own rules and possibly the government's fair trading laws, but then the Australian Amway business gets smashed to a pulp. On the other hand, carry on, keep reaping in the profits and take no real action (like you have done for the last 25 years since the "Directly Speaking" tapes) against the AMO's who will churn IBO's in and out for you, and profiting from it regardless too. It's all about the money isn't it......at the expense of the average joe who does not know any better. And you need the average joe, trouble for you is that the great majority of Aussies has access to the internet and to wealth of information contained therein. And yes, as you said yourselves, "adverse publicity impacts sponsoring", but the AMO's who you have entrusted with the training, sponsoring and motivation for the Amway business, is the root cause why you have adverse publicity and such a bad reputation worldwide.
So Fix it!....before the ACCC does a DBERR in the UK and fixes it for you.
Source: http://www.secinfo.com/dsVS7.52fj.9.htm#8luz
The quote used for the previous post (Saturation a Risk) also came from this same document.
Wednesday, December 19, 2007
Tuesday, December 18, 2007
Amway Australia - Saturation a Risk?....Oh Yes Indeed
Market saturation has been a much debated topic regarding Amway and MLM's in general. We've seen many discussions about it where Amway advocates often dismiss the notion of saturation affecting Amway.
Well, here is what Amway Asia Pacific said about it back in 2000:
"In addition, we may be unable to increase distributors beyond a certain point as there is a finite number of persons interested in having a direct selling business".
Saturation argument now settled then?
Well, here is what Amway Asia Pacific said about it back in 2000:
"In addition, we may be unable to increase distributors beyond a certain point as there is a finite number of persons interested in having a direct selling business".
Saturation argument now settled then?
Monday, December 17, 2007
The Trouble with Buying through Amway - Part 1
The crux of the Amway business is for an IBO to redirect their household spending to Amway and teach others to do the same, also commonly known to as BFYTODS (Buy From Yourself and Teach Others to Do the Same). By doing so, IBO’s can earn bonuses on the amount they spend and of those who they recruit. Amway IBO’s should also be retailing these products to consumers (non-IBO’s) at retail prices. However from our experience with the IDA system, little or no emphasis on this is made, in fact, we were told that there was “no selling” involved. After seeing the retail prices on some everyday household and grocery items, it is no wonder the IBO’s don’t focus on retailing. The pricing on most items do not offer enough incentive and value for a consumer to buy them.
But it’s not only the prices that are unappealing, in our opinion, there are many other factors that make buying from Amway as a customer a very unattractive proposition. These are: Buying in Bulk, Inconvenience, Non-Perishable Items Only, and Limited Range. We’ll discuss each of these factors in detail, as well as the Pricing issue in separate upcoming blog posts.
Today, we’ll look at the Buying In Bulk.
Like most people, we do a weekly supermarket trip, many grocery shop fortnightly whilst there would be a very small percentage, if at all, who shop monthly. We buy what we need when we need it. Almost always, if a particular product is on special by a significant amount (eg. half price) and if it’s a non-perishable item, then we’ll buy one or two extra. We figure that we’re not much different from the average household and assume that the majority of people shop this way too.
The trouble with buying from Amway is that a great majority of grocery products are sold in bulk. Take the tissues for example. You can’t buy one box, you have to buy 16 of them (16 x 200pk @ $29.94). Yep, 16 of them! Now we’re lucky to go through one box per month (more in winter) so that’s what we buy, one per month. We have no need to buy 16 boxes in one hit and we wouldn’t have any room to store them all anyway. To us, it makes no sense to buy a years supply of tissues and especially when the cost per box ($1.87) is no cheaper than a 224pk of Sorbent or Kleenex tissues on special.
Next product is the San Remo Pasta. You get 12 x 500gm packets ($22.56). Again, we have no need for 12 packets of pasta. Now our household loves pasta, but even so, we probably only have one sometimes two pasta dishes every week. So on average we’d consume 6 packs per month. With Amway, this would mean we’d have to buy two months supply. Apart from the storage issue again, there is more often than not, a decent brand of pasta on special every week or so anyway, for less than Amway’s price ($1.88). Moreover, pasta is pasta, they all pretty much contain the same few ingredients whatever the brand and whatever they type. We have differing types of pasta each week, spaghetti, fettuccine, spirals, penne etc. and we often buy these at .69c per pack. To buy a dozen packs of the same pasta that would take 2 months for us to consume and to pay over $14 more for it, does not make sense at all.
