Is Amway A Scam?

[brian ronald]

The FTC should have made MLM illegal and made direct sales exclusive to single-level marketing. The multiple and unnecessary pyramid distribution levels are inefficient. Seven levels of salespeople sharing commissions, that's just ridiculous.

In Amway, you might be able to sell a few products to yourself and a few family members, but because they are overpriced relative to products of similar quality, the only method to generate more sales is to recruit.

Legitimate franchises operate much more efficiently, franchisees do not recruit other franchisees, franchisees actually have to qualify and they try to control market saturation.

It's really sad people still get tricked into Amway, especially in this day and age. I'm surprised to see an actual distributor on a website for critical thinking, absolutely ridiculous.

 

[icerat]

The FTC should have made MLM illegal and made direct sales exclusive to single-level marketing. The multiple and unnecessary pyramid distribution levels are inefficient. Seven levels of salespeople sharing commissions, that's just ridiculous.

(1) The majority were far fewer than seven
(2) How many layers of people sharing marketing and distribution profits do you think there are in traditional business?

In Amway, you might be able to sell a few products to yourself and a few family members, but because they are overpriced relative to products of similar quality, the only method to generate more sales is to recruit.

As per earlier posts, first time I joined Amway I only sold products, I didn't recruit anyone. I was selling primarily to businesses. No family where I lived. I made money.

In the UK Amway reps are required to have 5 registered customers before they can become a "Certified Retail Consultant" and sponsor anyone. Thousands of reps have done that, for tens of thousands of non-rep customers. Including myself in the UK. This friend of mine in New York has over a thousand non-rep customers on his books.

My experience contradicts your theory. Data contradicts your theory.

Are you willing to reassess your theory or will you continue to defend it?

Let's test your "overpriced relative to products of similar quality" allegation, ok?

Artristy is Amway's second biggest selling product range, a few billion dollars a year I believe. It's been independently assessed by market researchers to be competing in the "premium" skincare and cosmetics category, alongside brands like Clinique, Estée Lauder, Lancôme, and Shiseido.

Please go to Amway.com, select some Artistry skin care products, then find the nearest equivalents with those brands, then come back with some RRP price comparisons. Since it can be difficult to directly compare products, pick the cheapest and the most expensive that appear to be competing, and let's see if Artistry falls anywhere in that range.

Sound reasonable?

It's really sad people still get tricked into Amway, especially in this day and age. I'm surprised to see an actual distributor on a website for critical thinking, absolutely ridiculous.

And I think it's said that people on websites for critical thing display so very little of it when it comes to this subject, apparently preferring to rely on hearsay and myths from self-published website rather than peer-reviewed academic articles and independent expert reports.

I note you have still failed to point out where the FTC got it wrong.

 

[brian ronald]

Still multiple pyramid distribution levels. I wish I had time to analyze financial statements of other companies with similar products to provide some specifics for you about distribution and marketing costs as a percentage of gross revenue, but don't have time right now. Also, Amway doesn't publish their financials as far as I know as they are private.

Theoretically and mathematically, the business model makes absolutely no sense.

Sure, your experience was different than what I previously, but anyone else I've spoken to tells a different story. Clarify your question about the FTC, I don't recall stating they got something wrong.

Joe Cool and others are clearly critical thinkers, you sound like a brainwashed cult member, no offense. The business model doesn't work for the distributors, sorry.

 

[Wowbagger]

It seems to me like an argument for Amway's business model, which unlike other business models includes lots of safeguards to protect people from loss, such as low cost of entry, the buyback rule, satisfaction guarantees, and the extensive trial period.

By saying this, you seem to be condoning deception:

"Oh, it's okay to deceive lots of people about their chances of success, as long as we give them a chunk of their money back, if they don't."



AMC, though iTunes, recently sold a "Season Pass" to the show Breaking Bad, that did NOT include all of the episodes in the season. Some people thought that was deceptive, and Apple is issuing refunds.

Now, this is a rare thing for Apple (not sure about AMC), so it is excusable to a certain degree. But, could you imagine if Apple's entire business model relied on deceptions like that? Imagine if they sold tons of things on false premises, to lots of people, and only issued refunds to those who complain. Would that be a fair and condonable business model?

 

[icerat]

Still multiple pyramid distribution levels.

Yes, just like most other distribution systems.

I wish I had time to analyze financial statements of other companies with similar products to provide some specifics for you about distribution and marketing costs as a percentage of gross revenue, but don't have time right now. Also, Amway doesn't publish their financials as far as I know as they are private.

