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I started this blog nearly a decade ago because I was sick and tired of encountering the same myths, over-generalizations and falsehoods about the Amway business all over the Internet. It became a “go to” place for news and discussion when various crises hit the company, and I think (hope) I contributed to raising the level of discourse about the company and opportunity.
Recently, frankly, there’s not been a lot to write about! The same old “critics” are still obsessively writing their same old claims, but they continue to get less and less attention. The press, when talking about Amway, rarely even mentions long discredited “pyramid” claims, and Amway itself has begun to do a good job in reporting news about the company from around the world with the Global News website, and the Amway Insider blog.
It was also almost a decade ago that Amway began what it termed a “transformation”, where there was more focus on the great products, more focus on a professional business approach. If coverage of the company in the media is any measure, it’s been a great success. The Truth About Amway really has started to spread.
So where to now with this blog? There’s been some significant developments in the world of MLM and network marketing, with Hedge Fund activist Bill Ackman attacking Herbalife, and the FTC acussing Vemma of being a pyramid scheme. These are topics I feel need professional, informed commentary. Should I post about them here? I’m undecided. What about issues with Amway? I think there’s a lot of things Amway still needs to improve, and I’ve made a few recent “critical” posts, but I don’t want the blog to just be a place for me to complain. I suspect there will likely be fewer and fewer new posts as we go forward.
Well done Amway, you’ve almost succeeded in making this blog obsolete. And I think that’s great! Keep it up.
I first joined Amway when I was 19, more than 25 years ago. I was only an IBO for a couple of years, but I made a little cash, liked the products, and was impressed by the company. 18 years ago I joined again and built a reasonable size network. Again, I loved the products and the company – whenever I had to deal with Amway staff the experience was exemplary, they were always trying to help.
Sadly, I’m not finding that’s always the case today and sometimes I get a sense of “arrogance” from them. In one case I was trying to learn about why a particular Nutrilite product – Omega-3 – cost so much more than the competition. As best as I could tell from my research, the product was high quality and of a form that arguably made it perhaps 25% more effective than most competitors, but I simply could not justify it being 3-5 times the price of competitors. This was the case even with competitors where the actual fish oil in the capsules was essentially indistinguishable from Nutrilite’s. Indeed there were some signs it may have come from the same supplier. So I contacted Amway for help to understand the value proposition. The answer I got was essentially “it’s Nutrilite, that’s why” and that they don’t even look at competitor’s pricing and weren’t interested. In another case they launched a new Beauty Cycle product (nail stickers) to take advantage of a trend. I couldn’t find a single example of a competitor that was more expensive than Amway’s offering, and only one that came even close. The competitors also had more range. It was clearly not a competitive product. I contacted Amway about this and was told simply “we’ll pass your comments on to marketing”. The product didn’t last a year before it was pulled, and pricing slashed to get rid of stock.
It wasn’t the pricing that concerned me – many Amway products legitimately command a premium price. What concerned me was the apparent complete lack of caring about what the marketplace was doing. It reeked of a certain corporate arrogance. I felt this arrogance even more as an IBO – that they simply didn’t care about it, and were bothered by me asking. Contrast that to one of my early experiences, where I reported a concern with competitor pricing to Amway, and within a couple of months, Amway had dropped their price!
Then there was what happened a few weeks ago. On May 1 I received an email from Amway Australia saying my IBOship had expired and they were transitioning me to being a “VIP client”. It seems I’d forgotten to renew. I checked through my records and discovered I’d received an email back in November (nearly 6 months earlier) reminding me about renewal, but apparently I’d missed it.
So, this was my fault, I’d not renewed. I’d previously renewed for a 3 year period, so it had been a long time since I’d worried about it. Again, my fault.
Now, I wasn’t too concerned – past experience is that Amway has typically given up to a year to resurrect a lapsed business, so the next day I emailed Amway back and explained I’d been an IBO for 18 years and had downline around the world and that I needed to renew. They emailed me back and said I had to submit a late renewal request directly to a local area business manager, so respond putting her name in the subject. I did so.
