Amway UK vs BERR – Amway Responds

The Times has continued their coverage of the Amway UK vs BERR case, this time outlining Amway’s response to BERR’s charges. In summary -

  1. Amway has replaced senior UK management
  2. Amway has substantially altered it’s business model
  3. While a sponsoring organisation may have misled people in to thinking Amway was "easy money", Amway’s literature makes it clear you have to work hard to succeed
  4. No further recruiting will occur until earnings data is published
  5. The company is acting "in the public interest" with its numerous changes

Plus of course the normal explanations of how no payments are made for recruiting etc. No mention was made by the Times of any response regarding the product pricing issue.

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Amway UK v BERR – Case outlined

The Times Online has outlined the case that BERR has brought against Amway in court in the UK today. In summary -

  1. Just 10% of agents make any profit
  2. Less than 10% sell a single product
  3. Amway’s main activity is encouraging people to join so that they pay the registration fee and buy marketing materials
  4. Amway attracts people by “offering “substantial financial rewards or easy money””
  5. Only 6 per cent of agents bought Amway products to sell on
  6. the vast majority of products offered by Amway were overpriced even before retail markup was added
  7. 71 per cent of agents made no income from Amway in the year 2005-6
  8. 90 per cent had made a loss after paying the £18 fee to renew their registration
  9. One marketing presentation authorised by Amway offered the opportunity for a “small secondary income or an income which would rank in the top 2 per cent of money earners.”
  10. Such money “is being achieved in the same time it takes to study for a degree”.
  11. Amway’s own records showed that only Trevor and Jackie Lowe, and Jerry and Mandy Scriven among its agents earned more than the £78,000 required to place them in the top 2 per cent of earners, the court was told.
  12. Amway’s records showed that of the 2005, agents operating at that time, just 37 made more than £25,000 a year.
  13. 39,000 agents “working” for Amway
  14. 27,000 (71%) had no income
  15. 11,410 (30%) earned something
  16. 7,492 (of the 11,410) received average of £13.53 per year
  17. 11 agents received 75 per cent of bonuses
  18. £116K paid to top earner Trevor Lowe
  19. 26 number of years Mr Lowe was an agent

“The reality of being an IBO is that a substantial majority make minimal financial returns,” Mr Cunningham said. “Our case is founded on the selling of the dream on one hand and the loss or minimal financial return on the other.”

At first glance it would appear that Mr Cunningham and BERR have been sucked in by the bogus analyses of anti-mlm zealots like Robert FitzPatrick, Dean Van Druff and bloggers such as JoeCool, Larsen et all. They all seem to some how think that just the act of registering as an Amway “agent” means you are actually putting in an effort to make money.

Anyone with any experience with the Amway business knows that -

(a) many folk join just to buy the products at “agent” price and
(b) many folk register with a plan to work, then decide quickly it is not for them, ie they don’t make an effort to earn an income and don’t expect to earn an income.

As such, the figures they give above are incredibly misleading.

Mr Cunningham, your own data says that only 6% of agents bought stuff for the purpose of on-selling it – ie, actually working the business! – yet 10% make a profit!

So the problem is what exactly?

Point 3 is absurd, since Amway doesn’t profit from marketing materials. I’m wondering if perhaps that’s a misunderstanding on the part of the journalist rather than BERR. I find it hard to believe they’d understand the model that poorly.

If anybody has been claiming Amway is “easy money”, as stated in point 4, well, they should be drawn and quartered. I certainly don’t represent the business that way, and I know Amway doesn’t.

Point 6 is a similar issue to what TEAM has raised, and myself and others have made similar points about some Amway products. I have however received price comparisons by Amway UK IBOs showing the coreline products are generally competitive for products of similar quality. IMO there does however need to be adjustment on some lines to allow easier retailing for new IBOs. I’ve been suggesting the HomeCare range, and Amway has in fact dropped prices on that range in the UK since this case was launched.

Now, points 9 and 10 seem to be of legitimate concern. The article says this was material “authorised by Amway” not “distributed” or “made” so I’m guessing it was material produced by one of the “systems” and approved by Amway, yet it clearly isn’t true for the UK market.

I’m not sure what kind of income representations are made by Amway UK agents, so I can’t really judge the claims on that. I do know that I spent 2 years with no luck trying to get “average income” statistics out of Amway Europe.

