Is Amway A Scam?

[marplots]

At the minimum, to make it in the Amway model, I either have to sell/buy Amway products myself or recruit other people to do either or both of those things.

I think even Icerat would agree with that.

Obviously, I don't think this is something I want to do. Others do want to do it. So what's the retention rate and how fast is the pool of recruits/customers in the US being replenished and how fast are they leaving? What is the finite limit of Amway US?

 

[icerat]

Independent Business Organization. That's what it's called. By definition, all of them are businesses.

Actually, the term in the US is Independent Business Owner.

Are you seriously claiming that Amway Corporation gets to define whether someone is running a business or not? Has the IRS agreed to this?

If they called it "Amway member" instead, then the model would be different?

I haven't shared my personal anecdotes because there's no need to. I think I've demonstrated that I know enough about them to discuss them rationally.

You've demonstrated ignorance of how the model works

The problem for Amway is that no one is "building a business" through sales of the products. The statistics prove this.

Utterly false. Again, where are the forty billions of dollars worth of products that Amway has sold in the last decades? Buried somewhere?

Yes. There is a lot of product being moved. However, the evidence indicates that the product is being moved by IBOs buying for their own consumption and recruiting others to do the same.

You're contradicting yourself. You're saying nobody is building the business through sale of products and then saying product is being moved (ie sold).

Is it being sold or not?

No need to argue it because it makes my point. You aren't running a business, you are buying things at a discount.

You contradict yourself again. Right at the beginning you insisted I'm running a business because Amway calls me an IBO.

Now if you want to claim that there are plenty of people who DO join it and 2-3 years later are raking in the money, you need to present evidence of this.

Already presented. Indeed the statistics you claim prove "failure" already do it. The brochure says over 309,000 North American members received a bonus last year. It also says 0.3% earned bonuses over $40,000/yr. We know from the statistics in the Team vs Quixtar lawsuit that half who register never even purchase products after doing so, so we know they don't earn a bonus. That means there's more than 618,000 North American members.

So there's somewhere around 2000 Amway business owners in North America alone averaging over $40,000/yr in bonuses and commissions.

Here's more examples -
Achievers Magazine
Amway Wiki

Of course you need downline! Reaching Gold level or higher (which only 0.47% of all IBOs ever do) requires monthly sales volume of roughly $15,000. We all know (as you said "Since the vast majority of them have no expectation to make money and indeed don't even try") that virtually no one is selling that much in monthly volume by themselves.

I've already pointed out I know people who do this much in customer sales volume. A friend of mine in New York has over 2000 regular customers on his books.

You must recruit a downline to help you reach this. But most of the people you recruit will not even try to make money. So the realistic chances/odds of ever reaching Gold level are very minute.

The networking statistics are that if you recruit 20 people, 8 will do pretty much nothing. 9 will be wholesale shoppers, maybe recruit a small number. 3 will treat it as a business and try to make some money, at least for a while. So even in the BFYTODS model, your customer:business builder ratio is 3:1. Throw in the fact that active and recruiting business builders will usually have at least 20 regular customers, and your now at a 60:1 customer:business builder ratio.

Sponsor 20 people and develop 20 personal customers and the statistics for those who reach Gold and higher are close to 100%

Which means that I don't really have a chance/opportunity of ever making any money with Amway. Therefore, Amway sucks as a business opportunity.

Statistics also indicate that if you expose the business plan and products to 100-200 people within a 3-6 month period, and operate in a professional manner, you'll sponsor 20 and develop 20 personal customers.

But the article you quoted said I had 35-1 odds of making a $50,000 salary if I recruited a productive downline.

Yes, just recruiting *one* productive downline.

I merely said that I have the same odds of winning that money on a $1500 bet to illustrate that the odds of that happening are pretty long by the logic of the article you quoted.

Hypothetically, since you're so focussed on odds -

Sponsor someone for $50. Buy $150 (at wholesale price) worth of products for your grandmother, register it as a customer sale. Have the person you sponsored buy $150 (at wholesale price) worth of products.

You've now qualified for a downline bonus, you're now in 1:35 odds. Pay for all that yourself and you've spent $350 and got $300 worth of products. Actually sell the products and you're $50 in the black and got equivalent odds to your vegas winnings.

I also implied that I don't really buy the premise of the article in the first place.

So point out the flaws.

But as I quoted you above, you said I would have 12 months to reconsider. This only says 3 months to get my business registration fee and training material expenditures back and 6 months on product. Where does it say I have 12 months? That's what I can't find.

Actually to be honest I'm not quite sure on the current rules, they're vary from country to country. I thought they had changed it to 12 months in the US. Either I'm wrong or the brochure is outdated. Either may be true.

Not as an IBO for stock that I purchased to sell. For that they charge me $5.95 per return. So I'm not getting a "full refund" if I decide the opportunity is not good for me.

Ok, that's new. I don't have to pay that here in Sweden, nor in Australia where I built my business originally. I've returned stuff in both countries and they even pay shipping.

This has not been my experience. YMMV.

So go and gather statistics.

