Updated Amway IBO average income statistics, plus an important clarification

For the last decade, whenever Amway has published income data for the Amway business they have also reported, based on a survey in 2000, an “average income” for “active IBOs” -

The average monthly gross income for “active” IBOs was $115.

Approximately 66% of all IBOs of record were found to be “active.”

“Active” means an IBO attempted to make a retail sale, or presented the Amway Independent Business Ownership Plan, or received bonus money, or attended a company or IBO meeting in the year 2000.

“Gross income” means the amount received from retail sales, minus the cost of goods sold, plus the amount of Performance Bonus retained. There may be significant business expenses, mostly discretionary, that may be greater in relation to income in the first years of operation.

Amway critics have often latched on to this “average income” and claimed (by falsely assuming all these IBOs are working hard and have business expenses) that virtually all IBOs are losing money and that it’s a poor business opportunity. In reality it’s a very poor and virtually meaningless statistic. There’s a reason why if you google “average income” you’ll be hard pressed to find it. What you’ll find instead is “median income”, which is altogether different statistic. “Average” only really works when you have a group that is homogenous, or members are similar to each other.  The group used by Amway is “active IBOs”, and as per their definition includes everyone from the handful of US Founders Crown Ambassadors who have been building their businesses for decades and earn millions, through to the 19yr old college student who joined a few months back and  asked their brother if they wanted to buy an XS – and the brother said “no”, and they never did anything again.

Clearly the statistic doesn’t tell us much at all! I can only surmise that Amway keeps publishing it at the behest of their lawyers, who want to keep on the good side of the FTC and ensure nobody can complain Amway gave them an overly optimistic view of their chances of making money with Amway.

So, we’re left with a lousy, misleading, statistic. At least now though, we’re not left with an old lousy, misleading statistic. Recent issues of Amway’s Achieve Magazine have been reporting new data, based on a survey from 2010 – Read More »

The bizarre world of Amway in India

For some years now I’ve been trying to write a post about the trials and tribulations of Amway India, and I never quite manage to get one done. It’s a struggle  just to sort through the bizarre allegations, unreadable and confusing legalize, and the truly bizarre misinformation of Amway’s critics.

Anyway, I’m trying again. As many readers might know, back in 2006 police in the Indian state of Andhra Pradesh raided and closed several Amway offices citing the “The Prize Chits & Money Circulation Schemes” law. Amway appealed to the courts, successfully, to remain open but their attempt to get the courts to once and for all declare the Amway business model legal and tell the police to stop harassing them failed. The court refused, instead stating that if the police allegations were correct, then the law would apply, so they ordered the police to complete their investigations within six months so their original allegations could be heard. Five years later that still hasn’t happened, and Amway critics in the country have spent the intervening time claiming the courts decision means Amway is illegal in India and lobbying for action. Of course, they conveniently ignore the part about the allegations needing to be correct! Unfortunately, similar events, and allegations, have now been made in the state of Kerala, and today it’s been reported that “The Enforcement Directorate” is investigating money laundering charges against Amway.

So what exactly are these allegations? It’s frankly a nightmare trying to sort through all the very oddly worded legal documents, but as best I can find from the original court hearing, here are some of them -

  • Amway’s membership fees are “quick and easy money” and no services are provided to distributors in return.
    Apparently the products and literature that come with the kit, the www.amway.in website, telephone support staff, dozens of  product centers throughout India, Media advertising, 14,000 support stuff throughout the world etc, etc etc don’t exist)
  • prescription of minimum level of 50 PV to qualify for getting commission is sufficient inducement for the members to relentlessly strive for maintaining the PV level at or above the said minimum levels.
    This requirement, which much of the world (including the FTC) cites as a reason that Amway is not a pyramid scheme, is to the Andhra Pradesh police a reason why it’s illegal! Having retail customer volume provides evidence that an MLM company has real products with real world demand. In the bizarro world Amway India lives in, it “forces” distributors to buy Amway products, giving Amway “automatic” income. The fact the vast majority of Amway distributors don’t actually do this thing it’s claimed they’re “forced” to “relentlessly strive for” is apparently irrelevant. Read More »

Are you recruiting your competitors?

A supposed “criticism” of Amway, and indeed of multilevel marketing, that I’ve seen turn up regularly is the idea that it’s inherently flawed because “you are recruiting competitors”. For example, Robert T. Carroll, in his “Skeptic’s Dictionary” says -

Why, you might wonder would you recruit people to compete with you? For, isn’t that what you are doing when you recruit people to sell the same products you are selling? MLM magic will convince you that it is reasonable to recruit competitors because they won’t really be competitors since you will get a cut of their profits.