And finally, we have the Fountain Tomato Sauce. Forget about a 500ml, or 1 litre bottle, in Amway you have to buy 4 litre bottles. The only time we’ve ever seen the 4 litre sauce bottles is at places where large groups of people are eating (public sausage sizzles, the footy & fete’s etc). Now we’re as Aussie as anyone and love our harry horse, but not that much! A 500ml bottle lasts us for about a month or so. It’d be ludicrous for us to buy an 8 month supply of the stuff, eeww just the thought of squirting 6 month old sauce our sausage rolls is making us feel nauseous.
If the majority of people preferred buying the majority of their groceries in bulk, then there’d be Cash’n’Carry type outlets everywhere and supermarkets would be few and far between. In reality of course, the opposite is true. So the Amway IBO’s are virtually the only ones who purchase their groceries this way and only because they have that incentive to buy enough so as to hit that minimum 100pv level each month, and earn a measly 3% rebate back. Question is, if a lot of the products last for more than a month, 2 months or even 6-12 months, then what do IBO’s buy in each of the following months so as to hit 100pv?
Our guess is that, they buy the stuff that can be used within a month, products with the highest pv/bv attached to them and/or like our family member IBO’s are doing, buying products that they don’t need or have never bought prior to joining Amway. Not to mention, also stockpiling on products they already have. Absolute stupidity.
In our next blog post, we’ll discuss whether buying through Amway is really as convenient and time-saving as the IBO's proclaim it to be.
But it’s not only the prices that are unappealing, in our opinion, there are many other factors that make buying from Amway as a customer a very unattractive proposition. These are: Buying in Bulk, Inconvenience, Non-Perishable Items Only, and Limited Range. We’ll discuss each of these factors in detail, as well as the Pricing issue in separate upcoming blog posts.
Today, we’ll look at the Buying In Bulk.
Like most people, we do a weekly supermarket trip, many grocery shop fortnightly whilst there would be a very small percentage, if at all, who shop monthly. We buy what we need when we need it. Almost always, if a particular product is on special by a significant amount (eg. half price) and if it’s a non-perishable item, then we’ll buy one or two extra. We figure that we’re not much different from the average household and assume that the majority of people shop this way too.
The trouble with buying from Amway is that a great majority of grocery products are sold in bulk. Take the tissues for example. You can’t buy one box, you have to buy 16 of them (16 x 200pk @ $29.94). Yep, 16 of them! Now we’re lucky to go through one box per month (more in winter) so that’s what we buy, one per month. We have no need to buy 16 boxes in one hit and we wouldn’t have any room to store them all anyway. To us, it makes no sense to buy a years supply of tissues and especially when the cost per box ($1.87) is no cheaper than a 224pk of Sorbent or Kleenex tissues on special.
Next product is the San Remo Pasta. You get 12 x 500gm packets ($22.56). Again, we have no need for 12 packets of pasta. Now our household loves pasta, but even so, we probably only have one sometimes two pasta dishes every week. So on average we’d consume 6 packs per month. With Amway, this would mean we’d have to buy two months supply. Apart from the storage issue again, there is more often than not, a decent brand of pasta on special every week or so anyway, for less than Amway’s price ($1.88). Moreover, pasta is pasta, they all pretty much contain the same few ingredients whatever the brand and whatever they type. We have differing types of pasta each week, spaghetti, fettuccine, spirals, penne etc. and we often buy these at .69c per pack. To buy a dozen packs of the same pasta that would take 2 months for us to consume and to pay over $14 more for it, does not make sense at all.
And finally, we have the Fountain Tomato Sauce. Forget about a 500ml, or 1 litre bottle, in Amway you have to buy 4 litre bottles. The only time we’ve ever seen the 4 litre sauce bottles is at places where large groups of people are eating (public sausage sizzles, the footy & fete’s etc). Now we’re as Aussie as anyone and love our harry horse, but not that much! A 500ml bottle lasts us for about a month or so. It’d be ludicrous for us to buy an 8 month supply of the stuff, eeww just the thought of squirting 6 month old sauce our sausage rolls is making us feel nauseous.
