As reported previously, the court case regarding DBERR's petition to shutdown Amway UK concluded on the 6th December and initially a judgement was expected around the end of that month.
We noted that our search keywords for the blog began to be dominated by terms referring to the UK case, representing hundreds of people looking for any updates or any type of news regarding the decision. There were no comminications from the Amway Corp, none whatsoever, not even something along the lines of an update saying "that they are still awaiting the decision and we'll make it known when we do"....until very recently.
A number of very rightly concerned and anxious IBO's began emailing Amway UK, complaining about the lack of communication regarding the case and wanting an update on it. Amway UK must have received plenty of them as within days an email was issued to the leaders of Amway UK. That email surfaced on the truth about amway forum and so for the benefit of those who may not be aware of it's existence, the email is quoted below:
"Dear Leaders,
In light of enquiries from some of our leaders requesting news on the court case, I would like to take a moment to let you know the up-to-date position.
In addition, we have a number of key business initiatives planned for 2008 to inform you about at this stage.
Please feel free to share the information in this letter with ABOs in your group if you think it's appropriate right now and if they've been asking about the outcome of the court case. It's our plan to send out a Business Bulletin on Friday to all ABOs with a similar update.
As you are aware, the court hearings in the case brought against us by the Department for Business, Enterprise and Regulatory Reform (BERR, formerly the DTI) finished on 6 December and we were told to expect a written judgment some time in January.
We have not yet received a ruling from the court and although our lawyers check on a daily basis we have no indication as to when the ruling will be given. We are hopeful it will be announced before the end of this month.
This letter is to let you know about the arrangements we are making to ensure that you hear the result directly from Amway, and also to reassure you that we will do everything possible to ensure any disruption to the business is kept to an absolute minimum, once we know the outcome.
As soon as the ruling is announced in court, and we've informed our staff, we will telephone all UK Leaders (Business Consultants) to inform you of the result. The call will be brief, and will be followed up by a more in-depth email to you and a subsequent email to all registered ABOs later that day. We will try our very best to ensure that you hear the outcome first from Amway.
We are of course hopeful of a judgment in our favour, based on the evidence we gave in court and everything we have done to address the concerns that BERR (formerly the DTI) raised with us. Our legal team strongly disputed their case and the selective analysis of our figures they used to support it. We are nevertheless taking responsible steps to be fully prepared for any eventuality.
In the event of what we would call a negative judgment, let us reassure you that Amway is committed to staying in this market. Amway never left a market in the 20th century and it is not going to do so in the 21st.
Please note that throughout this period the changes to our business rules remain in place. The moratorium on sponsoring that was put in place on 4 May 2007 continues. Deciding to lift the moratorium will be a business decision based on our new retail, marketing and training programme being in place . This will be some months away and is not linked to the timing of the legal action being concluded. On this issue, we will of course take into account any comments the judge makes in his ruling.
With so much happening, it's our intention to meet with all Business Consultant leaders face-to-face in informal groups, ideally within 10 working days of the judgment, at our Milton Keynes offices, subject to your availability. The objective - to discuss key training, support and marketing strategies for the first half of 2008.
We will continue working on building this business, and improving the support we offer ABOs in training and retailing, starting with the announcement of extra 'Retail With Confidence' workshops to cope with demand - the initial 12 February workshops are fully booked. We're also bringing forward Retail Coaching and training for BCs, CRCs and RCs, on-line training on products and branding, and new Product Introduction Packs.
A note will be sent to you under separate cover soon with all the information you need about the face to face meetings. You are invited at our request, as our guests, and expenses will be covered by Amway UK. We will be in touch soon with more specific details.
I look forward to seeing you in person very soon.
With best regards,
Tom Denham Director and General Manager, Amway UK Limited"
The decision to date is yet to be known, but word around the net is that it is not far away, perhaps sometime this week. We'll continue to keep an eye out for any further news or developments and post them as soon as possible.
There is also some major happenings regarding Amway India also. Massive changes to the Amway business looks set to be made, as a result of the government investigation there too. We'll do a seperate blog post on that in the future.
Showing posts with label UK. Show all posts
Showing posts with label UK. Show all posts
Saturday, February 2, 2008
Wednesday, December 19, 2007
About Sponsoring, Sales and Adverse Publicity
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.
"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.
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.
Tuesday, November 27, 2007
Amway UK to be Shutdown? Part 1
Amway UK is being taken to the High Court by Britain's DBERR (Department of Business, Enterprise and Regulatory Reform) which was formerly known as Department of Trade and Industry (DTI). The DBERR is Australia's equivalent to the ACCC (Australian Competition and Consumer Commission) and the USA's FTC (Federal Trade Commission).
To those who have been following the Amway/DBERR case, this news will be of no surprise. However, for the benefit of any new readers, as there have been so many developments and elements to the case, too many of which to post here!, we recommend you visit http://www.mlmleads.eu/ which provides an abundant amount of information regarding the case, all in chronological order.
To outline the case briefly though, basically the DBERR conducted an investigation of Amway UK, and some of it's AMO's (Amway Motivational Organisations) namely Britt World Wide (BWW), IBS and Network 21 and raised serious concerns as to how the business was being promoted, it's business practices and the misrepresentations that were being made. So serious were the allegations, the DBERR lodged a petition to wind-up the company. In response to this, Amway sanctioned it's entire UK sales force and has since made major changes to it's business over the last six months, in the hope of satisfying the DBERR that it had addressed it's complaints and thus prevent the petition to wind-up the company from proceeding. It didn't work, the case to shutdown Amway went to court yesterday.
Although the Amway UK business makes up only a tiny percentage of Amway's revenue, a drop in the ocean really, the ramifications are far more reaching and it could very well be the beginning of the end of the Amway business on a global scale, including Australia.
The following news article covers the the first day of the court proceedings. The DBERR is certainly not backward in coming forward with their claims and revelations as a result of their investigation.
http://business.timesonline.co.uk/tol/business/industry_sectors/media/article2951266.ece
Some pretty shocking stuff eh?
There's a lot to take in, so we'll discuss the contents of the article in detail and how this relates to the Australian Amway experience in Part 2. Stay tuned!
To those who have been following the Amway/DBERR case, this news will be of no surprise. However, for the benefit of any new readers, as there have been so many developments and elements to the case, too many of which to post here!, we recommend you visit http://www.mlmleads.eu/ which provides an abundant amount of information regarding the case, all in chronological order.
To outline the case briefly though, basically the DBERR conducted an investigation of Amway UK, and some of it's AMO's (Amway Motivational Organisations) namely Britt World Wide (BWW), IBS and Network 21 and raised serious concerns as to how the business was being promoted, it's business practices and the misrepresentations that were being made. So serious were the allegations, the DBERR lodged a petition to wind-up the company. In response to this, Amway sanctioned it's entire UK sales force and has since made major changes to it's business over the last six months, in the hope of satisfying the DBERR that it had addressed it's complaints and thus prevent the petition to wind-up the company from proceeding. It didn't work, the case to shutdown Amway went to court yesterday.
Although the Amway UK business makes up only a tiny percentage of Amway's revenue, a drop in the ocean really, the ramifications are far more reaching and it could very well be the beginning of the end of the Amway business on a global scale, including Australia.
The following news article covers the the first day of the court proceedings. The DBERR is certainly not backward in coming forward with their claims and revelations as a result of their investigation.
http://business.timesonline.co.uk/tol/business/industry_sectors/media/article2951266.ece
Some pretty shocking stuff eh?
There's a lot to take in, so we'll discuss the contents of the article in detail and how this relates to the Australian Amway experience in Part 2. Stay tuned!
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