If 8 million is the number registered then this means that only about 36000 worldwide (extrapolating the .46% in North America) have reached gold level or above. That means that 7,964,000 have been pitched a "business opportunity" and not made any money at it at all.

No, that doesn't mean that at all. First of all, I had a profitable Amway business *long* before reaching "gold level". But yes, most people "pitched" the idea won't make money. That's cause most people don't try. As the judge in the UK court case said - "it's an opportunity, not a guarantee".

But if it was a legitimate business opportunity, the success rate would be a hell of a lot higher.

(1) Why? Given the very lost of entry and low risk, you would expect a very large number of people to not treat it very seriously. Heck, it costs more to join the gym, but most people who join the gym stop shortly afterwards. That doesn't make exercise a poor way to get fit.

(2) You're arbitrarily defining "success" for other people. If someone joined Amway to make a few hundred dollars a month holding makeup parties, and does say, you're calling them a failure even though they reached their goals.

I don't think people sign up with Amway to fail. Even if half just signed up on a whim or just to please a friend or family member, that still leaves quite a few who may have wanted to make money but discovered that the business model was unsustainable.

Amway Japan statistics in their annual report a few years back said 75% joined primarily to get discounted distributor pricing. If they successfully place an order and get a product, they've reached their goal. You're calling them a failure and evidence of an unsustainable business model.

Is going to the gym and exercising a poor way of getting fit because most people who join the gym don't get fit?

I have to ask you: Why do you care so much if you don't have a stake in this? You have said that you are not actively involved in Amway so why so much effort in defending it?

A few years back I was spending a few months in Paris and got bored and ended up getting into arguments with people on the 'net about Amway, because my experience was completely different to theirs. Researching the company became a hobby. If someone is spouting BS I call it, doesn't matter whether it's on Amway or anything else.

I am pretty active in discouraging everyone I know from getting involved in it (and all MLM products) because I've seen first-hand how bad it can be. My aunt lost everything she had because she got sucked in to this trap. I lost my best friend because I wouldn't join his downline (he's no longer involved and we've reconciled). It does tear apart families and friends and can lead to financial ruin. That's why I'm here, anyway.

And yet I made money, learned a lot, and never lost a friend. Don't you think maybe it's possible both experiences occur? That it's not the model per se, but the way people operate it that causes problems?

I can't say the way people operate it is entirely independent of the model itself. The low cost of entry pretty much guarantees you'll get (a) a lot of non-serious people give it a try (so high "failure") and (b) a lot of scam companies using it.

But the low cost of entry is also a great attraction of the model, making it an open opportunity, both for companies wanting to get a product to market and people wanting to start a business.

 

[icerat]

At the minimum, to make it in the Amway model, I either have to sell/buy Amway products myself or recruit other people to do either or both of those things.

I think even Icerat would agree with that.

Yup, though it's not an "or" for the second part. If you're going to do that you have to do the first part as well.

Obviously, I don't think this is something I want to do. Others do want to do it. So what's the retention rate and how fast is the pool of recruits/customers in the US being replenished and how fast are they leaving?

What is the finite limit of Amway US?

Historically, 30% of people who register renew in the first year. Overall renewal rate is nearly 60%. Without having the figures to do the math properly, it's clear that there is very high retention past the first year. Indeed I've been told that past year three it's close to 100%.

Note of course that fully 50% of people who join don't even order after joining, so half of people who join and actually order, renew.

Personally I've thought this first year data is evidence of terrible inefficiencies in the way new people are sponsored and started up with the business. On a more postive note, Amway North America trialled a new training program last year that resulted in a 76% first year retention rate.

Now that's people who register. There's also the problem of customers, and in particular customers of people who stop being IBOs. In the 90s Amway engaged market researchers who found that there were a very large number of people who had bought and liked Amway products but no longer purchased them. The main reason given when asked why not was "my distributor disappeared". Because I'm visible on the 'net through discussions like this I *regularly* get contacted by people wanting to buy Amway products but the person they bought them off "disappeared". Happened just this week from a guy in the UK. Used to buy the products in Poland. Now lives in the UK, found himself a distributor there. Now he can't contact them. I have some UK contacts so I've connected them.

It's another terrible inefficiency that offers a lot of room for improvement.

What is the finite limit of Amway US?

Ultimately it's the same as for any other business - what's the market saturation point for your product offerings? Like any other business, if you start hitting problems with demand, you adapt and change or die. That's one reason why Amway stopped being primarily a "soap" company two decades ago and is now a Health & Beauty company. It's a reason why in many markets they're opening product pickup "business centres" and now doing substantial mass market brand advertising to support the field.

Change or die, that's business.

 

[marplots]

I asked, "What's the finite limit for Amway US?"

Ultimately it's the same as for any other business - what's the market saturation point for your product offerings? Like any other business, if you start hitting problems with demand, you adapt and change or die. That's one reason why Amway stopped being primarily a "soap" company two decades ago and is now a Health & Beauty company. It's a reason why in many markets they're opening product pickup "business centres" and now doing substantial mass market brand advertising to support the field.

Change or die, that's business.

Do you envision a "congealed" Amway where recruitment is very low and the existing IBO's maintain the overall sales? I mean this generally, not an entire freeze.

