Is Amway A Scam?

[marplots]

(much snipped)You have clearly disproven your own thesis, showing this isn't happening to any real extent at all on ebay.

Why does it happen at all?

(After how many posts are you still this ignorant of the business model and commission structure?

Wrong. You apparently have next to no idea how the business model you've spent so much time criticising actually works.

My point exactly. It's designed that way. I had the same problem "understanding" Jesus. I kept asking questions and getting answers, but the answers were pretty uninformative. The problem turned out to be me. I was incapable of making the logic jumps and dual-reality mental leaps required.

It's an odd kind of stupidity, but I have to accept my own flaws.

Here are some of the things I can't seem to get straight.
1) Amway is a money making, business opportunity. I got this idea from reading their website and their magazine, both of which focus on business success, adding income and freeing oneself from the work-a-day world.

2) But very few of those who sign on ever make what I would consider even a worthwhile second income. Business opportunity does not mean what I thought it meant.

3) Amway is a discount buying opportunity. This I learned on this thread. But buying at a discount undercuts the profits that others might make. But still, this is OK so long as I want to buy Amway products - I'd have to shop around, pretty much like I do with any purchase.

4) Amway has instituted policies and procedures to keep their operation above board. Except IBOs are independent and can sell "business building" materials, sponsor conferences and so on, outside if of Amway's control. They are also free to run their operations in as honorable or as scammy a way as they can get away with. Amway cannot police this.

5) Amway members themselves discuss ways to present the opportunity without queering the deal by mentioning Amway.

6) There are almost no restrictions on signing up new IBOs and no consideration for market saturation, business experience, or even a complete understanding of how the model is supposed to work. Amateurs are encouraged and signed up by other amateurs without even a background or credit check from Amway. This is part of their "hands off" policy, except,when the poo hits the fan, Amway can terminate the relationship unilaterally. The filter is post, not pre sign-up.

 

[Wowbagger]

Far less than say, a franchise. Become a reseller for almost any brand and their are restrictions on use.

Thou doth protest too much.

There's nothing wrong with restrictions, per say. It's just that these things need to be communicated before one can assess the value of the opportunity.

If you don't want Amway to be seen as a scam, you need to make sure the bulk of those, that make the biggest impact on buying decisions, are front and center in the sales pitch. Otherwise, it looks like you're trying to hide something.

Buy stuff in volume (calculated monthly), earn a discount, sell in smaller volumes, pocket difference.

If it was as simple as that, there wouldn't be a cottage industry of seminars and video tapes around to help people do it.

If I understand correctly, if you really want to succeed in this model, you need to recruit more salespeople under you. And, that can become a mess.

Far more than that. But that wasn't the question was it?

And you don't find that suspicious?

You don't see that as evidence that Amway is a lousy opportunity for most people?

You don't think it's a scam that Amway tries to sell it to most people, anyway?

This is the opposite of what I buy when I buy a franchise name. If I opened a McDonald's, I would very much count on the good will McDonald's has built up for their products instead of worrying about potential customers finding out I was running a McDonald's. This is a serious problem.

I do find it hilarious that Amway: The mediocre toothpaste and soap company, has a worse reputation than McDonald's: The crappy restaurant!

 

[marplots]

I do find it hilarious that Amway: The mediocre toothpaste and soap company, has a worse reputation than McDonald's: The crappy restaurant!

I think they both enjoy the reputations they've earned. The public isn't quite as stupid as we are portrayed.

 

[icerat]

Forgive my poor phrasing.

As an aside, I can understand if you are a bit hesitant to respond to me as openly as you might like, as no matter whether Amway is a scam or not, some people have been brusque with you. I will openly admit that from what little I know it sounds bad to me, but I also openly admit I know very, very little so I want to learn about how it works before I come down on either side.

A pleasant change

Now, back to my questions. So, I buy 31 tubes of toothpaste from Amway and these are counted in Bill's figures. I meant to ask, are they counted a second time when I sell them on, or just once for the first time I purchased them?

Just once, though it's open to adjustment for returns obviously

the four remaining tubes are for my second question. I want to return them to Amway, which (if I am understanding correctly) they will pay me back for meaning I lose nothing?

