I’ve had a few interesting discussions lately both online and offline with folk who are absolutely convinced that multi-level marketing and Amway are scams. The discussions have been with highly intelligent and educated people, including one who is a lecturer in entrepreneurship at a school for business. What I’ve discovered is that the reasoning behind their beliefs fall into two areas -
Ignorance, confusion, and misconceptions about MLM
The first is essentially ignorance or misconceptions. MLM suffers greatly by the fact that virtually all illegal pyramid scams claim to be MLMs. When they inevitably fail or are closed down by the government, the meme that “MLM=scam” is reinforced. In reality this is poor logic. The very reason the scams are claiming to be MLMs is because MLMs are legal, legitimate businesses. Nevertheless, the effect on public perceptions is a daunting problem for the legitimate companies.
Associated with this is many misconceptions about how legitimate MLMs operates. Many folk believe we make money by recruiting others, and “smart” people know that means the model will inevitably “saturate” and you can’t make any money since there’s no longer anyone left to recruit. Of course, this isn’t MLM, it’s an illegal pyramid. We don’t make money by recruiting, we make money through sales volume. MLM isn’t really a business model – it’s a marketing strategy with the aim of increasing sales volume. Indeed, in general for any given level of sales, the more people you recruit to achieve it, the less you make on it. It’s no different to owning say a traditional retail store selling clothes. You could sell them all yourself, and keep the whole profit, or could employ some other sales staff. They’ll cost you money, but you hope that the increase in sales will offset the increase in costs.
These types of misconceptions abound, with people concerned about the legitimate problems inherent in illegal pyramids, and believing they exist in multi-level marketing.
Scammers can scam you with Amway
The second area that seems to influence people is their own personal experiences, or those of people they know, or, increasingly, experiences of others they read on the internet. The interesting thing is, when you delve into the problems with those experiences, they very rarely have anything to do with Amway or multi-level marketing per se, they have to do with how some people operate their multi-level marketing businesses.
You can be scammed in any business. A car salesman can knowingly sell you a lemon. A doctor can overcharge you for a simple procedure. A teacher can “force” you to purchase a substandard text book they’d written and printed themselves. An Amway business owner could sell you Double X by telling you it cures cancer, or you can be a millionaire with little work.
In each case you’ve been scammed, but the scam had nothing to do with the car industry, or the medical profession, or teaching, or Amway. It had to do with those individuals (and perhaps some of their associates) and the way they were behaving.
The multi-level marketing strategy, and Amway as it’s largest representative, is a brilliant way of doing business which allows anyone to start and own their own business, of which ever size they desire, with little financial risk, and without having to pursue it full-time. Just like in any other industry however, you can be scammed, and if you’re so inclined, you can scam people, but like any other industry, the scammers rarely last long.
Amway will soon celebrate it’s 50th anniversary. That should say it all.
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So who is buying these products from Amway? I browsed on the website after an acquaintance approached me about making more money. I politely declined, I have no interest in sales, and he was very cordial. But nonetheless- who is buying a box of Tampons at $26.40 a box? Is there like 200 tampons in this box or what? Even if the IBO discount was 75% that would still make an average box the normal price, nothing special. That’s just one example. What do Amway IBOs tell people about their products that makes them want to buy them?
JustWondering, Amway does not make tampons, and while they’re available through Amway in some countries, they are not Amway products and they are not the basis of the business. Having said that, Amway’s Fulton Street Market branded tampons retail at $26.40 for 108, or 24 cents each. According to Amway a comparable product is Tampax Pearl. It retails at $4.99 for 18, or 28 cents each at drugstore.com and $5.99 for 18, or 33 cents each, from PGestore.com. Those two stores were both recommended by tampax.com.
Now, I’ no expert on tampons, but the Amway product is 14% cheaper than drugstore.com and 27% cheaper than pgestore.com, so clearly the pricing is competitive. On top of that is the satisfaction guarantee, use them and don’t think they’re good value, Amway will give you your money back.
Again though, these are not the basis of the business, indeed their in a category of products that is primarily available for the convenience of IBOs, who get them at an even cheaper price, rather than retail customers.
Amway’s primary products are Nutrilite, Artistry, eSpring, XS Energy drinks, and the Legacy of Clean/Amway Home range.
ibofightback, thank you for taking the time to reply to these accusations that we get all the time as IBOs. Hopefully they understand that those experiences they’ve had were not because of Amways itself, but because of IBOs who have chosen to not follow the policies of the company.