They're public in a number of countries. Amway's distribution and marketing costs are part of their public business plan, with approximately 33% of revenues going to the field. They've increased more traditional marketing in recent years, but the vast vast majority is still in bonuses and commissions.

This is money that would typically be spent on sales & marketing and fixed store location.

Theoretically and mathematically, the business model makes absolutely no sense.

Theoretically and mathematically the business model makes perfect sense. In my experience people who make statements like you just did don't actually know how it operates. They usually seem to think it operates like illegal pyramids.

Given the other incorrect statements you've made (like the claim there's a requirement of 70% retail sales) you may want to consider the possibility that you're sources have misinformed you.

Sure, your experience was different than what I previously, but anyone else I've spoken to tells a different story.

You have anecdotes, I have hard data.

In Amway UK for the period period October 2012 to end September 2012 there were 12,544 Certified Retail Consultants. Each of them were required to have at least 5 registered customers with purchases of £150 pounds or more.

That's a bare minimum of 62470 customers and £1.9 million in sales. Furthermore, they were required to have this every month in order to receive bonuses and commissions.

Clearly the products are saleable.

In Amway North America, IBOs are required to have at least 50 points of registered customer sales volume in order to earn a bonus, around $150.

In 2012 over 312,000 North American IBOs earned a bonus. Even if each of them only earned a bonus in one month of the year that's a bare minimum of $47 million in non-IBO customer sales.

Clearly the products are saleable.

I quote (again) the FTC findings, regarding being unable to sell the products -

The preponderence of the evidence in the record does not support the allegation of 'saturation.' (Findings 148*52) From my observation of the demeanor, inconsistencies and uncertainties in the testimony of the witnesses called in support of the complaint in this regard, I believe the reason for their failure was more accurately described by a marketing expert who testified about this subject (Patty, Tr. 3109): 'I think generally speaking when a salesman tells you that a market is saturated, he has become discouraged for some reason, usually he is simply not making the sale effort that is required.'

Clarify your question about the FTC, I don't recall stating they got something wrong.

The investigated the issues of the number of "layers", the competitiveness of the products, potential saturation and many more.

They found the allegations to be untrue.

Joe Cool and others are clearly critical thinkers, you sound like a brainwashed cult member, no offense.

ROFLMAO!!! Yup. I cite independent references and statistics. You and joecool cite your beliefs and hearsay.

And I'm the brainwashed cult member lacking critical thinking!

The business model doesn't work for the distributors, sorry.

You may as well be telling me the internet doesn't work, while I'm sitting here using it. It really is an absurd, reality denying, statement.

 

[icerat]

By saying this, you seem to be condoning deception:

"Oh, it's okay to deceive lots of people about their chances of success, as long as we give them a chunk of their money back, if they don't."

No, the video you posted was about self-deception. As noted previously, it's a legal requirement to give people statistics on how many people reach various levels. Critics regularly try to use these very public statistics as evidence of "failure". Heck, I've even been in seminars (multiple times) where the keynote speaker has explicitly pointed out that (for one example) only one or two of those in attendance will reach the "diamond" level.

People are given the information. It's not a secret. In my opinion you simply can't build a long term, successful, sustainable business of any sort on deceit.

 

[Joecool]

By saying this, you seem to be condoning deception:

"Oh, it's okay to deceive lots of people about their chances of success, as long as we give them a chunk of their money back, if they don't."

I think it's safe to say that Icerat's experience in Amway is atypical and not what most people experience. (And I'm not counting people who did absolutely nothing).

He's living in a theoretical world where everything makes sense on paper but in real life a stark contrast. Icerat sees Amway with rose colored glasses.

Amway's own numbers suggest that about 1 in 200 or 300 reach the level of platinum, which is approximately the equivalent income of a full time worker earning $10 to $12 an hour. It may vary depending on business expenses, which can be very high if attending seminars, etc. Some platinums have reported actually losing money (net).

In real life, most people make nothing or lose money in Amway, as they do in most other MLM. In real life, Amway's reputation is in the toilet because of people representing Amway who trick, lie and deceive others. Icerat himself in the recent past has resorted to posting very personal information about people on forums, just because they oppose Amway. That kind of cyber bullying and other deceptions is why you google Amway scam and you gets hundreds of thousands of hits. That's the real life story.

Icerat will see it if he takes off the rose colored glasses.

 

[marplots]

What is Amway offering? As far as I can tell, it's the opportunity to sell Amway. But Amway has a negative brand recognition - there's no benefit to that. They aren't offering anything more than a chance to sell for them. Hardly a business opportunity when I could take orders and sell products I find on the internet, or magazines or whatever.