I'm curious because at some point, the market would reach near saturation. Would Amway then need to alter it's reimbursement structure from a growth/new blood model to some static version?

 

[Joecool]

Let's see. It's generally taught that to build a decently profitable Amway business you have to work hard consistently for at least one to two years.

How long did Joecool build for? less than a year

I built the business to the 4000 PV level (just below gold/platinum). My sponsor and upline swore, and even had people give testimonials that at that level, you have $1000 net income.

My business had all the parameters that were taught, but my net profit was zero.

My upline also started getting crazy like telling me I needed to check with him before buying a car, getting married, etc.

Easy decision to quit. The business did not deliver what they promoted. My downline were all losing money too. Easy decision for them to quit as well.

 

[icerat]

I asked, "What's the finite limit for Amway US?"

Do you envision a "congealed" Amway where recruitment is very low and the existing IBO's maintain the overall sales? I mean this generally, not an entire freeze.[/quote]

That already happens within groups within Amway. My original Amway business has had nobody "active" attempting to grow it in more than a decade. It followed the normal attrition rates and then for most of the last decade has maintained pretty steady volume year in year out, the same people buying the same stuff.

Will that ever happen for Amway as a whole? I doubt it. For one reason it's not that homogeneous. I think you'll get groups that stagnate and shrink, failing to adapt to market changes, and other groups will innovate and be successful and grow. There's plenty of examples of that already.

More common would be were growth and attrition cancel each other out (or attrition wins). Lots of occasions when that happens. Indeed, following the "recognitions" it appears that's happened where I live now, in Sweden. I don't think that's because of market saturation though, of either products or reps.

I'm curious because at some point, the market would reach near saturation.

Yes, and that point is pretty much defined by when there's little demand for whichever product you're trying to market, which is likely to come long before a theoretical limit of "everyone is an IBO". Remember that sponsoring people doesn't make anyone any money, what's important is product movement. If there's still potential for that to happen, then there's still potential to recruit, and retain, someone to successfully do it.

The first issue will be a recurring problem for any long-lived company. Eventually competitors will come up with something better, or match you on pricing or convenience, something.

The second one is unlikely to ever happen. Years ago I ran up a spreadsheet where I factored in things like renewal rates, activity rates, sponsoring rates, birth and death rates, etc etc. There were numerous iterations where sponsoring saturation never occurred. And that didn't factor in people like myself, the very large group of former IBOs who become IBOs again.

Would Amway then need to alter it's reimbursement structure from a growth/new blood model to some static version?

Amway's current structure is a blending of both growth incentives and "static" incentives. When BERR took Amway UK to court, Amway (at the request of IBOs) suspended all sponsoring for nearly 2 years. The company continued to have tens of millions of pounds in sales, and the people who had helped generate that sales volume continued to earn significant incomes.

Obviously if growth hypothetically became impossible, then the growth incentives would be available to pay the field an help prevent attrition. Smarter I think would be to put it in R&D and come up with innovative new products or marketing

 

[xjx388]

Actually, the term in the US is Independent Business Owner.

Are you seriously claiming that Amway Corporation gets to define whether someone is running a business or not? Has the IRS agreed to this?

I am claiming that Amway pitches themselves as a business opportunity and tells people to set themselves up as sole proprietorships for tax purposes. This is all according to Amway's brochures. Amway does NOT tell people to join a buying club.

If they called it "Amway member" instead, then the model would be different?

The model wouldn't change at all, but they'd be a heck of a lot more honest. If one was merely becoming a member of the Amway Buyer's Club where people could earn discounts based on how much they and their friends and family buy it would be a better representation of the reality. It is deceptive to market it as a business opportunity when there is no real chance of making money at it.

You've demonstrated ignorance of how the model works

Ok. Show me where I'm wrong.

Utterly false. Again, where are the forty billions of dollars worth of products that Amway has sold in the last decades? Buried somewhere?

Languishing in basements and garages. Consumed for personal use by IBOs. Product is obviously being moved, but mostly to IBOs, not outside customers. I've seen no evidence that would indicate otherwise.

You're contradicting yourself. You're saying nobody is building the business through sale of products and then saying product is being moved (ie sold).

Is it being sold or not?

Nobody is "building a business" through merely selling the products to end consumers who are not their downline IBOs. Product is being moved through personal consumption by IBOs.

You contradict yourself again. Right at the beginning you insisted I'm running a business because Amway calls me an IBO.

Amway sold you a business opportunity. It's rules require that you run it as a sole proprietorship (the simplest business structure). The fact is that you treat it as more of a buying club, as does the vast majority of IBOs. However, if you receive a bonus check, you are receiving business income. The IRS (in the US) will see you as a business. This contradiction is not mine, it's inherent in the Amway "business" model.

Already presented. Indeed the statistics you claim prove "failure" already do it. The brochure says over 309,000 North American members received a bonus last year. It also says 0.3% earned bonuses over $40,000/yr. We know from the statistics in the Team vs Quixtar lawsuit that half who register never even purchase products after doing so, so we know they don't earn a bonus. That means there's more than 618,000 North American members.

