Wednesday, June 15, 2016

Why Amway IBOs Fail?

One of the selling points of the Amway business is for people to do the work once and then reap financial benefits for life (Ongoing residual income). But that simply does not happen for the vast majority of IBOs. The reason why most IBOs do not have a sustainable business is because their business is not based on sales to genuine customers with a genuine need. Most IBOs themselves will not buy Amway products once their affiliation to Amway is over. And this is a problem. Recently, the FTC imposed injunctions on a company called Vemma, stating that 51% of sales must be to actual customers not affiliated with Vemma. No problem as Vemma claimed that most of their distributors were actually just discount customers. Sales fell 95%. Where were these loyal discount customers?

If you are an Amway IBO doing your 100 PV monthly by mostly self consumption, then your only way to increase volume is to sponsor downline in hopes that they will also do their 100 PV as shown in the plan. And even if you are somehow able to accomplish this and sponsor a bunch of people as shown in the plan, chances are that many IBOs will "do nothing" and of the remaining, some will move 100 PV, but they will likely quit in one year or less as they discover that making sales difficult to impossible, and sponsoring downline is no easier.

In many or possibly most cases, IBOs are only selling the Amway opportunity and not Amway products. They sell the possibility or hope that they will build a business, walk away and collect untold wealth for the rest of their lives. It just isn't going to happen. Say for example, you sold 100 PV monthly on a consistent basis to customers. These customers will automatically go online and make purchases when they run out of their products. If you are lucky, they will also refer friends to make purchases. But most IBOs do not sell products, they are selling the opportunity. And since the opportunity doesn't pan out for most people, you have constant churn but not enough actual sales to sustain your business. If you were an IBO and quit building the business, but you had enough repeat customers to move 300 PV for example, you would make over $100 a month in retail profits and PV bonus. There would be no reason to quit, even if you weren't building a big business. But that isn't the case. People who make nothing or lose money will quit. And that is exactly what I believe happens in Amway.

That brings up the next point about why an Amway business is not sustainable for most. The products cost more than most other retailers. That will limit the potential for customers and referals. Amway defenders like to cite quality issues, but most customers who shop online aren't familiar with Amway products and have no way to know whether Amway has quality products or not. That leaves them to decide based on prices. And Amway in general, costs much more than Walmart for the same or similar products. A tough sell indeed. Also, when it comes to soap or other household goods, people simply don't care about having "premium" goods, the value is in the price. And for these reasons, Amway IBOs fail.


Anonymous said...

Absolutely correct, Joe. Amway now makes most of its profits in China (where MLMs are illegal!) They do this by selling from brick-and-mortar stores, where people walk in and purchase stuff just as they would anywhere else. Since there isn't much competition in China from other retail outlets, and since the market is so huge (over a billion people), the thing is do-able.

Amway only works when the game is rigged in its favor. In North America, it only functions as a scam to siphon off fees and dues from the lowest-level IBOs.

Joecool said...

It should be noted that Amway saw big declines in sales the past 2 years. I wonder if saturation is now happening since Amway is in China?