If the majority of people preferred buying the majority of their groceries in bulk, then there’d be Cash’n’Carry type outlets everywhere and supermarkets would be few and far between. In reality of course, the opposite is true. So the Amway IBO’s are virtually the only ones who purchase their groceries this way and only because they have that incentive to buy enough so as to hit that minimum 100pv level each month, and earn a measly 3% rebate back. Question is, if a lot of the products last for more than a month, 2 months or even 6-12 months, then what do IBO’s buy in each of the following months so as to hit 100pv?
Our guess is that, they buy the stuff that can be used within a month, products with the highest pv/bv attached to them and/or like our family member IBO’s are doing, buying products that they don’t need or have never bought prior to joining Amway. Not to mention, also stockpiling on products they already have. Absolute stupidity.
In our next blog post, we’ll discuss whether buying through Amway is really as convenient and time-saving as the IBO's proclaim it to be.
Sunday, December 9, 2007
Amway UK Case makes News in Oz
The current UK DBERR case against Amway has now made news in Australia:
http://business.theage.com.au/amway-may-be-the-first-to-trip-in-direct-selling-merrygoround/20071208-1fur.html
Amway may be the first to trip in direct selling merry-go-round
James Kirby
December 8, 2007
DIRECT selling might just be on its death bed: a British investigation into Amway has dug up so much dirt that the British Government has applied to wind up the company "in the public interest". Amway - one of the biggest direct-selling organisations in the world - is suddenly in the spotlight.
And there's plenty at stake. Amway Australia has been uniquely successful, racking up $140 million in sales per year.
It seems every neighbourhood in Australia harbours Amway hopefuls - often stay-at-home mums- who think they can make some money from paying for the right to become an Amway agent. There are 50,000 agents nationwide.
But the British investigation of that country's 12,000 agents found that only 10% make a profit from selling the group's products, which range from water cleaning products (eSpring) to jewellery (Emma Page).
In other words, many Amway agents can end up with a stack of unsold stock and nothing to show for it.
And it's not as if the revelation that questionable selling practices at Amway - or any other mob in the direct selling game such as Avon, Nutrimetics, Tupperware, Mary Kay or Herbalife - should come as a shock.
Amway was originally cleared of "pyramid selling" in the US in 1979. But today it faces official probes in three countries.
There is also a government investigation of Amway in India and a class action was filed against the group in California earlier this year.
At the heart of the matter is whether Amway is really a selling organisation or something more like a merry-go-round where the real money is made in signing people up for the dream of making money "on the side". There are also serious questions about "motivational materials" in which the company makes money from motivational CDs and other gimmickry.
Amway Australia charges more than $100 a time for joining Amway as a so-called independent business owner. In Britain the company has already promised to scrap this controversial joining fee. No such luck in Australia, where direct sellers are under the eye of the Australian Competition and Consumer Commission. A spokesperson for the regulator says Amway has been examined in the past and it was not breaking any Australian laws.
I asked Tony Greig, chief legal counsel for Amway Australia, whether the group would now change its ways. Greig defended his turf, suggesting Amway Australia was a very different company from the British unit. He said the joining fees - which include product - were the only way to get the agents to understand the products they were selling.
My own sense of it is that direct selling in Australia - especially the foot-in-the- door style of Amway - is fading. Company records of Amway Australia show the revenue, at $140 million, has been relatively flat; it was as much as $120 million five years ago.
With low-cost Chinese manufacturing pumping out cut-price goods, it's increasingly difficult to buy anything for less than you might pay at Kmart or Spotlight or your local discount store. In fact, intermediaries like selling agents just add to the price. And with the internet allowing you to buy direct, you no longer need your neighbours trying to flog something over the garden fence … no wonder most of them don't bother.
A few surprising bits of info have come out of the article, but that this made news here in the first place is surprising in itself!