So there's somewhere around 2000 Amway business owners in North America alone averaging over $40,000/yr in bonuses and commissions.

And you think this represents "good numbers?" Those are terrible numbers for any kind of investment.

Here's more examples -
Achievers Magazine
Amway Wiki

I've already pointed out I know people who do this much in customer sales volume. A friend of mine in New York has over 2000 regular customers on his books.

Look, no one has ever denied that there are a few people that make money at Amway. In fact, there are about 36,000 of them worldwide who do. What I am saying is that:

1. Amway is a terrible business opportunity for the vast majority of people who are pitched it.
2. The Amway business model is ultimately unsustainable and is basically a legalized pyramid scheme.

Those two facts have not been shown wrong by anything you've said here thus far.

The networking statistics are that if you recruit 20 people, 8 will do pretty much nothing. 9 will be wholesale shoppers, maybe recruit a small number. 3 will treat it as a business and try to make some money, at least for a while. So even in the BFYTODS model, your customer:business builder ratio is 3:1. Throw in the fact that active and recruiting business builders will usually have at least 20 regular customers, and your now at a 60:1 customer:business builder ratio.

Sponsor 20 people and develop 20 personal customers and the statistics for those who reach Gold and higher are close to 100%

Thank you, you are proving my point. That's 40 people that you have to recruit/sell to. To really make the good money, each of those 20 people I recruited has to do the same thing I did. And on and on and on. Even at the first level of this pyramid, we are talking about 840 people! And we already have the numbers (provided by Amway no less!) that show that none of those people will ever do anything with Amway. This is why I say the Amway model is unsustainable. And I haven't even begun to touch on the dark side of Amway: The constant pressure to go to conventions and buy motivational CDs, etc.

Statistics also indicate that if you expose the business plan and products to 100-200 people within a 3-6 month period, and operate in a professional manner, you'll sponsor 20 and develop 20 personal customers.

I don't see those statistics anywhere. This is pure speculation. But again, it goes to prove my point more than it does yours. Who has the time/money to dedicate to finding and approaching all those people? Very few people, I would suspect. And IBOs can't even advertise their products or business opportunities, so all of this has to happen by personal one-on-one contact. Yet another reason why the Amway business opportunity sucks.

Yes, just recruiting *one* productive downline.

Which you've already shown takes a heck of a lot of work. And even if I accomplish that, I still only have a 35-1 chance to make good money. That sucks, frankly.

Hypothetically, since you're so focussed on odds -

Sponsor someone for $50. Buy $150 (at wholesale price) worth of products for your grandmother, register it as a customer sale. Have the person you sponsored buy $150 (at wholesale price) worth of products.

You've now qualified for a downline bonus, you're now in 1:35 odds. Pay for all that yourself and you've spent $350 and got $300 worth of products. Actually sell the products and you're $50 in the black and got equivalent odds to your vegas winnings.

So point out the flaws.

For the record, when I evaluate a business opportunity, I am NOT focused on the odds. I'm focused on the opportunity to make money. But the article you quoted from IS focused on odds, and I'll be happy to point out what I think is the fatal flaw:

The article is built on the idea that a certain "anti-MLM zealot" says that the odds of succeeding in Amway (reaching platinum) are 8294 to 1 and that a person would get better odds at roulette. The author says this is wrong thinking because success in Amway is not a game of chance like roulette. Your success is dependent on your goals and actions. However, I could also say that success at roulette is also dependent on your goals and actions. Allow me a quick parody to illustrate:

Anti-roulette zealots say that the odds of making any money are pretty close to zero. I say they are wrong! Success at gambling is dependent on your goals and your actions. What if your goal at roulette is merely to have fun? Your odds of success are therefore 100%, if you just play the game! But what if you want a shot at making $50,000? Well, we know that to win at roulette you have to enter a casino. Therefore, just by visiting a casino, your odds have increased from 0 to 1 in 135! But then you have to decide to gamble! Once you have decided to gamble, your odds have shot up to 1 in 63! Now you have to pick a number to bet $1500 on. Just by picking a number to bet on, you have increased your odds to 1 in 35! But if you pick the right number, your odds are 100%! See? Your goals and the actions you take make all the difference!

That's the kind of logic the article is employing. In reality, the numbers can't be twisted like this. The fact is that the average person who plays roulette (joins Amway) has very little chance of making any money at all. That's why playing roulette (joining Amway) is a very poor business opportunity. Thankfully, no is trying to market roulette as a business opportunity, unlike Amway.

<snip>

Is going to the gym and exercising a poor way of getting fit because most people who join the gym don't get fit?

Joining a gym is a poor way of getting fit, statistics show. Starting an exercise program can be a great way to get fit, depending on which exercise program you choose and what you put into it. But joining a gym, for the vast majority of people is just throwing away their time and money.

Now substitute <Amway> for <a gym>, <making money> for <getting fit> and <business> for <exercise program>.

A few years back I was spending a few months in Paris and got bored and ended up getting into arguments with people on the 'net about Amway, because my experience was completely different to theirs. Researching the company became a hobby. If someone is spouting BS I call it, doesn't matter whether it's on Amway or anything else.