I just don't see why this is a business any more than me buying X from wherever and selling it.

What does Amway provide, since sponsoring a distributor is cutting my own throat - I lose my retail profit margin by doing so.

Imagine if, on your next visit to Walmart, the cashier told you you could get your purchase, and all further purchases, at 30% (or more) off by becoming a Walmart distributor? And worse, that 30% comes from the cashier's paycheck, not Walmart. It's nuts.

 

[icerat]

I just don't see why this is a business any more than me buying X from wherever and selling it.

That's pretty much all Amway is too, except you get a ridiculous amount of logistical support for almost nothing.

What does Amway provide, since sponsoring a distributor is cutting my own throat - I lose my retail profit margin by doing so.

We've been through this. The idea that Coca-cola is slitting there own throat by selling to other wholesalers and retailers is absurd.

Yet you persist with it

Imagine if, on your next visit to Walmart, the cashier told you you could get your purchase, and all further purchases, at 30% (or more) off by becoming a Walmart distributor? And worse, that 30% comes from the cashier's paycheck, not Walmart. It's nuts.

Not really analagous, but I'll run with it. What if the cashier got a bigger paycheck because you bought more stuff? And what if he got it even if he was at home sleeping and you ordered off the Walmart website?

Still nuts?

 

[Joecool]

What is Amway offering? As far as I can tell, it's the opportunity to sell Amway. But Amway has a negative brand recognition - there's no benefit to that. They aren't offering anything more than a chance to sell for them. Hardly a business opportunity when I could take orders and sell products I find on the internet, or magazines or whatever.

I just don't see why this is a business any more than me buying X from wherever and selling it.

What does Amway provide, since sponsoring a distributor is cutting my own throat - I lose my retail profit margin by doing so.

Imagine if, on your next visit to Walmart, the cashier told you you could get your purchase, and all further purchases, at 30% (or more) off by becoming a Walmart distributor? And worse, that 30% comes from the cashier's paycheck, not Walmart. It's nuts.

Amway offers you a chance to be a commission only sales person. You get no salary, no fringe benefits and the cost of marketing the product it yours, but don't advertise because Amway has restrictive rules on advertising.

You also have the opportunity to sponsor all your friends and family so you can get a greater commission at their expense.

If things work out really well, you and your friends and family will attend seminars and buy instructional cds so some guy upline can wear designer suits and drive a Mercedes,

And then you get to sell $50 bottles of vitamins that can be bought at a fraction of the cost elsewhere or cleaning supplies that can be bought cheaper at Walmart. If you purchase and use about $300 of these overpriced products, you can get back about $10.

Oh, and many people associate Amway with a pyramid scheme or some kind of scam so you have to overcome that challenge.

That's what Amway offers you.

It is why many people will run the other way just because you mention the name "Amway".

Icerat must exist in some bizarro world where there is a "good" Amway.

 

[marplots]

That's pretty much all Amway is too, except you get a ridiculous amount of logistical support for almost nothing.

Logistical support? You mean they take your money and ship you stuff, right? Amazon does that much.

We've been through this. The idea that Coca-cola is slitting there own throat by selling to other wholesalers and retailers is absurd.

Coca-cola does not sell retail. Retailers do not make it a practice to sell wholesale. You are asking distributors (who are selling retail, at least at first) to give up their retail sales whenever they create another distributor. Not only that, to create a competitor. That is nuts.

Not really analagous, but I'll run with it. What if the cashier got a bigger paycheck because you bought more stuff? And what if he got it even if he was at home sleeping and you ordered off the Walmart website?

Still nuts?

They don't get a bigger paycheck. We've already been over the numbers - an IBO makes 30 to 35% retail markup and much, much less when Amway takes over sales to their customers when those customers convert to an IBO. And, you've already told us that it takes very little work to keep retail sales alive.

This is good business, but only for Amway. They collect, one way or another, on every sale made. They don't care if you make anything selling retail or if you convert your customers to wholesale - why should they?

 

[icerat]

Logistical support? You mean they take your money and ship you stuff, right? Amazon does that much.

Shipping to your wholesale and retail customers, handling of commissions and bonuses, substantial amounts of online training, sales taxes, legal issues, international expansion etc etc

All for $50 a year or less. Costs $40/mth plus selling fees for less on Amazon.

Coca-cola does not sell retail.

Sorry, but yes they do. Varies from market to market, but they operate some of their vending machines themselves.

