Amway - My Opinion

Firstly, I need to make it clear that this is by no way a criticism or attack on my friends or anyone who has joined Amway. That is you choice and that's fine with me. This post is clearly my own opinion on the scheme.

So a couple of days ago, my friend asked me to go to his place for an Amway session. I have always been a sceptic regarding Amway but since it was only supposed to go for an hour at most, I went along since there was supposedly dinner afterwards (you can coax me to do a lot of things with a free meal). So I arrived on time and took my seat. The one hour session ended up going for about 3 hours. I was very sceptical from the start, but decided to keep an open mind and listened carefully to everything that was said. I asked questions that I genuinely wanted answers to. By the end of the night, I'm now positive that Amway is an evil scheme where you can only make money by convincing more people that its a good thing.

During the presentation, the constant message that kept being bombarded at me was that if I wanted "financial freedom", Amway is my way to that. Amway is also great for everyone, since its just like doing your regular shopping but at discounted prices. The so called "middleman" is cut off and you get the direct discount due to this. Herein lies the first problem. I don't believe that huge multi-national companies such as Coles and Safeway who turn over hundreds of billion a year cannot negotiate better prices than Amway, which are selling much lower numbers. Coles and Safeway don't need to go through any middlemen, they're such large buyers that I'm sure they can negotiate deals directly with manufacturers. With Amway, they themselves are sourcing mostly third party products anyway, so what makes them any different to the supermarkets. Amway also has to pay each of the Independent Business Operators (IBO) a percent of the profits to keep them recruiting more people. This means that the sale price has to be marked up by Amway to account for these commission to the IBOs. Amway also need to make a profit so need to mark up the price even further.

Lets take a simple example to illustrate this price mark up. Say a bottle of dishwashing liquid costs $5 for Amway to buy from the manufacture. If they were to sell that bottle for $10, they would make 50% profit. However, since they might have to pay many levels of commission to their IBOs, they have to cover themselves for this so that they don't end up making a loss on the profit. So they mark up the product grossly, to say $50. This way, no matter how many levels of commission there are (at a maximum 21% commission), as long as people are buying the overly priced product (that they then have to pay a commission for), they will still be making money.

The second message that I kept getting throughtout the night was that Amway is not a pyramid scheme. Why is there the need to make this so clear. People will know for themselves whether it is or isn't a pyramid scheme. Because pyramid schemes are illegal, Amway is nowadays a "pipeline", where we (its all very team orientated so it was always WE, US, IBOs etc giving this sense of team) would be all working together to make savings and more money. However, how can you truly be a team when some people are gaining more from the same effort whilst others gaining less. I was told that everyone in my "pipeline" UNDER me would contribute to savings and money I could make. However, I kept asking who are these people UNDER me in my pipeline. They were supposedly just people who signed up after me. But how does that work exactly, I couldn't get a straight answer. I was told that if the person who signed me up, signed another person up, they would be UNDER me in the pipeline. Then what is the motivation to do anything. I can just be lazy and depend on my other IBOs to sign people up and I would reap the benefits. But how many levels away from my original signee does that work. So say the person who is two levels up from me, person A who signed person B, who signed me, would I get the benefits of further people that person A signs. I don't know. The above assumption is the best case scenario. I looked up the Australian and American Amway sights and couldn't get any clear answers as to who are UNDER me in the pipeline. I read the handbook from front to back, including all the technical contracts and still couldn't find anything. Finally, on the European Amway site, they do say that people are only in your pipeline if you directly sign them, the classic pyramid scheme that everyone knows.

Lets just assume that everyone who signs after me who is someway connected to my signees also goes towards my commission. If it truly was a team, why shouldn't everyone be getting the same benefits. I can never match it with the people above me. Now matter how hard I worked and signed up people, those above would always be getting more benefits. And as a maths major, I can tell you that you cannot maintain a skewed distribution pyramidal scheme for a long time. If I signed more and more people, I would rise up, but so would those above me. They would keep going up. To maintain this upward trend, you would need an exponential increase in the lower levels, but then those originally in the lower levels would start to move up, meaning that even more lower level people are needed. This trend cannot continue as you physically run out of people. So unless you were one of the early adopters of Amway, it is extremely hard for you to move up in the scheme.