In general, yes. In the US there's a $5.95 processing fee (waived in certain circumstances), in other markets there is none. Often if you contact them they will simply write off the order and refund without requiring the products to be shipped back.

Note that the general procedure is that you shouldn't be ordering 31 tubes of toothpaste unless you already have orders for them (including personal use). Larger orders (this is pretty small) can trigger red flags for possible inventory loading and Amway may investigate.

 

[marplots]

Icerat,
And for some products there is no return, correct? But for the example there is.

 

[icerat]

Thou doth protest too much.

There's nothing wrong with restrictions, per say. It's just that these things need to be communicated before one can assess the value of the opportunity.

Yes, which is why people are given as long as they want to assess all of this stuff, including (in the US) a full 6 months to research with full access as an IBO.

If you don't want Amway to be seen as a scam, you need to make sure the bulk of those, that make the biggest impact on buying decisions, are front and center in the sales pitch. Otherwise, it looks like you're trying to hide something.

So you simultaneously want people to make informed decisions, but then appear to think they should be making them on the spot?

I think a better option is to allow people as long as they want to research and come to a decision.

If I understand correctly, if you really want to succeed in this model, you need to recruit more salespeople under you. And, that can become a mess.

depends what you mean by "really want to succeed" First time I joined I wanted to make some cash, and did so, without recruiting. If you want to build a significant income, especially offering some time freedom, then just like any other business, it's going to be easier to do with help, yes.

And you don't find that suspicious?

I don't find it suspicious that people try something out and decide for whatever reason not to pursue it?

No, I don't. I think it's pretty weird that you do.

 

[icerat]

Icerat,
And for some products there is no return, correct? But for the example there is.

Amway in the US partners with many other companies offering their own products and services (eg AT&T, Best Buy, Sears etc) along with points.

They have their own return policies.

 

[marplots]

If I only sell retail and never sponsor anyone, what is the profit margin on products?

I am trying to figure out what sales volume is required to make the current poverty level (single person, my state, $11,490). Just as a benchmark.

 

[icerat]

If I only sell retail and never sponsor anyone, what is the profit margin on products?

IBOs set their own prices, recommended is 20 to 30% base retail margin on the coreline products. Plus you have the volume discounts of up to a further 29%.

I am trying to figure out what sales volume is required to make the current poverty level (single person, my state, $11,490). Just as a benchmark.

Why would you limit yourself only to retail sales and ignore wholesale sales opportunities?

 

[icerat]

I think they both enjoy the reputations they've earned. The public isn't quite as stupid as we are portrayed.

I'd be interested in seeing the market reasearch you two are citing. Link?

The UoW study showed the overall reputation of the industry (including Amway as one of the companies they covered) is positive.

 

[MarkCorrigan]

A pleasant change



Just once, though it's open to adjustment for returns obviously



In general, yes. In the US there's a $5.95 processing fee (waived in certain circumstances), in other markets there is none. Often if you contact them they will simply write off the order and refund without requiring the products to be shipped back.

Note that the general procedure is that you shouldn't be ordering 31 tubes of toothpaste unless you already have orders for them (including personal use). Larger orders (this is pretty small) can trigger red flags for possible inventory loading and Amway may investigate.

Ok. Again forgive me if I'm going over ground mentioned before but I don't really have the patience today to trawl through a long and heated thread like this.

So let's say I send back the 4 extra tubes and pay no processing fee. I would assume these four tubes are not listed in my sales figures since I neither used them nor sold them. Are they also wiped from Bill's?

Then let's assume that Sue wants to join too, since she's seen what I'm doing, and uses me as her sponsor. She buys 50 bars of soap. Now, under what happened with Bill, I assume these come up as my sales figures because I am her sponsor. Do they also come under Bill's, or is it just the immediate step up the ladder that gets credited?

As an additional, does Bill make money on my sales as well as getting credited for them?

 

[marplots]

IBOs set their own prices, recommended is 20 to 30% base retail margin on the coreline products. Plus you have the volume discounts of up to a further 29%.

Why would you limit yourself only to retail sales and ignore wholesale sales opportunities?

I make more money selling retail? But honestly, it's just to get an idea about the numbers.