But you have previously said that you only joined Amway (like you joined Microsoft's reseller program) to get a discount. I'm a little confused as to your actual experience.

And yet I made money, learned a lot, and never lost a friend. Don't you think maybe it's possible both experiences occur? That it's not the model per se, but the way people operate it that causes problems?

I can't say the way people operate it is entirely independent of the model itself. The low cost of entry pretty much guarantees you'll get (a) a lot of non-serious people give it a try (so high "failure") and (b) a lot of scam companies using it.

But the low cost of entry is also a great attraction of the model, making it an open opportunity, both for companies wanting to get a product to market and people wanting to start a business.

These reasons, to my mind, are very good reasons NOT to get involved with Amway. If most people who join it are not serious, it attracts a lot of scammers and has a serious dark side, I think I can find better business opportunities, don't you? Maybe playing roulette?

 

[Joecool]

Quote:
I am pretty active in discouraging everyone I know from getting involved in it (and all MLM products) because I've seen first-hand how bad it can be. My aunt lost everything she had because she got sucked in to this trap. I lost my best friend because I wouldn't join his downline (he's no longer involved and we've reconciled). It does tear apart families and friends and can lead to financial ruin. That's why I'm here, anyway.

And yet I made money, learned a lot, and never lost a friend. Don't you think maybe it's possible both experiences occur? That it's not the model per se, but the way people operate it that causes problems?

I can't say the way people operate it is entirely independent of the model itself. The low cost of entry pretty much guarantees you'll get (a) a lot of non-serious people give it a try (so high "failure") and (b) a lot of scam companies using it.

So Icerat had a nice experience in Amway, but acknowledges that many don't. If there was a restaurant in your area where half the people loved the food and service, but the other half got food poisoning, would you eat there?

And if the people who suffered food poisoning complained about it, would you deny their experience as true just because you escaped getting food poisoning? What if these poisoned customers never filed formal complaints to get the restaurant shut down but you knew the poisoning took place, would you still eat there and refer your friends and family?

 

[Nogbad]

Products that are good pretty much sell themselves. When you are spending more time selling the selling you would be wise to step back and say WTF?

No idea if Amway products are any good - they aren't something you come across every day (well any day come to think of it)

 

[marplots]

So Icerat had a nice experience in Amway, but acknowledges that many don't. If there was a restaurant in your area where half the people loved the food and service, but the other half got food poisoning, would you eat there?

And if the people who suffered food poisoning complained about it, would you deny their experience as true just because you escaped getting food poisoning? What if these poisoned customers never filed formal complaints to get the restaurant shut down but you knew the poisoning took place, would you still eat there and refer your friends and family?

Well, it depends. Do I make a commission if I get other people to eat there? What's a little food poisoning if I'm lining my pockets?

 

[xjx388]

Joecool and marplots: Excellent analogy!

That's exactly the way it is. By Amway's own numbers and icerat's admission Amway:

1. Is a bad business opportunity for most people.
2. Is filled with abuse and scams.

So to defend it simply because a certain few people are making money at it is, at best, contributing to the losses, abuses and scams that are the norm.

 

[icerat]

I am claiming that Amway pitches themselves as a business opportunity and tells people to set themselves up as sole proprietorships for tax purposes. This is all according to Amway's brochures.

Please quote it.

Amway does NOT tell people to join a buying club.

No, they don't. Nothing to stop people using it that way though.

The model wouldn't change at all, but they'd be a heck of a lot more honest. If one was merely becoming a member of the Amway Buyer's Club where people could earn discounts based on how much they and their friends and family buy it would be a better representation of the reality. It is deceptive to market it as a business opportunity when there is no real chance of making money at it.

The majority of people who put in the recommended work for the recommended time make money, your assertion is false.

Languishing in basements and garages.

evidence?

Consumed for personal use by IBOs.

Which is a retail sale.

Product is obviously being moved, but mostly to IBOs, not outside customers. I've seen no evidence that would indicate otherwise.

Amway rules aside, there is no legal or ethical reason why products can be consumed primarily by Amway members.

Nobody is "building a business" through merely selling the products to end consumers who are not their downline IBOs.

Utter BS. You just make this stuff up and state it as fact. First time I joined Amway was I think in 1990 or thereabouts. I was a distributor for two years in which time I did not sponsor anyone and made money simply by selling products at full retail price. It's why I joined. I made money doing so.

Product is being moved through personal consumption by IBOs.

Which is retail sales.

Amway sold you a business opportunity.

No they didn't, not in terms of marketing anyway. My brother did the first time. Another friend of mine did the second time. What Amway sold me was the right to buy their products at distributor pricing and the right to sponsor others to do so if I wish. Whether I do anything is up to me.

It's rules require that you run it as a sole proprietorship (the simplest business structure).

No they don't. You're just making things up again. You don't need a business form at all if you're not running it as a business. And if you take it seriously there's many forms it can take. I had a downline setup a Trust. Larger businesses normally incorporate.

The fact is that you treat it as more of a buying club, as does the vast majority of IBOs. However, if you receive a bonus check, you are receiving business income. The IRS (in the US) will see you as a business. This contradiction is not mine, it's inherent in the Amway "business" model.