The response was that they weren’t forwarding the email as the business managers had decided they weren’t doing any more late renewals. I’d missed the official renewal period (October 1 to December 31) and the “amnesty period” (January 1 to March 31). If I wanted to re-register I should contact my sponsor.
When I checked my records again I couldn’t find anything from Amway about renewing since November. There’d been various marketing emails, but nothing warning I could lose my business during the 6 month period until I got the letter – too late.
Again, this was my fault. But I can’t help but feel that this “sorry, bad luck” response, and the “don’t care about the competitors” responses isn’t the way Amway was when I first joined. In my first years I felt like Amway would do anything to help out – including once helping me renew even later than this! – but not any more.
It’s also worth noting that these experiences I’ve given are from 3 different Amway markets, so it’s not just one country. I’ve also seen reviews of Amway as an employer on various corporate “review” websites where some staff have expressed similar experiences – Amway internally isn’t the same company.
It isn’t unusual in the history of business that when companies grow and expand rapidly they lose their “heart” and the personal touch – many consider Google an example of this – I wonder if the same has happened to Amway?
Now, “losing” my Australian IBOship isn’t as big an issue for me as it could be. The way my business is structured internationally I’ve actually lost very little in the way of my downline, as it’s nearly all through-line of my IBOship in my new home country. In some ways it actually may work out better for me to re-register back in Australia. Nevertheless it’s not the way I’d like my downline IBOs to be handled – at the very least there should have been a lot more warning!
So – long time IBOs in particular – what’s your thoughts on this? Has Amway’s extraordinary growth led to a change of corporate culture? Did I just have rose-coloured glasses at the beginning? Or just some “bad luck” now?
I’m what’s known as a “skeptic”. Skepticism has been defined as “the process of applying reason and critical thinking to determine validity”1. As such, I don’t believe in things like ghosts, astrology, homeopathy, or supernatural beings. Show me some solid evidence then I’ll change my mind. Skepticism though, suffers from the same flaws as any other reasoning system – if you start with incorrect assumptions, or your “facts” are wrong, then you’ll almost certainly come to false conclusions.
Alas that’s something I often see happen with many “skeptics” and the world of multi-level marketing. They have little knowledge of the area, and they unfortunately tend to start their application of reason and critical thinking from a position of false assumption, often based on cursory internet research. It’s no surprise then that they finish with false conclusions. If you want to apply reason and critical thinking to an area, the first thing you need to do is collate facts. Continue reading A Skeptical Debunking – Robert Carroll’s A Skeptic’s Dictionary and MLM→
Brian Dunning, What Is Skepticism?, skeptoid.com ↩
Read the GIP 2013/14 section on your local Amway website available from September 2013
GIP stands for “Growth Incentive Programme”. It’s a program that is announced yearly with various rewards and incentives, including free business trips, for ABOs who grow their businesses. Great, right? So why does it drive me nuts? Because the first day of qualification is September 1 the beginning of the new Amway “year”. And the requirements for qualification are made available when? After then. Many of the incentives require you to have qualifying volume for 12 months, so to receive the reward that you learn about in September you already need to be in qualification.
Now, to be fair, many of the incentives are for people who have already reached Platinum and above, and they do get notified of the GIP details a little bit earlier (but often not by much). ABOs below platinum, however (ie those who most need incentive, as they’re not yet making much money) – it’s kept secret from them. This is even the case with an incentive that’s probably the most popular – the Amway Leadership Training Seminars (LTS). Qualifers have just recently been enjoying EuroDisney, courtesy of Amway. For various reasons I haven’t been actively building an Amway business for some years, and I don’t qualify for these Leadership seminars, but as a parent with two young children, an all expenses paid trip to EuroDisney is a huge attraction for me. When did Amway Europe first tell me and other not-yet-qualifying ABOs about the EuroDisney incentive?