Australian MLM critic Peter Bowditch (ratbags.com.au) says for example regarding his own business compared with MLM -

I am a certified consultant and an authorised reseller for several software and hardware products. I can open a retail shop to sell these things, I can sell them on eBay, I can walk door-to-door around the neighbourhood, I can ask retailers to stock them and computer builders to include them as packages with their machines …I am not expected to find and recruit competitors for my business

Anti-Amway obsessive JoeCool comments on one of his (many) blogs -

 you are very strongly encouraged to RECRUIT YOUR OWN COMPETITION. If Amway were a business where the goal was to make money selling products, it is a suicidal business plan

So, what are they on about?

Well, the claim has some truth to it because when you sponsor someone in to your business, that person is indeed now a potential competitor for a retail customer. For any given customer, you’ll make more money if you sell to them personally than if your downline does.

One flaw in this “complaint” is that the same thing applies in traditional business as well. If you owned a small clothing store, every time you sell something, you get to keep all the profit. But what if you employ someone? In the clearest example, if you simply paid them on a commission basis, then they are a direct competitor to you on each retail sale. They get that commission instead of you. The same really applies even if they’re a salaried employee. The money your paying them could have stayed in your pocket if you hadn’t employed them and sold it yourself!

Or how about Coca-Cola? If you buy a coke from an official coca-cola vending machine then are you’re buying it direct from Coca-Cola. Yet you could also buy it from your local corner store. Every time Coca-Cola reps try to get a store to sell their products, they’re recruiting competitors!

Or let’s take Pete Bowditch’s own software example. As he mentioned, he could sell the software directly himself, or he could ask retailers to stock them. In other words – he could recruit a competitor! By having a reseller sell to a customer, that’s a potential retail sale he is missing out on.

Why does Coca-Cola recruit competitors? Why does a  small business owner recruit salespeople? Why does Bowditch suggest recruiting retailers?

No “MLM magic” is needed to answer that. It’s because you can make more money that way! By recruiting resellers, you can hopefully get much larger total sales volumes than by trying to do all the sales yourself. Yes, you’ll make less money per sale than if you did a sale personally, but you still get a percentage on the wholesale sale to your recruit, and you should be able to get a lot more sales for the same time invested. Asmaller percentage of a larger volume can easily be worth more than a larger percentage of a smaller volume. What’s more, the larger discount you get thanks to your recruit’s volume means you get an even bigger profit margin on your own retail sales!

Unless the marketplace for your products is saturated, and there is no room for expansion, recruiting other sales people to increase your sales volume is a smart and sensible way to increase your profitability.

Amway to be presenting sponsor of the Detroit Red Wings

Amway and the 11 time Stanley Cup winning Detroit Red Wings have announced that Amway is to be the team’s first ever presenting sponsor, and Nutrilite the team’s official nutritional supplement. Nutrilite is also going to work with the team on optimising supplements for each player.

With 11 titles the Red Wings are the most successful ice hockey club in the US, bested in the overall NHL rankings only by two Canadian teams. Along with the AC Milan sponsorship this means Amway and Nutrilite are partnered with two of the most successful teams in world sport. This sponsorship has benefits outside of the US though, with the team currently including not only 6 American players, but 7 Canadians, 6 Swedes, 2 Czechs, a Russian, a Finn, and a Slovenian. Indeed the captain, Niklas Lindström, is a Swede, so this sponsorship might be a fillip for Amway Sweden as well as North America.

The increased effort in marketing and branding seems to be working, with Amway North America Vice-President of Sales, Sandy Spielmaker revealing in a video to IBOs this week that Amway North America has been experiencing double digit growth over the past year.

Can a positive review be a bad thing?

Today on my Facebook feed a post came up from Nutrilite US about Nutrilite Energy Bars getting a positive review in Triathlete Magazine -

“That’s great!” I thought. I’ve competed in triathlons and have a few friends who continue to do so. So I eagerly clicked on the link through to Amway’s News website and looked at the PDF of the Triathlete Magazine Review.

The magazine highlights four energy bars for “when you need an extra shot of energy to keep going on a long ride or run”. The four are Honey Stinger Waffles, Iron Girl Energy Bar, Nutrilite Energy Bar, and Clif Bar. All four are given glowing reviews, which is great for Nutrilite. So where’s the problem? There’s two. First is this -

Honey Stinger Waffles – $1.39
Iron Girl Energy Bar – $0.99
Nutrilite Energy Bar – $20.97 for box of 9 bars
Clif bar (coconut chocolate chip) – $1.39

You have to do the math, but that puts the Nutrilite Energy Bar at  $2.33/bar – nearly 70% more expensive than the next most expensive bar, and 135% more expensive than the cheapest!