In one of our earlier blog posts (Some Numbers To Ponder), we stated that in the year 2000 there were 100,000 IBO's in Australia and currently, according to Amway Australia's own website the number of IBO's in Australia and New Zealand combined is 80,000. We then came up with an estimate that Australian IBO's made up about 65,000. Note that the article states that there are "50,000 agents nationwide". Now the reporter did not quote the source of this figure but if it came from Amway itself, it seems were being a wee bit generous with our estimate. A 50% decrease in sales force numbers hardly reflects a growing and thriving business.
Although Amway has caught the attention of the ACCC previously and "is not breaking any laws", Amway has now caught the ACCC's attention again and they could be watching this case with closer interest now. There is some speculation about on the net that the ACCC has already recently received some formal complaints since the UK case has been brought to the publics attention.
Amway Australia says it "was a very different company from the British unit". Ummm well it is now since Amway made changes to it's business model because of the UK investigation, but prior to that, how "very different" was it?....not much at all we think. Let's see, same company, same coreline products, same compensation plan and pin levels, both have training and motivation provided by the AMO's for starters. So if there's any UK readers out there, please feel free to enlighten us on just how different your business is (pre-DBERR case of course) compared to here. Even better would be to hear the perspective from any aussie IBO's out there.
No surprise that Amway is "defending" their turf and won't change it's ways. So there will be no free joining or renewal fees, no drastic retail price reductions (as much as 70%) on selected products, no mandatory training and certification required before being able to recruit others, no minimum retail sales to customers (non-IBO's) requirements, no reforms on the marketing of "tools" and no reigning in of the AMO's practices. Nup, it's business as usual for all you aussie IBO's.....until if the time ever comes, that the ACCC might see fit that it needs to defend you.
Regarding the UK case, the latest news is that the court proceedings have finished and judges decision will be known within the next couple of weeks.
http://business.theage.com.au/amway-may-be-the-first-to-trip-in-direct-selling-merrygoround/20071208-1fur.html
Amway may be the first to trip in direct selling merry-go-round
James Kirby
December 8, 2007
DIRECT selling might just be on its death bed: a British investigation into Amway has dug up so much dirt that the British Government has applied to wind up the company "in the public interest". Amway - one of the biggest direct-selling organisations in the world - is suddenly in the spotlight.
And there's plenty at stake. Amway Australia has been uniquely successful, racking up $140 million in sales per year.
It seems every neighbourhood in Australia harbours Amway hopefuls - often stay-at-home mums- who think they can make some money from paying for the right to become an Amway agent. There are 50,000 agents nationwide.
But the British investigation of that country's 12,000 agents found that only 10% make a profit from selling the group's products, which range from water cleaning products (eSpring) to jewellery (Emma Page).
In other words, many Amway agents can end up with a stack of unsold stock and nothing to show for it.
And it's not as if the revelation that questionable selling practices at Amway - or any other mob in the direct selling game such as Avon, Nutrimetics, Tupperware, Mary Kay or Herbalife - should come as a shock.
Amway was originally cleared of "pyramid selling" in the US in 1979. But today it faces official probes in three countries.
There is also a government investigation of Amway in India and a class action was filed against the group in California earlier this year.
At the heart of the matter is whether Amway is really a selling organisation or something more like a merry-go-round where the real money is made in signing people up for the dream of making money "on the side". There are also serious questions about "motivational materials" in which the company makes money from motivational CDs and other gimmickry.
Amway Australia charges more than $100 a time for joining Amway as a so-called independent business owner. In Britain the company has already promised to scrap this controversial joining fee. No such luck in Australia, where direct sellers are under the eye of the Australian Competition and Consumer Commission. A spokesperson for the regulator says Amway has been examined in the past and it was not breaking any Australian laws.
I asked Tony Greig, chief legal counsel for Amway Australia, whether the group would now change its ways. Greig defended his turf, suggesting Amway Australia was a very different company from the British unit. He said the joining fees - which include product - were the only way to get the agents to understand the products they were selling.
My own sense of it is that direct selling in Australia - especially the foot-in-the- door style of Amway - is fading. Company records of Amway Australia show the revenue, at $140 million, has been relatively flat; it was as much as $120 million five years ago.