So what is the reason to join Amway. Well it supposedly costs you nothing and the potential is limitless. You can work in your own time and hence it can subsidise your normal salary rather than replace it. Well, lets address the first point of costing nothing. Firstly there is the small join up fee, $100-$160 dollars depending on the "kit" you want. The kits are basically just some pamphlets and information. Then there are running costs for Amway, just like any other business. Calling people to attend requires money for phone calls. Travelling to people's houses requires petrol, usage of your car. But the highest cost will be in your time. If each session takes 2-3 hours of actual time, you also need to do your presentation homework, travel to and from places and you're looking at a lot of your "spare" time being used up. Depending on how many you can sign up at each session (possibly none), you efforts may or may not result in much earnings. The second point that there is limitless potential I don't agree with either. You get higher and higher up by putting in more and more time and asking more and more people to join. However, due to the nature of this scheme, a lot of people will quickly realise they are not benefitting from it and drop out. This means you will need to recruit even more people, and there are only so many hours you have "spare", unless you quit your job and do it full time.

The final problem that I see with this whole scheme is in the products themselves. The common example that was used all night was "Imagine that you spent $400 dollars on groceries each week, well if you shopped through Amway, you would say 25% on the actual product prices already, plus gain 100 points so get a further 3% reduction". Well there lies the problem, no one would buy $400 worth of their products each month. Amway only has a very limited amount of grocery items in terms of food items. There was lots of cleaning agents and other things such as jewelery, electronic goods etc, but how much of that specific brand and type can you buy. Their washing powders, dishwashing liquids etc are all supposed to last a year from each bottle, so why would you buy a bottle each week. The products cannot sustain the level of buying that is required for the higher discounts. Also, all the customers are buying their own products and yet expecting to make a profit on it. It's like me buying a CD from someone at a "discounted" price from which I want to also make a profit on from that seller. How does that work, its just a closed loop with no income coming from externally so how can you every earn money from it. Someone has to make a loss, and that someone are the people at the base of the pyramid who aren't making any money but are paying for overpriced products. If Amway offered every item in a supermarket and people really could do all their shopping there, it theoretically could work. But then if it was like a regular supermarket, the prices would need to be competitive to regular supermarkets for people to buy. But how can the prices be competitive when they would be buying from the same suppliers as the supermarket at the same prices but yet needed to pay commission to their IBOs. See the problem with the whole situation. For 10% of people at the top to make money, 90% of the people at the bottom would need to lose money since there are not external incomes or maths as we know it needs to be totally rethought. And I trust in 3000 years of mathematical logic rather than what the Amway person is telling me.

So I think I have made it clear that I am not going to join Amway. The whole info session was a series of vague statements all sold on the simple fact of greed. I kept asking for more information and for the numbers to all be backed up with statistics and a break down of the figures, but all I got was that I would be told later, but never did see the breakdowns. I'm a maths major from uni and even I couldn't understand how the mathematics could possibly work, despite the claims that many people were making it rich through Amway. But this can be said for any industry. I'm sure there are plumbers out there who are millionaires, but what is the percentage of millionaire plumbers compared to just your normal average wage plumber.

I can do a quick exercise to give perspective of what amount of products need to be sold for you to make a decent earning. If I remember correctly, the lowest of the "presitge levels", diamond or something, required a pipeline at 21%, 15% and 12%. To achieve a pipeline of 21%, you need a total of 7500 points. Each $4 is worth one point. So overall that line would need sales of $30,000 a month. The other two lines would require another $20,000 say. I can't remember the exact values but its somewhere there. So in a month, you would need to achieve sales of $50,000 in your pipeline. It doesn't have to come directly from you, but from all people in your line. Lets be very generous and say each household spends $100 a month, that's still 500 households that need to consistently spend that much money a month. Those aren't small numbers, and thats assuming people buy $100 worth a month and then keep doing that for a whole year. That's the best case scenario. The worse case scenario is that 90% of people drop out of Amway after a year and most people will probably only buy a few hundred dollars worth of products in their first purchase and then buy hardly anything after that but instead try to convince their friends to buy products in the hopes of making money. This scheme is therefore only self sustaining for those at the very top who always have changing people under them purchasing, but not for those at the bottom where changing people will not contribute to their earnings.

So, if you have bothered to read to this stage, you are either someone like me who is interested in reading about interesting discussional topics or you are looking to join Amway. I will NOT discourage you to join, as that is your choice and it may work for you. I will just say that I don't think it is a viable sustaining method to make money. It is probably a way to lose some friends along the way if that is your wish.

Edit: Oops, should really proof read my posts. Leaving out the NOT makes a huge difference. I will NOT discourage you to join. :-)