But tell me, let's assume you're right. Why don't they sell retail? Aren't they "cutting their own throats" and missing out on the retail profit margin?

Retailers do not make it a practice to sell wholesale.

Really? So if I'm running food van at the local football park, the local supermarket won't sell me supplies?

You are asking distributors (who are selling retail, at least at first) to give up their retail sales whenever they create another distributor.

Can you give me an example of an Amway distributor giving their retail customers to a person they sponsor? How often does this happen?

Not only that, to create a competitor. That is nuts.

What would you prefer, 30% of 10 retail customers buying $105 each or say 12% of 10 wholesale customers buying $1050 each?

They don't get a bigger paycheck. We've already been over the numbers - an IBO makes 30 to 35% retail markup

Yes, we have been over them. Apparently you weren't paying attention.

The retail markup available (in the US) is up to around 60%.

and much, much less when Amway takes over sales to their customers when those customers convert to an IBO.

Do you understand that a small percentage of a big pie can be more than a large percentage of a small pie?

And, you've already told us that it takes very little work to keep retail sales alive.

Nope, I haven't. Irrelevant anyway. I'd rather have a small percentage of a big pie than a large percentage of a small pie.

 

[marplots]

Shipping to your wholesale and retail customers, handling of commissions and bonuses, substantial amounts of online training, sales taxes, legal issues, international expansion etc etc

All for $50 a year or less. Costs $40/mth plus selling fees for less on Amazon.

Seriously? That counts as logistical support? Paying sales taxes and legal issues? If Amway distributors are getting into legal trouble selling vitamin supplements and make-up, that's a whole different problem.

Sorry, but yes they do. Varies from market to market, but they operate some of their vending machines themselves.

I see. So, in your mind, Coca-cola is a retailer. Got it.

But tell me, let's assume you're right. Why don't they sell retail? Aren't they "cutting their own throats" and missing out on the retail profit margin?

Because they are a manufacturer and wholesale distributor. Just as Amway is, primarily. An IBO is neither of those things and loses money when they convert a retail customer into a wholesale customer.

Really? So if I'm running food van at the local football park, the local supermarket won't sell me supplies?

Yes and no. If you are half-way smart, you'll buy wholesale instead. You are confusing giving a volume discount with a wholesale purchase and relationship.

Can you give me an example of an Amway distributor giving their retail customers to a person they sponsor? How often does this happen?

It happens 100% of the time. If you buy from me retail, and I sponsor you, you now buy wholesale and I have lost a retail customer (and gained a wholesale customer). You told us that many people become distributors just for this reason - to be able to buy things at a discount. That discount comes from the IBO, not Amway. Amway makes the same either way.

What would you prefer, 30% of 10 retail customers buying $105 each or say 12% of 10 wholesale customers buying $1050 each?

And here you've slipped up. What you are describing is exactly the pyramid scheme we have all said underlies the set-up. And what has happened in detail? Why, instead of me being on the hook for selling, we've introduced ten times the volume and, all else being equal, ten times the number of new customers.

But all this does is shift the problem to those ten beneath me. I'm set, but we've multiplied the number of people getting screwed by ten.

Yes, we have been over them. Apparently you weren't paying attention.

The retail markup available (in the US) is up to around 60%.

Which makes a conversion from retail to wholesale even worse.

Do you understand that a small percentage of a big pie can be more than a large percentage of a small pie?

Oh yes. I also understand how the pies have to keep getting bigger and multiplying. But no matter what, the majority get a very small piece, if any at all. More pies is not the answer, and larger pies aren't the answer - the pies are filled with human misery and dashed hopes. I would be ashamed to participate in such an enterprise.

 

[icerat]

Marplots,

Why does Coca-Cola almost entirely sell wholesale? Wouldn't they make more money as a retailer, selling direct to consumers?

 

[Joecool]

Marplots,

Why does Coca-Cola almost entirely sell wholesale? Wouldn't they make more money as a retailer, selling direct to consumers?

What a ridiculous response. What are they supposed to do? Open up Coca Cola retail outlets?

The same could be said for Proctor and Gamble, Johnson and Johnson, Swanson frozen dinners, etc.

 

[marplots]

Marplots,

Why does Coca-Cola almost entirely sell wholesale? Wouldn't they make more money as a retailer, selling direct to consumers?

Yes, except who would they buy the product from, PepsiCo?

I'm trying to imagine a business that only sells coke products at retail. Maybe they looked at it and figured out it was a bad idea. But if you have a line to Muhtar Kent, you can ask him. Amway sells retail on their website, so it's not totally out of the question.