After it was too late to be able to qualify!
What on earth is the logic behind this? What is Amway thinking?
Watch this video, this is for the Amway Europe LTS in 2014. Have you ever wanted to go on a cruise through the magnificant fjörds of Norway?
Put yourself in the picture! Would you like to go? All paid for by Amway? Does that motivate you to build an Amway business?
Sorry, you had to be in qualification for that a year ago. It’s too late. But don’t worry, there’s another trip coming up you can qualify for! It’s …. somewhere … put yourself in the picture! Imagine going there! Imagine walking the … beaches? streets? ????…
This is NOT motivating. Indeed, psychologists will tell you that this kind of “disappointment”, seeing what you can’t have, what you’ve missed out on, can be demotivating.
I simply don’t understand why Amway doesn’t have these incentive programmes decided upon and publicised 6 to 12 months in advance? You’d still motivate the leadership who are already or on their way to qualifying but you’d also motivate the new ABOs, and the many many ABOs like myself that have not yet prioritised building an Amway business.
It’s a common claim among critics of multilevel marketing and Amway that “most people lose money”, some even go so far as to give specific figures. Jon Taylor of Consumer Awareness Institute claims loss rates exceeding 99.9%. Robert FitzPatrick of Pyramid Scheme Alert essentially just repeats Taylor’s analysis and claims the “loss rate” exceeds 99%. Former Amway Emerald Eric Scheibeler claimed that a UK court case (BERR vs Amway UK) found a 99.7% “loss rate for investors” and this was reported in a news article and is currently included in the wikipedia article on Multilevel Marketing. The truth is that no such finding was made. Prolific Amway critics like Joecool, Shyam Sundar, and David Brear repeat these myths, and unfortunately so do members of the media.
Is there any truth to these accusations?
An example of a Jon Taylor & Robert FitzPatrick analysis
Robert FitzPatrick and Jon Taylor come up with their figure by analyzing various companies Income Disclosure Statements. Using the averages and number of distributors qualifying at a particular level (a frequency distribution), they work out the total income each level earned and use this to calculate the average income of the “bottom 1%”. Taking their Nu Skin example, using 1998 average income data, they calculated that –
The mean average payment to the bottom 99% of Nuskin distributors was $7.43 per week
and go on to add “before expenses and taxes are deducted – resulting in a significant loss.”
Mathematically their calculations are roughly correct (though averaging from a frequency distribution doesn’t give the exact mean). Statistically however, their analysis is completely bogus. Why?
There’s several flaws. First, when calculating statistics like “mean” or “average”, a measure of central tendency, you need to consider differences between groups included in your sample. For example, when statisticians calculate and present average heights, it’s typically broken down by age and sex. It simply makes no sense to average the heights of, say, 5 year old girls and 30 year old men together. You can do it and get a figure, but what does it tell you? Pretty much the only thing it tells you is you need a better statistician! This however is exactly what Taylor and FitzPatrick do. They pile together people who have been registered for a few months and mix them together with people who have been actively building a business for 30 years and more! They include people working 30 hours a week and people working one hour a week. They include people with a goal to generate a full time income with people whose goal is to buy some products cheaply. It simply makes no sense. The only thing it tells you is need a better statistician!
Still, that’s possibly not the worst thing they do. Jon Taylor claims to have a PhD in Applied Psychology. I too have qualifications in Psychology (and postgrad in Sociology) and I can assure readers that you do not get these qualification without quite extensive training in statistics. Here’s one of the things you’ll typically be taught about statistics like “mean” or “average” –
The important disadvantage of mean is that it is sensitive to extreme values/outliers, especially when the sample size is small. Therefore, it is not an appropriate measure of central tendency for skewed distributions.
What is a skewed distribution? It’s helpful first to look at what’s called a “normal distribution”. Here’s a graph of a sample of men’s heights.