It appears to me that the core of the problem, again, is whether someone is making a legitimate effort to actually earn an income is being ignored. Back in August I wrote a post – How to Improve Amway & Quixtar – Part I where I outlined my concerns about this very problem. Amway’s own system of categorizing folk provides unrealistic and misleading data about the business, with folk who are little more than wholesale shoppers being lumped in as “business owners” with folk who are seriously working to develop an income. I’d suggest this very problem is contributing substantially to BERRs position in this case. Amway UK’s new requirements to be considered a business owner in the UK are a major step towards improving this situation, and I would suggest similar action should be taken elsewhere.

Finally however, it must be said that point 12, and indeed the corresponding general lack of growth of the UK market is a concern. It’s my belief that Amway’s core products are, in general, of premium quality, and priced competitively for that market. However – it’s extremely difficult for a new IBO to market such products. I again encourage Amway to globally address the problem of having products that are easily retailable by a new IBO. I would suggest that even the new Simply Nutrilite range launched in the US still doesn’t quite fit that category. You still need to be educated about the health benefits of the products and market to a group that (a) are interested in health (b) are willing to pay a little more for it.

Amway’s HomeCare range such as SA8, LOC, and Dish Drops in particular are very well regarded in the consumer marketplace – yet they simply are not as price competitive as they used to be, at least not outside the new UK pricing! IMO they are easy to market and easy to sell when well priced. Products like XS can be too – however the corp. has to respond more quickly to market changes. XS was very price competitive when launched, but as the energy drink category grew and inspired more competitors, others dropped their prices. Amway can be notoriously slow to respond to market forces and changes in pricing and needs to address this problem.

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Amway UK Update

The BERR court case against Amway UK begins today. Over on mlmleads.eu, the following email from Amway about the case was published last week. It looks like the outcome should be known within about 3 weeks. The letter indicates that over 6,4 IBOs have already transitioned to the new business model. This is more than half of the approximately 12, that reportedly renewed at the end of last Amway financial year. Given the circumstances I believe this is an excellent result and a great vote of confidence in Amway UK. The letter indicates that Amway UK believes the business model changes they have made have addressed the concerns of the DTI and thus the case is unwarranted. I agree. It’s my feeling that BERR does however want to "make a statement" through this case, and is thus continuing to pursue it. I would be extremely surprised if Amway UK was shutdown – indeed stunned.

From Amway UK -

We naturally want to make every effort to keep you informed about the court action that has been initiated by the Government Department for Business Enterprise and Regulatory Reform (BERR), formerly the DTI.

The judge will start hearing evidence in court on Monday (26th November) and the case is expected to conclude by 18th December or possibly a few days earlier.

Firstly, we want to reinforce that we are entering a strong defence of the BERR action. As you know, we moved swiftly to make changes to the business model and respond to BERR’s concerns, and our lawyers will argue that bringing this action now is unwarranted and fails to recognise the changes that have been made.

Because the case is in court, there are limits to what we can say and we intend to keep communication to the necessary minimum before the result is known.

For instance, we are not intending to communicate directly with ABOs about the case before the outcome, which would run the risk of causing unnecessary speculation. For your information, our call centre is receiving a very low level of enquiries about the case and we do not see any advantage in raising concerns where there are none.

We intend to provide you and ABOs with a full report on the outcome of the case once it is known, and to advise you of any action that may be necessary as a result.

Until that time, we are asking you, as our Leaders, to treat this communication with discretion and to use your own judgement about whether to communicate it to ABOs in your group who have asked for information or reassurance. We do not expect you to communicate this update proactively to your downline.

All of us want to get on with running our business and I’d like to take this opportunity to thank each and every one of you for your support since the EXPO and our new mode of operation.

We’ve just received the figures for our first trading month which show an exceptional sales performance. ABO-ship transitions are now in excess of 6,4 and growing daily. Initial November numbers indicate strong growth over October.

These positive figures are the evidence that you and your groups are already making the new retail model work successfully. In terms of your support right now, where it counts is out in the field “at the Sharp End” – letting your groups know about the success of the new model and helping them move forward and transition.

Once again on behalf of all of us here at M.K. a big thank you for all your support.

Kind Regards

Tom Denham
General Manager & Director Amway UK/RoI Limited

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Quixtar Diamond Greg Johnson resigns?