If you were a triathlete, would you check out the Nutrilite bar first or last? Now, I’ve learned a lot over the year about The Nutrilite Difference, and often even though a Nutrilite product may be more expensive, it may be a significantly better product and better value. We don’t have Nutrilite Energy Bars where I live and so I’ve never tried them and don’t know much about them. So I went to Amway.com to learn more. And that’s where the second problem came up -

Hopefully it will change soon, but right now two of the three flavours, indeed the two that were mentioned by Triathlete Magazine, aren’t even available! Hello? Even if you can’t help when Triathlete magazine promotes something, why on earth would you be promoting a product on Facebook that people can’t even order? Wouldn’t it have made more sense to wait until the products were in stock?

In any case, I went to amway.com to see if I could learn more about these bars and if there was any information to help a consumer make the decision to purchase these over the other three bars, or indeed for an IBO to market these products against competitors. Unfortunately, under “competitive info” I found only some nutritional comparisons with Power Bar. Reading through the rest of the info the only thing that stood out was “Exclusive NUTRILITE® C-Lenium Blend provides antioxidant protection from harmful free radicals generated by intense exercise”.

Was that the Nutrilite Difference? I don’t know. It sounds good – but is it worth paying more than double the price compared to an Iron Girl energy bar? I don’t know that either. If anyone from Nutrilite or Amway, or an IBO, can help explain it, I’d love more information. What I do know is that it’s unlikely that many triathletes are going to be turned on to Nutrilite by this review. All the information they get is from the magazine, and then the Nutrilite Health and Amway websites. That tells them these products are expensive, and out of stock.

Is that what you want from being highlighted in a magazine?

UPDATE: Even worse, anyone checking out this product after September 2 (two days from now), will see another price – $22.65 for a box of 9, or $2.52/bar. So a potential customer checking out the product is going to get yet another “sticker shock”. Unless there’s something incredibly special about this product – and if there is, both IBOs and customers need to be educated about it, the only way I can see this being successfully marketed to customers is by IBOs putting big discounts on the suggested retail price. Even at base IBO price the bars are still significantly more expensive than the competitors. At least though they’d be marketable. Is Amway US slipping back to the old habit of targeting product pricing at IBOs instead of customers?

The #1 problem with Amway and multilevel marketing

Amway has  a problem, a problem it shares with entire multi-level marketing industry. The result of this problem is that the vast majority of people who join Amway never make any significant money.  It’s a problem that leads to low average incomes. It’s a problem that leads to many people not renewing their memberships.

This very same problem occurs with all MLM companies. This same problem, at an industry level, also means that a large percentage, perhaps even the majority, of multilevel marketing companies are not good business opportunities and many are outright scams.

It’s a problem that, thanks to things like above, results in the multilevel marketing concept and companies like Amway having a poor reputation among many people.

What’s the #1 problem with Amway and multilevel marketing problem?

Low barriers to entry and low risk.

It’s (relatively*) easy and (relatively*) cheap to start up an MLM company. You don’t even have to pay much for marketing! You only pay your salespeople when they actually get results! So if you’re an entrepreneur who is low on cash, or got some product that can’t compete in the traditional marketplace, or even if you’ve got some scam in mind … then MLM is the strategy for you. Low risk, low cost, so if it doesn’t work out you live to fight another today.

It’s easy to startup as an agent for an MLM company. It usually only costs a few dollars, nobody checks up to see if you’re turning up for work, you can return stuff you don’t want or can’t sell. Nobody cares what degrees you have or your success or failures of the past. Why not give it a shot for a few weeks or months and see if it’s something for you? What have you got to lose? It’s just an opportunity, not a promise.

Low barriers to entry and low risk. Amway and multilevel marketing’s biggest problem – and it’s greatest strength.

* compared to traditional strategies!

Amway posts a billion dollars sales in a month

Grand Rapids press has reported that last month Amway had it’s first ever billion dollar month. Wow. To put that in perspective, according to Direct Selling News there’s only 11 other direct selling companies in the world that do over a billion dollars in a year. In 2010 Amway did US$9.2billion for the year, trailing only Avon, who reported sales of $10.9 billion, which includes from their retail outlets. Is 2011 going to be the year Amway takes the crown as the world’s biggest direct sales company? It’s going to be tough, with Avon also reporting first quarter sales up 7% over the same period last year.

The report also noted Amway North American sales continue to grow, which is great news for Amway’s oldest market, which has had some struggles in the past few years.

RSS for Posts RSS for Comments