You’ll note how the graph peaks in the middle and tails off to either side in roughly symmetrical fashion. The more symmetrical it is in this “bell curve”, the more useful a statistic like “mean” is in describing the population or sample you’re interested in.
Now let’s take a look at another distribution.
You’ll note this distribution is very heavily skewed to the left, then a bump, then a tail to the right.
Remember what I said above about “skewed distributions” and “mean”? It is not an appropriate measure.
But that’s exactly what Taylor and FitzPatrick have done. The second graph above is a graph of the actual data they used to calculate that “The mean average payment to the bottom 99% of Nuskin distributors was $7.43 per week”.
So what is that big group on the left? It’s Nu Skin distributors that earned no bonus at all. According to the 1998 Nu Skin income disclosure statement, fully 86% of distributors earned no bonuses at all. That’s no surprise. This is what it says on Nu Skins’ 2004 income disclosure (I was unable to find a copy of the 1998 one Taylor & FitzPatrick quote) –
As with any other sales opportunity, the compensation earned by distributors varies significantly. The cost to become a distributor is very low. People become distributors for various reasons. Many people become distributors simply to enjoy the Company’s products at wholesale prices. Some join the business to improve their skills or to experience the management of their own business. Others become distributors but for various reasons never purchase products from the Company. Consequently, many distributors never qualify to receive commissions.
85% of individuals who sign up with Shaklee do so as “wholesale buyers” rather than distributors
Primerica, Quixtar, Melaleuca and others all reported similar statistics to the FTC. Quite simply these people are not operating a business, and their predictable lack of income from not operating a business should obviously not be used in determining whether it’s possible to earn an income through the business. It’s as absurd as judging whether a particular medicine works by including all the people who didn’t take the medicine! It might tell you something, like the pill is too big so people don’t want to take it, but it won’t tell you whether the medicine itself worked or not.
The obsession that anti-mlm zealots have with the low income of people who don’t actually try to make money makes you wonder if their disappointment with MLM comes from the fact it’s not some kind of “get rich quick scheme” and requires work to succeed, just like any other business. It seems they wanted fast riches and were disappointed.
FitzPatrick & Taylor don’t stop with their bogus analyses there though. In part 2 I’ll look at the other side of the profit equation – expenses.
Howard,I’ve been researching and writing about multilevel marketing companies like Amway for over a decade, and unfortunately your article is full of inaccuracies. This isn’t surprising considering you quote Robert FitzPatrick, who has spent a better part of his life spreading myths about multilevel marketing.(1) You say “the most basic requirement is that participants sell a reasonable percentage of the products to outsiders”. This is false, and the FTC has explicitly stated as much in response to allegations by the likes of FitzPatrick. What’s important is that people are purchasing products out of legitimate demand and not out of some belief doing so will some how make them rich. It makes no difference if they are registered as distributors or are full retail paying customers. It’s this same falsehood that Bill Ackman is promoting in his failing attempt to short Herbalife. Having said all of that, Amway requires all it’s active distributors in the United States to have a minimum level of sales to retail customers.
(2) You’ve mixed up two different lawsuits. One involved a large group of distributors that Amway terminated from the company because of alleged unethical practices. Amway fought and won that lawsuit, including a version in California that alleged it was an illegal pyramid. The other involved a separate couple of California distributors. Amway elected to settle that lawsuit, and an analysis of the settlement shows why – the settlement is costing them significantly less money than going to court would have. Interestingly, despite having contacted 97% of all Amway distributors and former distributors in the US over the past decade, the class settlement administrators have been unable to get rid of the money! There’s apparently simply not enough people who feel “scammed”. Indeed only 0.7% of distributors submitted a claim for reimbursement of losses. An independent consultant for that case found that at most only 18% of all distributors had even $100 of expenses over the entire lifespan of their time as a distributor. On the other hand, government mandated statistics published by Amway show that “active” distributors (46% of those registered) earn on average nearly $2500/yr in monthly commissions alone, not counting retail profit margin and not counting yearly bonuses which can be as high as several million dollars. Despite this hard data critics claims 99% lose money, which is virtually a mathematical impossibility.