Following on from the resignations and terminations of the Team affiliated diamonds, then the "non renewal" of IBS (Harteis) affiliated Diamonds in the UK and early this month reports of the resignation of Diamonds Jerry & Polly Harteis (Jerry is Double Diamond Fred Harteis’s brother), I’ve heard today that Quixtar Diamond Greg Johnson apparently resigned last week.

Back at the beginning of October I reported that I’d received reports that a Harteis affiliated US Diamond had been soliciting South African Amway IBOs for a new gambling affiliated MLM apparently under consideration by former UK Diamonds Jerry & Mandy Scriven.

That Diamond was Greg Johnson
– so, needless to say, reports of his resignation come as no surprise. I wouldn’t be surprised if the resignation followed a "please explain" from the corp.

Other sources tell me Double Diamond Fred Harteis is still fully on board the Quixtar opportunity, as does Harteis himself. Could be an interesting Thanksgiving for the Harteis clan …

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Alticor launches new venture: Fanista

I recall hearing rumours about this quite some time ago – well, it appears about to be true. Alticor is launching a new web venture dubbed Fanista. What is it? According to International Herald Tribune -

The Web site, set to make its public debut this week, will initially sell DVDs and CDs. In the coming months it will add video games, digital downloads and books.

Interesting. Sounds a lot like Amazon.com. The tribune continues -

The carrot: If a friend joins and buys something, identifying you as the reason for joining, you get 5 percent of the sale in cash or credit.

Well that sounds familiar, doesn’t it? Frankly it doesn’t sound too exciting. Affiliate marketing – which was pretty much "stolen" from the Amway model except it stops at one or two levels and is generally less profitable – has been around pretty much since the internet began. Amazon does it, Barnes & Noble does it. Heck, even Microsoft dabbled for a while (still does?).

So what’s the deal? No idea. I’ve signed up for the beta to have a better look. If anyone can shed more light, I’d love to hear about it. In the meantime the IHT article can be found here.

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Joint memo from Quixtar and Network 21

The following memo was sent out by Quixtar and Network 21 several days ago. Someone asked me if I had any comments on it. My response? No, not really! It doesn’t say anything new that hasn’t been getting told to N21 IBOs since N21 started using a "Team depth approach". After the memo I’ve posted some text from a "Depth Approach" brochure that’s used in Europe, as you can see copyright 26.

Of course, as with any large organization, people need reminding of the rules and the reasons for them occasionally. Like in the rest of life, there is undoubtedly N21-affiliated IBOs bending or breaking these rules. Hopefully reminders such as those below will help convince them to stop, as they damage the reputations of all IBOs


Joint memo from Quixtar and Network 21 to all
IBOs affiliated with Network 21

As part of our ongoing efforts to assure that Independent Business Owners affiliated with Network 21 are aligned with Quixtar’s Best Practices, we again are communicating our desire to encourage balance and responsibility in building our businesses and training our downline IBOs.

We know there is much excitement concerning the benefits of focused activities in certain active teams through coordinated depth- and relationship-building. However, we must always remember to “begin with the end in mind.” Ultimately, a successful business will require balance between width and depth, a proper emphasis on the sale and use of product, and the commitment to help people become profitable.

The leadership at Network 21 continues to work with Quixtar to assure proper principles are followed when building our businesses. With the recent buzz over the term “stacking,” as opposed to proper depth-building, we felt it wise to again provide clarification on the differences between the two as well as some basic guidelines to follow as you build your business. Below is the latest position from Quixtar, and we believe you will find that what you have been taught, if followed, will lead to acceptable practices and a sound, profitable business.

Guidelines for acceptable business-building using a team/depth approach

“Stacking” is an unacceptable business-building practice. It is defined as the strategic and artificial structuring of an organization by an upline IBO who places new IBOs in depth, regardless of whether there are relationships between those who are sponsored and those who sponsor. It is a method of doing business that creates an imbalance in depth and potentially inhibits profitability.