This Amway business is nothing more than a pyramid and a misleading scam. I am truly surprised it has not been shut down yet..
GK,
The answer to my question above is probably “both”. I know my experience is a true experience, and I have no reason to doubt yours. The problem is you’re extrapolating from your experience with one or one group of Amway independent business owners and assuming everyone operates that way. A couple of questions -
(1) How do you think it’s a pyramid? You don’t earn any money by recruiting people, which is the basis of an pyramid scheme.
(2) How did Amway mislead you?
Dear GK,
What is a ‘pyramid’? There’s a pyramid in ALL organizations. How many CEOs or COOs or managers are there in a company from the top down? Eg. Owner 1x, CEO 2x, Managers 5x, Supervisors 10x, Workers 50x…. etc.
In Amway, you can surpass (in income) the person who brought you in & all above you- if you work harder; which is a LADDER concept. As Business Owners we are ‘partners’ with Amway, not ‘working for’ Amway.
I was sucked into it years ago. I lost a lot of money and so called friends, as the whole thing is a cult built on a misleading lie.. They call themselves Christians, but as it says in the Bible, are false prophets.. Bottom line; if I was ever approached by one of these ratbags again, I’d politely tell them to F- Off and don’t waste my time… There are two words missing from the word Amway. And they are, the “Sc” before it.
GK,
And I made a lot of money, and a lot of friends, and I call myself an atheist. Whose experience is the true one? Yours? Mine? Both?
Amway, and other MLM where recruitment is in the forefront, is nothing more than recruiting of participants in an unlimited endless chain of empowered and motivated recruiters recruiting recruiters- Ad Infinitum. Ask yourself this sbout Amway,or most other MLM schemes. Is unlimited recruiting allowed, and are those who are recruited empowered and spurred on by incentives ( such as overrides from downline purchases, advancement, etc.) to recruit additional recruiters who are likewise empowered and motivated to recruit still more recruiters, etc.- so, that the effect is an endless chain of recruiters recruiting recruiters?
This leads to a perception that a given market is satuated (de facto satuation), and the program must move on to another location, or introduce new products, or new divisions(Quixtar) to continue . The opportunity for each new person to make money becomes less and less as the endless chain, or pyramid participants continue to expand.
Peter,
There are about 300 thousand IBOs in North America. And the population in the U.S. alone is over 300M–a thousand times the number of IBOs.
There are about 3 million IBOs in the world. And the population of the world is over 6 billion –two thousand times the number of IBOs.
More people turn 18 years old in the U.S.(4 Million) EACH YEAR,than there are IBOs in the entire world.
The “saturation” argument is ridiculous, and has been proven by history (Amway has been in business for 53 years) to be completely false.
The Amway business is not about “endless recruiting” any more than Starbucks, McDonald’s, and 7-Elevens are about opening up endless numbers of stores.
How many emeralds were made in 2012? How many diamonds? my husband just got into Amway and I want to see how realistic it is…
This post gives some figures. There were over 55,000 people who qualified at new levels from silver producer and higher.
Pete,
I can go and buy Coca-Cola from Walmart and resell it to someone. Who can resell it to someone. Who can resell it to someone. “Spurred on” by the incentive to profit, recruiting can go on “ad infinitum”. Market reality is that’s not what happens. Just like Amway.
This is compeletly wrong. Amway cannot and will not allow the reselling of products. It’s actually one of their rules. Otherwise you’d see their products in stores across the world. They do not believe in having their products distributed through chains such as wal-mart or any other business. I do not earn money for recruiting people, I earn points. My main goal as an IBO is to ensure the sale of products, which, if you didn’t know already can speak for themselves. I paid 200 dollars to start my business. And have gone through training and been to meetings with no charge. I would never try to sell a product to someone, if it was not in their best interest to buy it. Honestly, if you’ve never worked with amway your arguement is invalid. It’s not a scam and so far everyone who has had more experience than me has been doing their best to ensure help me understand the process of running my own business and guarenteeing customer satisfaction.