With low-cost Chinese manufacturing pumping out cut-price goods, it's increasingly difficult to buy anything for less than you might pay at Kmart or Spotlight or your local discount store. In fact, intermediaries like selling agents just add to the price. And with the internet allowing you to buy direct, you no longer need your neighbours trying to flog something over the garden fence … no wonder most of them don't bother.
A few surprising bits of info have come out of the article, but that this made news here in the first place is surprising in itself!
In one of our earlier blog posts (Some Numbers To Ponder), we stated that in the year 2000 there were 100,000 IBO's in Australia and currently, according to Amway Australia's own website the number of IBO's in Australia and New Zealand combined is 80,000. We then came up with an estimate that Australian IBO's made up about 65,000. Note that the article states that there are "50,000 agents nationwide". Now the reporter did not quote the source of this figure but if it came from Amway itself, it seems were being a wee bit generous with our estimate. A 50% decrease in sales force numbers hardly reflects a growing and thriving business.
Although Amway has caught the attention of the ACCC previously and "is not breaking any laws", Amway has now caught the ACCC's attention again and they could be watching this case with closer interest now. There is some speculation about on the net that the ACCC has already recently received some formal complaints since the UK case has been brought to the publics attention.
Amway Australia says it "was a very different company from the British unit". Ummm well it is now since Amway made changes to it's business model because of the UK investigation, but prior to that, how "very different" was it?....not much at all we think. Let's see, same company, same coreline products, same compensation plan and pin levels, both have training and motivation provided by the AMO's for starters. So if there's any UK readers out there, please feel free to enlighten us on just how different your business is (pre-DBERR case of course) compared to here. Even better would be to hear the perspective from any aussie IBO's out there.
No surprise that Amway is "defending" their turf and won't change it's ways. So there will be no free joining or renewal fees, no drastic retail price reductions (as much as 70%) on selected products, no mandatory training and certification required before being able to recruit others, no minimum retail sales to customers (non-IBO's) requirements, no reforms on the marketing of "tools" and no reigning in of the AMO's practices. Nup, it's business as usual for all you aussie IBO's.....until if the time ever comes, that the ACCC might see fit that it needs to defend you.
Regarding the UK case, the latest news is that the court proceedings have finished and judges decision will be known within the next couple of weeks.
Sunday, December 2, 2007
Amway UK to be Shutdown? Part 2
(http://business.timesonline.co.uk/tol/business/industry_sectors/media/article2951266.ece
Parts of the article is reposted below with our comments noted in purple.
The Government investigation claims to have revealed that just 10 per cent of Amway’s agents in Britain make any profit, with less than one in ten selling a single item of the group’s products. It claims that Amway’s main activity is encouraging other people to join its salesforce so that they pay the registration fee and buy marketing materials.
So 90% of IBO's failed to make any profit and an even greater percentage (94%) failed to sell one single product. When we were prospected, we were told that we "did not have to sell anything", just buy from yourself (your Amway business) and teach others to do the same (known as BFYTODS). It seems that the "opportunity" is being pitched in the UK the same as here in Australia, thus these figures aren't surprising at all if that is the case. Looks like there's a whole lot of self-consumption going on. Now if the retailing of products to customers (non-IBO's) was encouraged and taught in the UK systems, then these dismal figures speaks volumes as to the pricing and saleability of Amway's products.
Mr Cunningham said that Amway attracted new agents, known as Independent Business Owners (IBOs), by offering “substantial financial rewards or easy money”. He said that promise of wealth was “illusionary” and amounted to “dream selling”.
Yep, the "opportunity" was presented to us as making $50,000+ per annum (residual income) within 2-5 years by working 10-12hrs pw and with no selling involved. It did sound easy indeed. The pitch focused on our dreams and goals and how this business could make us the kind of money to turn them into a reality. We were being sold the "dream" of being financially free. We didn't buy it.
The group, which has been operating in Britain since 1973, claims that agents can earn a substantial income from selling its range of dietary supplements, cosmetics, jewellery and water purifiers. They are also offered bonuses for recruiting other agents. However, an investigation by the Department for Business, Enterprise and Regulatory Reform showed that only 6 per cent of agents bought Amway products to sell on, the court was told.