Characteristics of acceptable depth-building

Quixtar believes acceptable depth-building is an important part of building a balanced, successful business, along with the development of width and the sale of product. Acceptable depth-building articulates the following:

  • Any business-building strategy, such as a team approach, is optional and should be so stated.
  • Building a balance of both width and depth is vital and must be taught in a group as the basis of profitability. Width is important for profitability, depth is important for stability, and together they make a balanced business.
  • The line of sponsorship may not be restructured by use of the transfer rules for strategic realignment of depth.
  • Product education is vital and a requirement for a successful business, which is based on building a balance of product sales and recruiting.
  • It is important that each IBO has a prior relationship with his sponsor, who agrees to fulfill the obligations of being a sponsor.
  • It is every IBO’s responsibility to communicate and clearly educate all who enter the business that profitability comes from the sale of products and the development of both width and depth.
  • A team approach does not take away the fact that building a business requires hard work and it is the responsibility of each individual IBO to build his business.

Unacceptable practices associated with stacking

  • Claims from IBOs that they have a special deal with or special rules from the Corporation.
  • Confusion about the role of Quixtar and the role of the support organization.
  • The omission or denigration of the fact that the sale of products is part of the QUIXTAR IBO Compensation Plan or that profitability comes from the balance of selling and sponsoring.
  • The new applicant does not know his sponsor.
  • Applicants are placed in the line of sponsorship without regard to the sponsor having been involved in the sponsoring activity and being aware of and engaged in fulfilling the responsibilities of a sponsor.
  • The applicant is instructed to leave fields blank on the application, which is subsequently filled in by the upline.
  • The upline holds the applications until the end of the month to artificially control the volume for qualification or income purposes.
  • Guarantees or implied guarantees of swift downline results.
  • Requests for transfers or the use of the six-month inactivity rules to realign existing IBOs in groups in depth so that they provide more value.
  • Legs are 25, 5, or even 1 deep, with little or no volume or width.

I think we can all agree that these guidelines are proper and sensible and that our goal must always be to assure each new IBO understands the rules and is treated with respect and care so that he/she can have a positive and profitable experience from their business. Remember the key words: balance, profits, relationships, integrity, optional strategies, and no rewards without effort.

We want all of you to continue to have confidence as you grow your business, so please use these guidelines to successfully build your business in depth.

Sincerely,

Gary VanderVen signature
Gary VanderVen
Director, Business Conduct and Rules

Jim Dornan signature
Jim Dornan
President, Network 21


Depth Approach
Business Strategy Guidelines

  • Participation in the Team 21 Business Strategy to building your Amway business and/or purchase of business support materials and services is strictly voluntary. Use and purchase of BSMs should be in balance with the income and/or goals of one’s business.
  • Building a balance of both width and depth is important.
  • The line of sponsorship may not be restructured for strategic realignment of depth building.
  • Product education is important because understanding and being able to explain Amway product features and benefits has been shown to increase IBO’s sales volume.
  • It is important that each IBO has a prior relationship with his sponsor who participates in a meaningful way in the sponsoring activity and agrees to fulfill the obligations of being a sponsor. “Stacking” people who are unknown to each other is unacceptable.
  • It is every IBO’s responsibility to communicate and clearly educate other IBOs in their Team(s) that profitability comes from increasing the sale of Amway products and managing expenses as IBOs develop their own customer base and support an effective sales force of IBOs in their Team(s) who do the same.
  • Implying income generated by IBOs is residual or self regenerating is inaccurate.
  • Suggesting an advantage will be lost unless one registers immediately is inaccurate.
  • A Team strategy does not take away the fact that it takes hard work and it is the individual IBOs responsibility to build his business.
  • IBOs must be educated on the fact that referring prospects to other IBOs may have a significant impact on their potential for qualification as well as a potentially negative impact on the profitability of their business if width is not developed.
  • No business building method is guaranteed to create success for those using the strategy on the time and effort invested. An individual is responsible for their own success based on their effort.

For Existing IBOs Only
© 26 Network TwentyOne International

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Amway to open in Sri Lanka, Nepal, Bangladesh and Pakistan

Following last week’s news reports that Amway Vietnam is scheduled to open in 2008, a report in Indian news media quotes Amway India Managing Director William S Pinckney as saying -

“the company will start exporting to Sri Lanka, Nepal, Bangladesh and Pakistan from India within the next couple of years.”

Given the current political turmoil in Pakistan, and to a lesser extent Nepal and Sri Lanka, this is somewhat surprising news. IBOs should note that market openings have often slid years passed their originally planned dates – so don’t start booking any tickets just yet! Still, it might make for smart business to start talking to ex-pats from those countries sooner rather than later. In the past it has often been folk who have learned to properly build the business in their adopted countries who then return to their home countries and build the most successful Amway businesses there.

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