Wrong on numerous counts. Rebates back on my own purchases are not taxable income. If I have a downline and receive commissions on that, then yes I am receiving a business or hobby income, and it is taxable. Whether the IRS sees me as a business or a hobby depends on whether I'm operating like a business or not.

And you think this represents "good numbers?" Those are terrible numbers for any kind of investment.

So 2000 people work part-time to develop a business, and all 2000 of them develop significant incomes, then that makes it a poor business?

Look, no one has ever denied that there are a few people that make money at Amway. In fact, there are about 36,000 of them worldwide who do. What I am saying is that:

ROFL. There's a lot more than that.

1. Amway is a terrible business opportunity for the vast majority of people who are pitched it.

You've provided no evidence to support that assertion. You've taken some limited data and thrown in lots of assumptions to come up with a conclusion you already decided upon.

2. The Amway business model is ultimately unsustainable and is basically a legalized pyramid scheme.

The Amway business model is as sustainable as any other product distribution business. Pyramid schemes are inherently illegal. Numerous independent authorities have analyzed the Amway business model and said it is not a pyramid scheme. "legalized pyramid scheme" is a contradiction.

Thank you, you are proving my point. That's 40 people that you have to recruit/sell to. To really make the good money, each of those 20 people I recruited has to do the same thing I did.

Sure, and if they do you'll make a lot lot lot more money.

And on and on and on. Even at the first level of this pyramid, we are talking about 840 people!

Right. And if I own a clothing store and the whole world comes at buys my clothes with the idea of reselling them, that'll be 7 billion people. What's your point?

And we already have the numbers (provided by Amway no less!) that show that none of those people will ever do anything with Amway.

Now you're going all over the place. First your claiming something is terrible. Then you claiming that it doesn't happen, so therefore it's terrible.

Make your mind up.

This is why I say the Amway model is unsustainable.

So it's unsustainable if you recruit 20 resellers and all 20 of them work hard and want to make money, and they recruit 20 resellers who do the same etc etc etc.

Yup, I entirely agree. Exactly same thing for any manufacturer/distributor.

So what's your point?

And I haven't even begun to touch on the dark side of Amway: The constant pressure to go to conventions and buy motivational CDs, etc.

Oh yeah. It's terrible. That's why I haven't been to one in years, or bought CDs etc. And why the vast majority of people registered with Amway don't buy any of this stuff - but post year 1 they keep renewing and keep buying Amway products. Unrelenting pressure.

I don't see those statistics anywhere. This is pure speculation.

No, it's internally collected statistics.

But again, it goes to prove my point more than it does yours. Who has the time/money to dedicate to finding and approaching all those people? Very few people, I would suspect.

So now it's a scam because it takes time and effort?

And IBOs can't even advertise their products or business opportunities, so all of this has to happen by personal one-on-one contact. Yet another reason why the Amway business opportunity sucks.

Also not true. IBOs can advertise, though there are contractual restrictions. The reason why it's not done much is that there are more effective and efficient ways.

Which you've already shown takes a heck of a lot of work.

No, it's extremely easy to sponsor one person and have them buy something. On average all you need to do is show the business to 4 or 5 people and you'll have one register and buy something.

And even if I accomplish that, I still only have a 35-1 chance to make good money. That sucks, frankly.

So maybe ten 5 minute phone calls and 5 half hour meetings and another meeting of a couple of hours gives you 35:1 odds (not chance) of generating a business exceeding a quarter of a million in turnover and >$40K in profit "sucks"?

You clearly haven't founded or run very many businesses. I wish my other ventures had such odds (and little time)

Frankly this discussion is encouraging me to drop my other ventures for Amway!

For the record, when I evaluate a business opportunity, I am NOT focused on the odds. I'm focused on the opportunity to make money. But the article you quoted from IS focused on odds, and I'll be happy to point out what I think is the fatal flaw:

The article is built on the idea that a certain "anti-MLM zealot" says that the odds of succeeding in Amway (reaching platinum) are 8294 to 1 and that a person would get better odds at roulette. The author says this is wrong thinking because success in Amway is not a game of chance like roulette. Your success is dependent on your goals and actions. However, I could also say that success at roulette is also dependent on your goals and actions. Allow me a quick parody to illustrate:

Anti-roulette zealots say that the odds of making any money are pretty close to zero. I say they are wrong! Success at gambling is dependent on your goals and your actions. What if your goal at roulette is merely to have fun? Your odds of success are therefore 100%, if you just play the game! But what if you want a shot at making $50,000? Well, we know that to win at roulette you have to enter a casino. Therefore, just by visiting a casino, your odds have increased from 0 to 1 in 135! But then you have to decide to gamble! Once you have decided to gamble, your odds have shot up to 1 in 63! Now you have to pick a number to bet $1500 on. Just by picking a number to bet on, you have increased your odds to 1 in 35! But if you pick the right number, your odds are 100%! See? Your goals and the actions you take make all the difference!

Ummm, no. The last part is 100% chance in roulette. There's very little chance involved in Amway (or any other business). But yes, your actions do improve your odds. "Critics" like yourself are effectively claiming that people who don't even step in a casino, have a 1:35 chance of winning $50K in roulette. Which is patently rubbish.