Although on it's website Amway Australia does market it's "business opportunity" where income can be earned from selling the products to retail customers, again, it is not how the "opportunity" was presented to us. As stated earlier, we were simply told that we did not have to sell anything. All we had to do was just redirect our household spending and get a 30% discount by doing so (the 30% discount is hogwash, more on that later in another blog post). By recruiting others to do exactly the same, we would earn commission on their purchases. We have since learnt that not all AMO's (Amway Motivational Organisations) promote the Amway business this way, but most do, like IDA here in Australia does.
Mr Cunningham said that the vast majority of products offered by Amway to its agents were overpriced even before they were expected to add a further 20 to 25 per cent for retail. “The unattractive pricing explains some the graver vices that are at the centre of the winding-up application,” Mr Cunningham said.
This is one of the biggest criticisms of Amway, it has been for decades. It is no wonder that the opportunity was not pitched to us with the focus being on the selling of products to retail customers. You only have to see Amway's retail prices to understand why. We'll do a separate blog post about the pricing in the near future. Anyhoo, it's nice to see a government body confirm what many prospective recruits and customers, critics and IBO's themselves have been saying for years.
Mr Cunningham told the court that Amway operates a “pernicious” scheme, which encourages agents to recruit family, friends and colleagues to the group so that they themselves could move up to “that very narrow group that makes any money”.
Ouch....."pernicious" a very strong word indeed, meaning "injurious", "harmful", "destructive" "malicious", "wicked". Having family members that are IBO's under the IDA system and the damage their involvement has done to our relationship with them and others, we concur totally with this.
He said that the Amway scheme involved targeting the “gullible”, “deluded” and “vulnerable” to join the scheme and accused the group of “dream selling.”
Some very strong words here too but we believe that anyone and everyone is a target, it is after all pitched as the "opportunity for everyone". No matter what one's socio-economic status is, most people want for a better life. Nothing wrong with that at all. When we criticised the Amway business to our family member IBO's, they responded by saying that "how can it be a scam when there's doctors, lawyers and other professional people doing it". Which implied that doctors and lawyers etc are smarter than the average person and smart people don't get conned. Ludicrous. The "dream selling" techniques that the AMO's have had decades to perfect is extremely powerful and appeals to people from from all walks of life.
However, Amway’s own records showed that only Trevor and Jackie Lowe, and Jerry and Mandy Scriven among its agents earned more than the £78,000 required to place them in the top 2 per cent of earners, the court was told.
So in over 34 years of operation in the UK, of which tens of thousands of people have joined Amway and in all that time, only two couples have managed to achieve a substantial income. (equivalent to $180,000 AUD). Wow, what an embarrassing revelation that is.
The records showed that it takes at least 14 years to make it into the top 20.
So much for the 2-5 year plan, especially when we see the next claim by the DBERR:
The top 12 new joiners since 2001 earned an average of just £164 a week, said Mr Cunningham.
The average weekly wage in the UK is about $457 per week. So after 7 years in the business, these Top 12 IBO's earned an average of $293 less than the average weekly wage earner. A 2-5 year plan to financial freedom indeed.....not.
The “snapshot” of Amway’s records showed that of the 25,000 agents operating at that time, just 37 made more than £25,000 a year.
So not 10%, not 5%, not even 1%, but in fact a paltry 0.15% of IBO's made more than the average annual full-time income ($457 x 52 = $23764GBP).
Amway has claimed that it has substantially changed it business model since the department lodged its petition to wind up the company in April.
Amway has indeed made sweeping changes to it's business model. But after operating in the UK for decades, it is damning that it took a government investigation for any substantive reforms to be made to address pricing issues and it's AMO's practices. Issues that the Amway Corp would've been fully aware of long before now. Had it not been for the investigation, we believe without any doubt that it would've been business as usual for Amway UK. Should the DBERR win, the ramifications across the globe could be huge.
There is plenty of anecdotal evidence from former and even current Australian IBO's that mirror the DBERR's claims, particularly in regard to the practices of the motivational organisations.