If I understand correctly, to make my $11,000 nut, I'd have to sell something like $30,000 of merchandise (at retail). Or would there be a better way to estimate it? I understand there might be different mark-ups or incentives, but to a first approximation, what retail sales volume would I need at the $11,000 a year profit level?

 

[icerat]

So let's say I send back the 4 extra tubes and pay no processing fee. I would assume these four tubes are not listed in my sales figures since I neither used them nor sold them. Are they also wiped from Bill's?

Yes

Then let's assume that Sue wants to join too, since she's seen what I'm doing, and uses me as her sponsor. She buys 50 bars of soap. Now, under what happened with Bill, I assume these come up as my sales figures because I am her sponsor. Do they also come under Bill's, or is it just the immediate step up the ladder that gets credited?

It's done virtually these days, but in the past in reality as well, but Bill sold them to you, and you sold them to Sue. So it's sales for all of you (though see below).

Note again, bulk purchasing of large amounts of products without prior orders, is discouraged. For the sake of the discussion I'll assume prior orders.

As an additional, does Bill make money on my sales as well as getting credited for them?

Depends. If this is the only sales that have occurred then Bill has effectively sold them to you at the same price he bought them, so no profit margin. You've then sold them to Sue at the same price you bought them, so no profit margin. Sue would make retail margin from selling to customers.

So only Sue is making any money out of this, which is reasonable since she's the one who has done (almost) all the work!

 

[icerat]

I make more money selling retail? But honestly, it's just to get an idea about the numbers.

Even if you want to focus on selling retail, would you prefer a 30% profit margin or a 59% profit margin?

If I understand correctly, to make my $11,000 nut, I'd have to sell something like $30,000 of merchandise (at retail).

Depends on how the orders come in. If the volume in any given month is enough to qualify for a volume discount, then it would be less.

Or would there be a better way to estimate it? I understand there might be different mark-ups or incentives, but to a first approximation, what retail sales volume would I need at the $11,000 a year profit level?

Let's make it $12000/yr, evenly spread over the year, and it's gross profit.

So that's $1000/mth.

Plugging that in to the Income Simulator on amway.com (requires login) and selecting the "Beauty" category, which has the highest margins (35%), you'd make $1000 in retail profit margin with 19 customers purchasing $150/mth.

A suggested product mix was -

3 * ARTISTRY® TIME DEFIANCE® Skin Care System Normal/Dry
8 * ARTISTRY® essentials Makeup Kit - Light
10 * ARTISTRY® essentials hydrating skincare system for Normal-to-Dry Skin
10 * ARTISTRY® TIME DEFIANCE® Lifting Eye Crème
5 * ARTISTRY® intensive skincare renewing peel
29 * ARTISTRY® Light Up Lip Gloss

You would earn a cash volume bonus on top of the $1000 profit of 6% of your business volume. It would be on this type of sales an additional $100 to $200, so you can adjust down a customer or two. There are also additional "fast track incentives" which offer further cash bonuses. We'll ignore them for this discussion as they're not part of the contractual compensation plan and may disappear in the future.

 

[Wowbagger]

So you simultaneously want people to make informed decisions, but then appear to think they should be making them on the spot?

It's called Due Diligence.

You don't think an Amway recruiter should be responsible for putting in a proper amount of diligence, so potential partners can clearly know what they are getting into?

I think a better option is to allow people as long as they want to research and come to a decision.

They can do that, too. But, I think the bigger risks and restrictions should be clearly communicated up-front. Otherwise, you could be seen as running a.......... errr..... what's that word I'm looking for.... begins with the letter S....

If you want to build a significant income, especially offering some time freedom, then just like any other business, it's going to be easier to do with help, yes.

Right, and that makes it more complicated than the simpler "Buy stuff in volume (calculated monthly), earn a discount, sell in smaller volumes, pocket difference" description you gave earlier.

I don't find it suspicious that people try something out and decide for whatever reason not to pursue it?

Look, if someone insists on trying it, they can. If someone want's to play slot machines in the casino, they can.

Most people lose money in the casino, but that is expected from the nature of the casino business. And, those who play accept that risk.

I suspect most people get sold into Amway thinking they can run a business and earn income. They do NOT expect it to me more like a casino, where most people actually lose something: In this case, it could be more time and effort than money... unless they were pressured to buy more things than they needed.