But, lets run with this idea. Are you saying that if coke had the choice of selling to the same customer at wholesale or retail, they wouldn't take the higher profit margin? How generous of them.

You seem to think volume is the saving grace here. But one of my retail Amway customers, who buys $100 in retail a month from me, and who then switches to being a distributor, now only counts as $60 (or less) in sales - for the exact same purchase, and, the $40 loss comes out of my pocket, not Amway's. The same sale, which used to pay me $50 in profit, now pays me only $10.

The only thing that has changed here is that my customer became an IBO. They still get the same product (and save money), Amway still supplies the same stuff, and I get screwed. This is bad business.

 

[Wowbagger]

No, the video you posted was about self-deception.

And I am hypothesizing that Amway exacerbates that particular form of self-deception, in its sales pitches, and exploits it.

As noted previously, it's a legal requirement to give people statistics on how many people reach various levels.

Right, and each person goes in with the deception that they can do better! Why is that?

I hypothesize that this form of self-deception is one that a good, polished Amway salesperson can grow and foster in many individuals prone to have it.


(And, I doubt the statistics are actually given during the sales pitches, straight-up. It is probably buried in the fine print, if at all, which is lack of diligence on Amway's part. But, that's a different story. If we assume the proper numbers are given, Amway is still stuck in a rut, because they are working with, and possibly fostering, the Planning Fallacy in its presentations.)

I think it's safe to say that Icerat's experience in Amway is atypical and not what most people experience. (And I'm not counting people who did absolutely nothing).

I am not interested in Icerat's experience in particular. I see the rose-colored glasses he has on.

I was more interested in unraveling this from a more fundamental angle. I was hoping Icerat would help, in my modeling of the business, but his assistance ran short. (He got offended when I would try to delineate the "complications" in the system, for one thing.)

And, now he incriminated the whole enterprise by trying to justify the form of deception I pointed out. Heh... He's not very good at this, even with those glasses on.

 

[xjx388]

Let's say Coke went crazy and adopted Amway's business model. The price they sell to distributors at would have to go up substantially so that they could pay bonuses. Thus, the retail price would go up. No one is going to buy a $3 can of Coke at their supermarket; that would be a scam -like when you go to a hotel for a can of soda.

Furthermore, Coca-Cola would not sell anywhere near the level they sell now if they went to direct retail sales. Manufacturer-regional distributor-retail is a much more efficient model for the level of sales we are talking about with Coca-Cola.

A direct sales model makes sense only when you are trying to push niche products with a limited market. I'm struggling to find a situation when a pyramid-style compensation system ever makes sense.

 

[AdMan]

In my opinion you simply can't build a long term, successful, sustainable business of any sort on deceit.

That's your opinion, but the Amway scam seems to demonstrate otherwise.

Stop shilling for the scammers, icerat. It's very tiresome and became monotonous and unconvincing long ago.

 

[icerat]

Yes, except who would they buy the product from, PepsiCo?

Where were they excluded as manufacturer?

Amway sells retail on their website, so it's not totally out of the question.

volume bonuses on this are still paid to IBOs.

But, lets run with this idea. Are you saying that if coke had the choice of selling to the same customer at wholesale or retail, they wouldn't take the higher profit margin? How generous of them.

They do have they choice and they don't take the higher profit margin.

You seem to think volume is the saving grace here. But one of my retail Amway customers, who buys $100 in retail a month from me, and who then switches to being a distributor, now only counts as $60 (or less) in sales - for the exact same purchase, and, the $40 loss comes out of my pocket, not Amway's. The same sale, which used to pay me $50 in profit, now pays me only $10.

And if that's all they plan on doing, then you shouldn't be registering them an IBO!

Not unless there's another good reason, which can be as simple as convenience. If they're now ordering and doing everything themselves, you no longer have any work but still profit.

The only thing that has changed here is that my customer became an IBO. They still get the same product (and save money), Amway still supplies the same stuff, and I get screwed. This is bad business.

If you are converting a customer to an IBO, it's because they expressed interest in building the business. You are happy about this because now they'll be buying (vitually) more than $100 from you, since they've now going to be developing their own retail and wholesale customers. Sometimes they may not do this directly initially, but they will refer people to you and you build their downline, increasing your sales volume (and profit) with the additional hope that the investment will pay off with them deciding to build later.

Some groups in the US, particularly in the 90s and 00s focussed almost entirely on registering everyone as IBOs, with no retail customers. It didn't work, and for much the reason you raise - new people weren't making any money since they were losing the largest source of a profit for a new business.