That's the kind of logic the article is employing. In reality, the numbers can't be twisted like this. The fact is that the average person who plays roulette (joins Amway) has very little chance of making any money at all. That's why playing roulette (joining Amway) is a very poor business opportunity. Thankfully, no is trying to market roulette as a business opportunity, unlike Amway.

See, there you go. Claiming people who haven't even stepped in the casino, merely expressed an interest in doing so, have a chance of making money.

Joining a gym is a poor way of getting fit, statistics show.

bingo!

Starting an exercise program can be a great way to get fit, depending on which exercise program you choose and what you put into it.

give the main a prize!

But joining a gym, for the vast majority of people is just throwing away their time and money.

Two prizes!

Now substitute <Amway> for <a gym>, <making money> for <getting fit> and <business> for <exercise program>.

Except with Amway, you get something in return for your money (products) even if you don't "go", plus you can ask for your money back if you discover you're simply not going to do it. I tried that with my new gym after I crashed my bike and broke several ribs a few weeks after joining. It didn't work. I even had to keep paying them for another three months.

But you have previously said that you only joined Amway (like you joined Microsoft's reseller program) to get a discount. I'm a little confused as to your actual experience.

I've joined Amway more than once.

These reasons, to my mind, are very good reasons NOT to get involved with Amway. If most people who join it are not serious, it attracts a lot of scammers and has a serious dark side, I think I can find better business opportunities, don't you?

I don't think Amway attracts a lot of scammers. It attracts a lot of unserious people. I think the MLM strategy attracts scam companies.

Maybe playing roulette?

I only gamble for entertainment, with the expectation that entertainment will cost me money.

But I'm an entrepreneur. I'm currently involved in two startups and evaluating a third business opportunity right now, and I'm always open to others. So go ahead and pitch me.

 

[icerat]

Products that are good pretty much sell themselves.

Got any examples?

When you are spending more time selling the selling you would be wise to step back and say WTF?

No argument there. Not the way Amway wants their reps to run their business though, and not the way I was taught.

According to Joecool it was the way he was taught. Dumb strategy.

 

[gnome]

I've encountered more examples of that strategy than those playing it by the way Amway's rules direct. I personally believe that it is because the MLM model creates incentive to run your downline like a pyramid even if Amway's rules say to do differently.

Is there a real advantage to the model, to legitimate IBOs or to Amway itself? It almost seems like it's trying to offer some of the benefits of a pyramid scheme without the unsavory aspects. It also seems like it's failing at that.

 

[Joecool]

Joecool and marplots: Excellent analogy!

That's exactly the way it is. By Amway's own numbers and icerat's admission Amway:

1. Is a bad business opportunity for most people.
2. Is filled with abuse and scams.

So to defend it simply because a certain few people are making money at it is, at best, contributing to the losses, abuses and scams that are the norm.

Thanks! But in Amway's case, the analogy with the restaurant would be more like 99% of people getting food poisoning!

 

[icerat]

I've encountered more examples of that strategy than those playing it by the way Amway's rules direct.

How do you know? Would you really notice if someone happened to engage you in a conversation, learned some stuff about you, decided you weren't a prospect for the products or business and never took it further?

I personally believe that it is because the MLM model creates incentive to run your downline like a pyramid even if Amway's rules say to do differently.

What type of incentives?

I think some iterations of the MLM model do indeed do that. I think the binary compensation plan might. I think plans were you are required to signup for some kind of autoship program in order to get bonuses certainly do. Programs where if you signup on a bigger autoship or buy more products up front put you on a higher commission do too.

The basic Amway compensation plan (stairstep) is however no different to standard distribution methods in it's monetary incentives.

Is there a real advantage to the model, to legitimate IBOs or to Amway itself?

The advantage to IBOs is you get the benefits of franchising type systems without the associated cost. For just a couple of examples, if you're building an Amway business in the US, for $50/yr you get hundreds of R&D staff developing new products and thousands of support staff looking after logistics for you. In a "more independent" business, you're either doing the R&D yourself or spending a lot of time hunting around for new products to market. You're also having to handle deliveries, invoicing, returns etc etc etc.

The advantage for companies is that a large part of their marketing expenses are paid out only after a sale, which makes for a heck of a lot more predictability and less risk in your business plan.

It almost seems like it's trying to offer some of the benefits of a pyramid scheme without the unsavory aspects. It also seems like it's failing at that.

1. What "benefits" do you mean?
2. What unsavoury aspects do you mean?

 

[gnome]

How do you know? Would you really notice if someone happened to engage you in a conversation, learned some stuff about you, decided you weren't a prospect for the products or business and never took it further?

That's why I limited my statements to what I personally have encountered. I did not claim that I know which is involved in Amway in higher numbers, only that I have personally encountered more of one kind.

What type of incentives?

I think some iterations of the MLM model do indeed do that. I think the binary compensation plan might. I think plans were you are required to signup for some kind of autoship program in order to get bonuses certainly do. Programs where if you signup on a bigger autoship or buy more products up front put you on a higher commission do too.