You are going to respond by saying "It's not like a casino" and "They didn't work hard enough".

And, my response to that would be: I'm pretty sure MOST of those people got in thinking they could work hard enough. Otherwise sooo many of those people would not have bothered getting into it.

So, something wasn't communicated to all of those people properly!

Either:
1. Take steps to ensure better people get into the system, in the first place.
Or
2. At the very least, more effectively communicate what is involved, so fewer people will make the mistake of deciding to go in when they can't handle it.

Without either of those two things in place, Amway just smells like.... something that rhymes with Sam.

 

[marplots]

Even if you want to focus on selling retail, would you prefer a 30% profit margin or a 59% profit margin?

I would want to use a reasonable estimate based on what products historically sell for in my market. I assume I cannot simply expect to create a profit margin out of thin air, set at any level I like. To get ridiculous about it, I wouldn't expect to sell one tube of toothpaste for a million dollars.

Depends on how the orders come in. If the volume in any given month is enough to qualify for a volume discount, then it would be less.

I'll assume you are being realistic and taken such factors into account. I'll rely on your expertise.

Let's make it $12000/yr, evenly spread over the year, and it's gross profit.

So that's $1000/mth.

Plugging that in to the Income Simulator on amway.com (requires login) and select the "Beauty" category, which has the highest margins (35%), you'd make $1000 in retail profit margin with 19 customers purchasing $150/mth.

A suggested product mix was -

3 * ARTISTRY® TIME DEFIANCE® Skin Care System Normal/Dry
8 * ARTISTRY® essentials Makeup Kit - Light
10 * ARTISTRY® essentials hydrating skincare system for Normal-to-Dry Skin
10 * ARTISTRY® TIME DEFIANCE® Lifting Eye Crème
5 * ARTISTRY® intensive skincare renewing peel
29 * ARTISTRY® Light Up Lip Gloss

You would earn a cash volume bonus on top of the $1000 profit of 6% of your business volume. It would be on this type of sales an additional $100 to $200, so you can adjust down a customer or two. There are also additional "fast track incentives" which offer further cash bonuses. We'll ignore them for this discussion as they're not part of the contractual compensation plan and may disappear in the future.

Thank you. Those items are consumed over the time period we are talking about, right? I might have misunderstood. Is that one month's supply spread over 19 people? If it is, then 29 lip glosses is reasonable? Let's say it is, since the products could be replaced with others, so long as the dollar amounts and profit margins work out.

If my calculations are correct, we have 19 people buying an average of $150 a month under this hypothetical. So I'm selling $2,850 worth of merchandise a month on average.

Is that correct?

 

[icerat]

It's called Due Diligence.

Exactly. Though you seem to think everything should be squeezed into a half hour presentation in some kind of hard sell.

Right, and that makes it more complicated than the simpler "Buy stuff in volume (calculated monthly), earn a discount, sell in smaller volumes, pocket difference" description you gave earlier.

yes, just like any other business

Of course, you also think it's so simple that everything should be able to be squeezed in to a half hour presentation or it's suspicious

They do NOT expect it to me more like a casino, where most people actually lose something:

Good. Because it's not. I thought we'd moved past that myth. You apparently are still holding dearly on to it.

And, my response to that would be: I'm pretty sure MOST of those people got in thinking they could work hard enough. Otherwise sooo many of those people would not have bothered getting into it.

I could have worked hard enough. I chose not to. I have zero problem with that.

2. At the very least, more effectively communicate what is involved, so fewer people will make the mistake of deciding to go in when they can't handle it.

So you think people should do their due diligence but not spend any time actually doing any due diligence, cause if it's not for them then they would have wasted their time doing due diligience!

Yea, that makes sense.

 

[icerat]

I would want to use a reasonable estimate based on what products historically sell for in my market. I assume I cannot simply expect to create a profit margin out of thin air, set at any level I like. To get ridiculous about it, I wouldn't expect to sell one tube of toothpaste for a million dollars.

My point is that if you're getting volume rebates, then your potential profit margins are higher. You can get higher volume rebates on your retail sales by recruiting another sales person, since their volume contributes to calculation of your volume rebates.

It's silly to ignore that even if you want to focus on retailing.

