Monday, June 13, 2016

Living On Amway Island?

Imagine an island with 100 adult residents. One guy gets sponsored into Amway from a cousin in another area off the island. Well, the island residents are a pretty tigh knit group so the one IBO immediately sponsors his six best friends and eventually, all 100 island residents. They are all dead serious about the Amway business so they all work hard, but because everyone is an IBO, they can only self consume 100 PV each. Thus the 100 IBOs move 10,000 PV each month. The group as a whole generates about 30,000 BV and the group receives $7500 in bonus money monthly from Amway. Of course, the first IBO sponsored is now a platinum receiving most of that money with the rest of the group receiving smaller bonuses.

Being serious IBOs, they all get standing order, books of the month, and travel by air to functions. They pay on average about $250 a month for their Amway training/tools. Thus the group pays about $25,000 a month for the training that will one day allow them to retire and quit their jobs. The island community is losing a net of $17,500 from their local economy each month. However, there is one resident IBO who is making a nice income urging everyone one Let's evaluate the group.

The platinum IBO is making a nice income and will receive a $20,000 bonus at the end of the year. His 6 downline friends make just about enough to break even (approximately 1000 PV) or lose a little. The rest of the residents have lost over $200,000 ($17,500 a month). The guy who owned the local grocery store went out of business and all the entertainment related business went down because the residents had no disposable income to spend money on anything except for Amway related activities. Eventually they all quit, including the platinum because once his group quit, he too, began to lose money.

Now Amway defenders will cry that this could never happen, but it shows that even if you could get everyone in the US to join, this scenario is what would happen. I believe the Amway name and reputation is for the most part, saturated in the US. Nearly everyone will have heard the Amway name and/or will know someone who had a brush with Amway. Because of the tool peddlers such as WWDB, BWW, or Network 21, there are likely millions of people in the US who ended up with a bad experience, perhaps tricked into attending a meeting, or lied to about something related to Amway.

While this story is fictional, it is what would happen if there was a city where everyone joined the business. It is what happens today. Few people benefit at the expense of their downline. And as usual, it is the tools that drive people to lose money - on Amway island, or anywhere else.


Allison Mishen said...

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Jerry D. said...

Another masterpiece of a post, condensed to a valuable gem. You're really upping your game, Joe, it's almost scary.

Ben Dover said...

Hey Joe,

I brought up that terrible Forbes article I read the other day, and weirdly enough I found another that brought up Amway. I was cruising their site today, because another member of the forum mentioned Forbes as puff pieces and relatively bleh (scientific term), when it comes to important topics. I really wanted to see how Forbes describes themselves these days, and to no surprise, they consider themselves a capitalist tool (suggesting their articles are designed to be advantageous to the business savvy and investment prone people). Of course right after that, the top article was on R+F...UGH.

Bringing this home with the connection to this blog post, Forbes brought up this comment, "The mother of multilevel marketing, Amway, is in more than 100 countries: over 90% of its revenue is estimated to come from outside the U.S." That was the holy cow moment...I knew Amway was doing badly, and that this is only an estimation, BUT THAT IS BOLD! 90%!?!??! On top of that Amway still lost money from last year...The doom and gloom actually seems to be right around the corner, and your Amway island has clearly reached capacity in the states.

Joecool said...

Ben, that is a common defense of Amway and MLM in general. They will ask where is the saturation? Well, obviously, saturating the world takes a long time. especially with people being born and turning 18 every day.

Some years ago, Amway used to report their sales in each market but they stopped reporting individual markets and they now report global sales. I believe it was to cover up the shrinking sales in the US.

But I believe China is their biggest market right now. But I'm not sure how Amway runs in China as they don't allow MLM.

Joecool said...

Thanks Jerry, I'm trying to paint a picture with these posts.

Ben Dover said...

According to this article from the Washington Post,

Amway did something extraordinary. They partnered with Harvard apparently, and then they launched an all out assault on penetrating the Chinese market. They started real brick and mortar stores, learned the value systems of China, and teamed up with their local government and national government (that's not so shocking). They have somehow morphed in China, and become slightly more legitimate, but still have the pyramid component...I'm not exactly sure how that works, but it would seem to be incredibly powerful.

One of the glaring factors is the disparity in average wages earned compared to what you earn in Amway. I don't make very much money by American standards, but in a communist China, I probably do quite well. The people have far less overhead when it comes to living, and an Amway check of a couple hundred dollars a month seems more viable to live on. That seems to be a strength, but I must say this is all speculation, and I haven't found a direct connection to research.

Joecool said...

Thanks for the link. It might be interesting to follow the saga about Herbalife. If the FTC finds them to be a pyramid, I wonder if their China operations will be affected?

Ben Dover said...

I wrote about a recent article from the WSJ (Wall Street Journal) on another blog that is following the Herbalife nonsense. It would seem, after an extremely arduous 2+ year process they are coming towards a conclusion...not a good one. Apparently, Herbalife stock is somehow rebounding, and they are in talks right now of reaching a settlement...($200 million dollars this time vs. the Amway 150+ million dollar settlement). If this case settles, I'm afraid the efforts put in by Bill Ackman, Robert Fitzpatrick, and Bill Keep will be for naught. The worst part is, these guys are both knowledgeable and powerful, but they still can't compete with these monsters. At least Bill Ackman won his nearly 1 billion dollar bet against Herbalife initially, and continues to fight on against them.

Ben Dover said...

Oops, I think I forgot to link the WSJ article. Here it is.

Joecool said...

I believe Ackman is down a billion right now. The stock went soaring one day went someone leaked false news that Herbalife was settling and there were insignificant penalties.

I'm hoping that the FTC levies injunctions that ensure no pyramid operations take place, like in the Vemma case.

Joecool said...

Thanks! I hope the issue is resolved very soon.