While I have not had any experience with Amway I have had experience with companies operating under similar business plans. The people who say it is not a scam are right. From a legal standpoint these companies are completely legitimate. That being said in my opinion these kind of companies are unethical because they pray upon people’s emotions by selling something besides their products they are SELLING hope. They tell you, you can succeed if you work at it hard enough, this is the dishonest part, not everyone has the personality for this kind of work. Where you live and the state of the overall market are also huge factors. Any company that charges for seminars and team building activities materials is a less than honest company. The comparisons to McDonalds and other franchises people have made are completely irrelevant. Franchises of that caliber have startup costs in excess of a million dollars you have a better probablity of success if you work hard. You can start a business with just a few hundred dollars but here’s the thing. If you have the ability to do that why do you need companies like Amway or CUTCO? Yes they provide a network and support group but this network as with any corporation favors those at the top so why do you need them if you do in fact have what it takes. Chances are if you had what it takes you would already have your own business and laugh at the idea of joining Amway. If you are part of a company like Amway and you have been successful that is great you could be the most honest hardworking person in the world for all I know. I am not accusing IBOs of being dishonest however I do think that the emotional appeals these kind of companies make on people who are usually already in a tight spot is not only unethical but disgusting. Amway is not in the business of helping people they are in the business of making money. They need IBOs to make money, even though most people who try are not successful Amway and other companies that operate this way make a boatload of money. The conclusion is they need your patronage in order to make money, you do not need them. Yes Bridget and yes IBOFIGHTBACK I have read the feed, I have heard your points, this is just my opinion. I apologize in advance for any misconceptions I have. The generalizations I’ve made are only based on my experience and the experience of people I know. The best investment you can make is an investment in yourself go back to school people it is not too late. Go to a workshop to improve your resume. Find a source of steady income and stick to it no matter how much it sucks, especially if you have a family. Life is not always pleasant not everyone that works at something or tries really hard can become rich. If your goal is to become rich think about what that wealth is really gonna cost you in the end.
I apologize in advance for the typos like prey* not pray. I have written off a mobile device.
“facts” – do you have any “facts” to support you claim that a specific “personality” type is necessary to succeed in this type of business? I’ve met and spoke with many, many highly successful Amway IBOs and they’ve been all different types of personalities. What they have done is learn the *skills* needed to succeed in a business like this, and worked damn hard at it.
Having said that, Amway isn’t for everyone no. Indeed being an entrepreneur isn’t for everyone. I think Amway has made some progress in recent years towards discouraging people from the “just try and recruit everyone” type of approach and instead work on the approach that I was always taught – “we’re looking for people who are looking for us”
Yes the fact is that a company that charges a membership fee, tries to sell you videos on how to learn the “skills” for success, and deceives people into believing they can become the next diamond millionaire or whatever is unethical. Granted many companies are unethical, but basing an entire business model on this sort of thing is crossing the line in my opinion. To me it seems like Amway is not “looking for people who are looking for them” because that’s not how businesses in general function. Obviously people are trying to actively recruit and are committed to recruiting as many people as possible because that is how they expand their own network in the company. They also have to motivate these people to buy into the idea of the company so they will sell products or bring in more recruits. Right? It’s a slippery slop these companies like the ones I’ve mentioned before are essentially pyramid schemes minus the fact that they are actually selling a product. However, it seems like the products are only secondary to an intricate ranking system that provides new recruits with the hope of future riches. In my opinion Amway and companies like it found a more creative and profitable way to advertise, they use people instead of billboards. For the most part Amway “entrepreneurs” are in fact themselves the consumers, they are Amway costumers. The company is thus able to sell the majority of their products not because they are necessarily “the best products around at low prices” but because they are selling hope. On top of this the “entrepreneurs” are also charged an annual fee, and people wonder why Amway is so successful. Bottom line is a large majority of people who join Amway hoping to develop some kind of steady or supplementary income end up being the consumers.
Slope* again I apologize for any other typos
“facts”, as far as I’m aware Amway doesn’t charge for any of their “videos”, they provide them free online or at cost as DVDs. It sounds to me like you’re probably talking about the many 3rd party companies that market to Amway IBOs. They do sell such materials, and as you would expect they profit from it.
Recruiting as many people as possible is not IMO how you expand a network. I’m aware some groups have a “throw mud at the wall” approach to network – show everyone, recruit everyone, hope the cream rises – but not all groups do. I think it’s inefficient. You spend a lot of time trying to pressure people to join, nearly all of whom then will do nothing anyway. You’ve wasted their time, you’ve wasted your time, and you’ve potentially damaged the businesses reputation along the way.