(3) You quote FitzPatrick as saying regarding MLM companies – “Not one would have passed the [Federal Trade Commission legal] test. Obviously not Amway. It did not pass that test.” This contradicts the fact that the FTC investigated Amway more than 30 years ago and cleared the company of allegations it was an illegal pyramid.
(4) You cite the decision of a Belgian court regarding allegations Herbalife is an illegal pyramid, and state it is “a company operating using Amway’s business model”. How can you make that claim when the Belgian court explicitly stated one of the reasons behind their decision was that Herbalife *did not* follow the Amway model? (As an aside, the Belgian court decision seems contrary to EU law on this type of model, so I’d be surprised if it’s not overturned on appeal).
Amway has an excellent reputation in much of the world, even winning “most admired company” awards in several countries. Unfortunately in the US it’s reputation was tarnished by a number of distributor groups operating in less than ethical ways. Those kind of issues were cleaned up by Amway some years ago, and it’s been primarily the likes of anti-MLM zealots such as Robert FitzPatrick who have actively been misleading people that has maintained the myths about the company and industry.
Please don’t support their efforts by repeating these myths uncritically.
Unfortunately this kind of censorship isn’t uncommon among Amway critics. Here’s a list of anti-MLM bloggers who I know won’t post comments from me –
Shyam Sundar, Corporate Fraud Watch
David Brear, MLM The American Dream Made Nightmare
I wrote a reply to Howard in the comments on one of the Capital New York articles, pointing out some of the errors. The site said I needed to register, so I did, upon which I received an email saying my account needed approval before the comment would be posted. I waited. No post. No approval. Other comments appeared. I tried registering a new account, separate from the article, using my full name and email address. I received an email saying my account needed approval. No approval was ever forth coming. Attempts to log in said the accounts were blocked.
I tried again, I still couldn’t post a comment. In the meantime, Amway showed nothing but class and reached out to Megdal and invited him to tour the facility.
His response was a third article on the website Sports On Earth, a join venture between Major League Baseball and USA Today. The article was again full of tired cliches and outright falsehoods about Amway and multilevel marketing. I posted a reply there. Sports On Earth uses the Disqus commenting system, so I could see my comment in my My Disqus control panel. It said it was awaiting moderator approval.
Then it disappeared.
I wrote a very short comment on the same article asking Howard why he was deleting my comments. It appeared immediately. Megdal replied that he wasn’t deleting comments, and couldn’t. I pointed out that if it wasn’t him, then his moderators certainly were. Another commentator said they’d like to see my responses for some balance. So I wrote several responses addressing the many inaccuracies in his article. A moderator, another “journalist” on the site,Emma Span, said she had deleted the original comment, accusing me of spamming “Amway PR”, and said if I posted again she would delete all my comments. She was true to her word, for when I protested she deleted my responses and the comment from other readers saying they wanted to read my responses.
Not surprisingly, I can no longer comment there.
This kind of censorship from ostensibly professional media outlets is nothing less than disgusting. I was not offensive in my comments, I did not in any way violate the terms and conditions for commenting on these websites. I simply pointed out the many inaccuracies in the article, with appropriate citations to back up what I was saying.
Those responsible simply didn’t want people to read what I had to say.
The Mets challenged many of the assertions Megdal made in the book, removed his media credentials, and wrote in response –
The author’s desperate self-promotional campaign for relevance has led to perpetuating baseless speculation and complete inaccuracies.
Now, I haven’t read any of Megdal’s books and neither am I an expert on the Mets. I do however consider myself to have some expertise on the subjects of Amway and Multilevel Marketing. If Megdal’s reporting on other topics is as wildly inaccurate and misleading as his reporting on Amway and MLM, and if he condones the active censorship of those who challenge that reporting – well, I’d suggest trusting very little of what he writes.