I'll assume you are being realistic and taken such factors into account. I'll rely on your expertise.

I would not recommend, and Amway would frown upon, ordering a huge amount of product and then trying to sell it over the months. You could focus on "big ticket" items like cookware and water treatment systems, which would require fewer customers to make large profits, but there's little in resales. Developing a regular customer base of consumables is a far more sustainable business.

Thank you. Those items are consumed over the time period we are talking about, right? I might have misunderstood. Is that one month's supply spread over 19 people? If it is, then 29 lip glosses is reasonable? /quote]

Ask a woman! Most have multiple colours

But yes you would need more than 19 customers on your books, as some of these products will last several months. I'm not an expert on the beauty products, but I'm guestimating you'd want to develop 50 to 60 regular customers to have 19 or 20 that order these products each month. Of course, what you should be doing is on-selling other products as well, so your overall customer base is less (or sales and profit more).

Let's say it is, since the products could be replaced with others, so long as the dollar amounts and profit margins work out.

If my calculations are correct, we have 19 people buying an average of $150 a month under this hypothetical. So I'm selling $2,850 worth of merchandise a month on average.

Is that correct?

Correct

 

[marplots]

My point is that if you're getting volume rebates, then your potential profit margins are higher. You can get higher volume rebates on your retail sales by recruiting another sales person, since their volume contributes to calculation of your volume rebates.

It's silly to ignore that even if you want to focus on retailing.

I understand. I was trying to dumb it down. But also, anyone I am piggy-backing on will face the same situation I am describing. At some level a sale must occur, even if it's to a distributor who uses the product. I thought it was more generous to assume retail sales right off.

I would not recommend, an Amway would frown upon, ordering a huge amount of product and then trying to sell it over the months. You could focus on "big ticket" items like cookware and water treatment systems, which would require fewer customers to make large profits, but there's little in resales. Developing a regular customer base of consumables is a far more sustainable business.

That was the hypothetical I was after to get a handle on sales volume as a dollar amount. I didn't mean that products should be purchased before they were sold.

I am not a good candidate for Amway under this scenario and income level. This is only my evaluation based on my own aversion to selling, others may find it easier to sell products than I do. On the other hand, I wouldn't feel the same about running an eBay store or a website.

Is my aversion to face-to-face sales common?

 

[Wowbagger]

Exactly. Though you seem to think everything should be squeezed into a half hour presentation in some kind of hard sell.

I'm talking about the exact opposite of a hard sell. If the system was sooo good, it wouldn't need one.

From what I hear, I severely doubt most recruiters put in their due diligence. I know the one time I was in an Amway pitch, the guy said, straight out "there are no risks". You and I know that isn't true.

Maybe this is only a problem for some IBOs? Why doesn't Amway seem to care or do much about it?

yes, just like any other business

First of all: It's not like any other business. You already mentioned that there are rules and restrictions involved that most other businesses don't have.

The entire MLM structure is certainly NOT like most other businesses. It contains a LOT of counter-intuitive features.

For example: If I was going to start an "independent business", I would probably think to myself "Oh good, I get to advertise and market the business, to my heart's content!"
But, that's NOT what happens. Advertising is restricted in this MLM, and the reasons why need to be carefully explained and understood. It is NOT an intuitive concept.

Of course, you also think it's so simple that everything should be able to be squeezed in to a half hour presentation or it's suspicious

Yes. It's called: Being Honest.

Good. Because it's not. I thought we'd moved past that myth. You apparently are still holding dearly on to it.

We DID move on past the myth. My point is that it is a little like a casino in one way: MOST people lose something. Time or some money. But, they certainly don't come out ahead, most of the time.

I doubt that is communicated very well during these half-hour sessions.

So you think people should do their due diligence but not spend any time actually doing any due diligence, cause if it's not for them then they would have wasted their time doing due diligience!

Wait.... what?!!

Perhaps I should clarify something:

MOST PEOPLE IN AMWAY FAIL.

Yet, MOST people going in assume they will succeed.

There is a very serious disconnect, somewhere, between what is sold, and what they actually get.

Maybe the answer is in better due diligence in communicating the risks involved. Maybe the answer is getting better people. Maybe both.

But, you are NOT going to worm your way out of this one by trying to make coleslaw out of my words.