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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