The basic Amway compensation plan (stairstep) is however no different to standard distribution methods in it's monetary incentives.

The incentives I mean are the incentives of recruiting a downline--which (again in my personal experience) is the number one selling point offered by people promoting Amway. I mean the promise of gaining profit from your downline's sales. I think because that is hawked so much it tends to drown out other potentially positive aspects, such as you might mention here:

The advantage to IBOs is you get the benefits of franchising type systems without the associated cost. For just a couple of examples, if you're building an Amway business in the US, for $50/yr you get hundreds of R&D staff developing new products and thousands of support staff looking after logistics for you. In a "more independent" business, you're either doing the R&D yourself or spending a lot of time hunting around for new products to market. You're also having to handle deliveries, invoicing, returns etc etc etc.

The advantage for companies is that a large part of their marketing expenses are paid out only after a sale, which makes for a heck of a lot more predictability and less risk in your business plan.

None of this seems to rely on the part of the model I'm focusing on... recruiting a downline. Everything here could be accomplished by a single level--Amway recruiting IBOs that sell their products without trying to build a downline.

1. What "benefits" do you mean?
2. What unsavoury aspects do you mean?

The benefits offered as an incentive to recruit others. The unsavory parts are precisely what everyone's been talking about in this thread, that you have said may occur from unscrupulous IBOs.

 

[icerat]

That's why I limited my statements to what I personally have encountered. I did not claim that I know which is involved in Amway in higher numbers, only that I have personally encountered more of one kind.

My point is that you may have (indeed probably have) encountered Amway/MLM reps and not even known they were. There's over 15 million direct sellers in the US, the vast majority of whom involved with companies using MLM (99% of direct selling). That's about 1 in 15 adults in the US. How many adults did you meet today?

The incentives I mean are the incentives of recruiting a downline--which (again in my personal experience) is the number one selling point offered by people promoting Amway. I mean the promise of gaining profit from your downline's sales.

The exact same incentive applies in traditional distribution. If I'm a chinese widget importer, the more my downline wholesalers/distributors/retailers etc sell, the more I make.

I think because that is hawked so much it tends to drown out other potentially positive aspects, such as you might mention here:

None of this seems to rely on the part of the model I'm focusing on... recruiting a downline.

Part of the whole issue is terminology. "recruiting a downline" = "customer acquisition". It is simply acquiring wholesale and retail customers. That's all it is. The exact same process happens in traditional business, just in MLM the "upline" (including the manufacturer, Amway) tends to be more proactive in helping downline.

Everything here could be accomplished by a single level--Amway recruiting IBOs that sell their products without trying to build a downline.

Sure, and I could import chinese widgets and try to sell them myself. Or I could try to develop a distribution network. Or I could start by selling them myself, and develop a distribution network at the same time. The latter would mean lower profit margins, but it should also mean higher volumes, which could ultimately mean more profit. Eventually it could be making more money that my retailing side, so I'd minimise my efforts there and focus on expanding through wholesaling.

The benefits offered as an incentive to recruit others.

Which is really no different to traditional distribution businesses, which are often even more "pyramid like" in structure, yet don't get accused of being pyramids.

The unsavory parts are precisely what everyone's been talking about in this thread, that you have said may occur from unscrupulous IBOs.

Which is mostly related to low cost of entry, which is also one of the model's big advantages.

 

[Joecool]

Quote:
Everything here could be accomplished by a single level--Amway recruiting IBOs that sell their products without trying to build a downline.

Sure, and I could import chinese widgets and try to sell them myself. Or I could try to develop a distribution network. Or I could start by selling them myself, and develop a distribution network at the same time. The latter would mean lower profit margins, but it should also mean higher volumes, which could ultimately mean more profit. Eventually it could be making more money that my retailing side, so I'd minimise my efforts there and focus on expanding through wholesaling.

The best way is to deceive prospects by telling them they'll be rich beyond belief by self consuming the product and at the same time, selling them propaganda like tools that reinforce this belief system. This is pretty much how Amway is run via the Amway motivational groups such as WWDB or Network 21.

 

[Joecool]

Let's see. It's generally taught that to build a decently profitable Amway business you have to work hard consistently for at least one to two years.

How long did Joecool build for? less than a year
How long did Russell Glasser build for? never been an IBO
Scott Larsen? less than a year
David Brear? never an IBO
Newton Trino? never an IBO
Ruth Carter? Less than a year
Stephen Butterfield? Less than 2 years, and he reports making money
Rick Ross? Never an IBO
Jon Taylor? Never an IBO
etc etc etc

Sure there's probably some people that worked hard and didn't make any money.

I've never jumped off a 76 story building before but I'm able to realize that it's likely to be an unhealthy activity. I've also never wrestled with alligators but I am somehow able to realize that this is also an activity that would not be good for my health. I've never picked up hot charcoals with my hands but I know my hands will get burned if I did.

Those who haven't done Amway are just smart enough to know better.

While I was once young and got duped into it, I quickly realized my error and got out. Also, I was outright lied to when I did get involved. After finding the truth, I decided to speak out against sut scammers to prevent them from trapping others.