So what percentage of Australian IBO's earn any income? How much did the average Australian IBO earn last financial year? How much does the top 10 or 20 Australian IBO's earn? What is the average monthly PV per IBO? What percentage of the Amway sales are made to actual retail customers (non-IBO's)? How many Australian Platinums, Emeralds and Diamonds are there? How long did they take to achieve these levels on average? What percentage of Australian IBO's renew after their first year? second year and so on?
How we would love to know the answers to these questions, Amway Australia certainly knows them. But all that we basically know is that there are 80,000 IBO's in Australia and New Zealand combined and according to Amway literature, the average "active" IBO from around the globe earned (USD)$115pm gross....in 2001 mind you. Now, how can a person thinking about joining Amway assess the "business opportunity" thoroughly enough based on this? How does one verify that the potential income levels as presented in the plan have actually been achieved in reality and by how many and within what time frames? They can't.
Perhaps the UK case might prick the ears of our own ACCC (Australian Competition and Consumer Commission)? It is likely that only then, will accurate and current figures regarding the Amway business will be revealed. We don't think Amway will ever disclose them under their own volition. In any case it is clear that the UK case has sparked major changes to the business model there which Amway say will be rolled out across the globe. If it's practices, prices and the promotion and marketing of the business by the AMO's are similar or the same as the UK in other countries, then it has no choice but to change or face similar government action.
Parts of the article is reposted below with our comments noted in purple.
The Government investigation claims to have revealed that just 10 per cent of Amway’s agents in Britain make any profit, with less than one in ten selling a single item of the group’s products. It claims that Amway’s main activity is encouraging other people to join its salesforce so that they pay the registration fee and buy marketing materials.
So 90% of IBO's failed to make any profit and an even greater percentage (94%) failed to sell one single product. When we were prospected, we were told that we "did not have to sell anything", just buy from yourself (your Amway business) and teach others to do the same (known as BFYTODS). It seems that the "opportunity" is being pitched in the UK the same as here in Australia, thus these figures aren't surprising at all if that is the case. Looks like there's a whole lot of self-consumption going on. Now if the retailing of products to customers (non-IBO's) was encouraged and taught in the UK systems, then these dismal figures speaks volumes as to the pricing and saleability of Amway's products.
Mr Cunningham said that Amway attracted new agents, known as Independent Business Owners (IBOs), by offering “substantial financial rewards or easy money”. He said that promise of wealth was “illusionary” and amounted to “dream selling”.
Yep, the "opportunity" was presented to us as making $50,000+ per annum (residual income) within 2-5 years by working 10-12hrs pw and with no selling involved. It did sound easy indeed. The pitch focused on our dreams and goals and how this business could make us the kind of money to turn them into a reality. We were being sold the "dream" of being financially free. We didn't buy it.
The group, which has been operating in Britain since 1973, claims that agents can earn a substantial income from selling its range of dietary supplements, cosmetics, jewellery and water purifiers. They are also offered bonuses for recruiting other agents. However, an investigation by the Department for Business, Enterprise and Regulatory Reform showed that only 6 per cent of agents bought Amway products to sell on, the court was told.
Although on it's website Amway Australia does market it's "business opportunity" where income can be earned from selling the products to retail customers, again, it is not how the "opportunity" was presented to us. As stated earlier, we were simply told that we did not have to sell anything. All we had to do was just redirect our household spending and get a 30% discount by doing so (the 30% discount is hogwash, more on that later in another blog post). By recruiting others to do exactly the same, we would earn commission on their purchases. We have since learnt that not all AMO's (Amway Motivational Organisations) promote the Amway business this way, but most do, like IDA here in Australia does.
Mr Cunningham said that the vast majority of products offered by Amway to its agents were overpriced even before they were expected to add a further 20 to 25 per cent for retail. “The unattractive pricing explains some the graver vices that are at the centre of the winding-up application,” Mr Cunningham said.
This is one of the biggest criticisms of Amway, it has been for decades. It is no wonder that the opportunity was not pitched to us with the focus being on the selling of products to retail customers. You only have to see Amway's retail prices to understand why. We'll do a separate blog post about the pricing in the near future. Anyhoo, it's nice to see a government body confirm what many prospective recruits and customers, critics and IBO's themselves have been saying for years.