Regarding people joining and becoming consumers, you’re partially correct. A lot of people join, inspired by the business opportunity, but then decide it’s not for them, but like the products and keep buying them. I see nothing wrong with that. Note that neither Amway nor IBOs make money from recruiting people, and in some parts of the world registration is free, so with processing costs it costs Amway money to register a new recruit. It obviously costs IBOs time and money to do so as well.
What’s important to note is that the vast amount of Amway products are ultimately bought and used by people who are not trying to build an Amway business and make a profit.
I think Amway is a scam. I was in it with my wife from 1994-1999 and were sold on the fact that we could make all this money and become rich. At the time we joined we were newly married and struggling like most couples. All our bills were on time but we weren’t able to take expensive trips, buy expensive things, etc but we were on time with our rent and bills and our credit was good. When we got in amway our finances got worst. First of all the products were way too expensive and we were required to do 600 pv a month which ended up costing us 400 on top things we needed to buy like groceries. Also, we had to buy those stupid tapes which were 7.00 a week plus 5.00 a piece for weekly meetings, rallys, functions etc. We racked up so much debt from being involved in this and incurred a job loss which further added to the financial stress were we in. We filed bankrucptcy and loss our cars etc. The straw that broke the camels back was when I started a new position and couldn’t make the function because I had to work out of town. My wife went to this function and had paid for her ticket a month an advice and our upline was suppose to show up with the tickets. Well our upline failed to show up which meant she had to buy a ticket for $10 more at the door plus the hotel stay and this caused her not to have enough money to eat while at the function, etc, plus having to contribute for gas money with the group she rode with. Our upline was supposet to reimburse us which never happen. Needless to say we got out of AMWAY and told our upline to never contact us again. Now almost 20 years later, we both work good positions and we have more money now than we ever had before and have substantial savings. You may not get rich working for someone else but in this day and time it is a blessing to have a job. So many people are out of work and would love to have a job.
John,
Apart from complaining the products were expensive, nothing you say has to do with Amway per se. You claim you “were required to do 600PV”, but Amway has never had any requirement to buy any amount every month. Who “required” you to do this? How did they “require” you to do it? You also claim you “had to buy those stupid tapes”. Any tapes you bought almost certainly weren’t from Amway, and it’s actively against Amway’s rules to “require” anyone to buy them – they were clear about this even nearly 20 years ago.
When you join Amway you’re in business for yourself. Nobody can make you do anything, but obviously they can give you recommendations. I’m glad you’re both successful in your careers. Owning a business isn’t for everyone, but don’t blame Amway for that.
John that’s not a representation of amway, that’s a representation of the human being who put you into business. I hate when I read stuff like “we were forced to run a certain PV every month”. That drives me crazy because you will now have a bad taste in your mouth and potentially miss out on a great opportunity because someone was being greedy.
My husband and I have been involved with amway for almost 2 years. We had to earn a spot on the team of our sponsors who are founders ruby. They didn’t recruit us, we were looking for opportunity and my husband met our sponsor at work one day. We didn’t get signed up, they said if they were to teach us how to be successful they needed to know they weren’t going to waste their time if we were going to just quit in a few weeks or months. We had to pursue them, pursue information, meet their coaches, etc. from the day we met our sponsors to the day we launched was one month. And I respected their honesty and the fact they made us convince them, not the other way around.
We don’t sign anyone and everyone up. We take everyone through a process just as we were taken through to make sure we are only launching people who are willing to work as hard as needed. This takes longer to build a successful business, but building it right the first time is better than having to rebuild over and over. We have actually denied more people than launched because this is OUR business and we only want people of our ambition level or higher. We also won’t launch someone if they have to go into debt to start their business. We have actually held off starting someone a few months until they could start with cash instead of adding to their credit cards.
We would NEVER push volume on anyone. We are taught “if the people in your group aren’t running volume don’t push them, find other people who are willing to do it. They will build their business when they are ready and pressuring them will only damage your relationship.” we’ve had IBOs who haven’t ordered or ran client volume for 3 months straight. We’d never ask them about it or tell them to smarten up. If they want help they will come to us, we won’t impose on their life.
Yes this takes longer to build but it shows integrity and it prevents what happened with you, John, which I am sorry you went through that. We went into business with a woman who did amway in the 90′s who went through what you did. She looked at what we do and how different it is and was excited to be a part of this in this form. I hope you can find something like this again with good people who really do want to help you, instead of people who push you so they can help themselves.