Mr Cunningham told the court that Amway operates a “pernicious” scheme, which encourages agents to recruit family, friends and colleagues to the group so that they themselves could move up to “that very narrow group that makes any money”.
Ouch....."pernicious" a very strong word indeed, meaning "injurious", "harmful", "destructive" "malicious", "wicked". Having family members that are IBO's under the IDA system and the damage their involvement has done to our relationship with them and others, we concur totally with this.
He said that the Amway scheme involved targeting the “gullible”, “deluded” and “vulnerable” to join the scheme and accused the group of “dream selling.”
Some very strong words here too but we believe that anyone and everyone is a target, it is after all pitched as the "opportunity for everyone". No matter what one's socio-economic status is, most people want for a better life. Nothing wrong with that at all. When we criticised the Amway business to our family member IBO's, they responded by saying that "how can it be a scam when there's doctors, lawyers and other professional people doing it". Which implied that doctors and lawyers etc are smarter than the average person and smart people don't get conned. Ludicrous. The "dream selling" techniques that the AMO's have had decades to perfect is extremely powerful and appeals to people from from all walks of life.
However, Amway’s own records showed that only Trevor and Jackie Lowe, and Jerry and Mandy Scriven among its agents earned more than the £78,000 required to place them in the top 2 per cent of earners, the court was told.
So in over 34 years of operation in the UK, of which tens of thousands of people have joined Amway and in all that time, only two couples have managed to achieve a substantial income. (equivalent to $180,000 AUD). Wow, what an embarrassing revelation that is.
The records showed that it takes at least 14 years to make it into the top 20.
So much for the 2-5 year plan, especially when we see the next claim by the DBERR:
The top 12 new joiners since 2001 earned an average of just £164 a week, said Mr Cunningham.
The average weekly wage in the UK is about $457 per week. So after 7 years in the business, these Top 12 IBO's earned an average of $293 less than the average weekly wage earner. A 2-5 year plan to financial freedom indeed.....not.
The “snapshot” of Amway’s records showed that of the 25,000 agents operating at that time, just 37 made more than £25,000 a year.
So not 10%, not 5%, not even 1%, but in fact a paltry 0.15% of IBO's made more than the average annual full-time income ($457 x 52 = $23764GBP).
Amway has claimed that it has substantially changed it business model since the department lodged its petition to wind up the company in April.
Amway has indeed made sweeping changes to it's business model. But after operating in the UK for decades, it is damning that it took a government investigation for any substantive reforms to be made to address pricing issues and it's AMO's practices. Issues that the Amway Corp would've been fully aware of long before now. Had it not been for the investigation, we believe without any doubt that it would've been business as usual for Amway UK. Should the DBERR win, the ramifications across the globe could be huge.
There is plenty of anecdotal evidence from former and even current Australian IBO's that mirror the DBERR's claims, particularly in regard to the practices of the motivational organisations.
So what percentage of Australian IBO's earn any income? How much did the average Australian IBO earn last financial year? How much does the top 10 or 20 Australian IBO's earn? What is the average monthly PV per IBO? What percentage of the Amway sales are made to actual retail customers (non-IBO's)? How many Australian Platinums, Emeralds and Diamonds are there? How long did they take to achieve these levels on average? What percentage of Australian IBO's renew after their first year? second year and so on?
How we would love to know the answers to these questions, Amway Australia certainly knows them. But all that we basically know is that there are 80,000 IBO's in Australia and New Zealand combined and according to Amway literature, the average "active" IBO from around the globe earned (USD)$115pm gross....in 2001 mind you. Now, how can a person thinking about joining Amway assess the "business opportunity" thoroughly enough based on this? How does one verify that the potential income levels as presented in the plan have actually been achieved in reality and by how many and within what time frames? They can't.
Perhaps the UK case might prick the ears of our own ACCC (Australian Competition and Consumer Commission)? It is likely that only then, will accurate and current figures regarding the Amway business will be revealed. We don't think Amway will ever disclose them under their own volition. In any case it is clear that the UK case has sparked major changes to the business model there which Amway say will be rolled out across the globe. If it's practices, prices and the promotion and marketing of the business by the AMO's are similar or the same as the UK in other countries, then it has no choice but to change or face similar government action.
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