Imagine an a city or 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 tight 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 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 ($25,0000 in expenses minus the $7500 in income generated from Amway) 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 also 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 collectively, 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 closed up 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 more than likely, 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 I believe would happen if there was a city/island 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.
Many years ago, those who promoted Amway said that the city in North America with the highest concentration of Amway distributors was Montreal. They added that Amway accounted for only 5% of the sale of household cleaning products in Montreal (this was back when Amway mostly sold soaps and cleansers). Therefore -- they argued -- there was no real way that there ever would be a super-saturation of Amway dealers in any place.
ReplyDeleteWhat they were really saying was this: Amway had no real competitive advantage against big-brand products, and was essentially using its own products as cover for what was in fact a pyramid scheme that depended heavily on endless recruitment.
And yes, theoretically any pyramid scheme like Amway would (if successful) very quickly sign up the entire planet. It doesn't happen because only a very tiny percentage of people join Amway and stay in it permanently. Most IBOs sign up, last for a few months, and drop out.
The real question is this: who joins Amway and stays in it? The answer is only a minuscule number compared with the actual world population. An even smaller percentage of those people actually make any significant money in the racket. The rest are hooked, like addicts on heroin, and remain in the scheme purely based on dreams and hopes. These latter types are the ones who keep the entire scam in operation.
ReplyDeleteThis is the problem with any setup in an organization where you need to recruit a team of others like yourself (who join for the same reason) in order to get what you signed up for. The 100 people island is easier to conceptualize, but it applies in any state, country, town or the world, because the number of people are not infinite. People without teams of downline will always be the majority. The so called plan in all it's versions, is always going to be a plan that requires losers, several losers in fact, for every success, because in a group only a minority can be the upline of others to begin with. That is regardless of how hard working, committed, positive, well trained or well supported the group is. And that is talking about having any downline at all, let alone a fairly large team as in Joecool's platinum example. Most members won't have any downline.
There is a name for it, a pyramid. Pyramids are illegal for good reason, but the Amway corporation gets around that by being arms length distance from the groups, and by officially claiming that a distributor sells a good amount of retail to the public, so they imply downline are not necessarily required. This may be technically true, but nobody believes that is true in practice. In practice, if you want to have the slightest hope succeeding, you need a team of downline. The groups say that openly with their plans, 6-4-2 or whatever version they promote, and by saying "not a sales person, no problem, no sales required". The latter is something the Amway corporation will never repeat, as that would be an admission of operating a pyramid. That is besides the fact that the commissions structure and price point of products does not really encourage retail sales.
Defenders respond to this by calling any hierarchy where higher levels are better rewarded, a pyramid, especially corporations with employees. The reason it is of course nonsense, is that in a corporation, even the lowest levels, the proverbial mail room assistant, get what they signed up for, even if it is a modest wage. In neither a corporation nor in an Amway group can everybody be someone's boss, but in a corporation it does not matter.
I myself worked as a consultant for many years without anybody reporting to me, yet I got what I signed up for and then some. In Amway groups, in as far as people sign up for a business that makes more money than it looses, the vast majority will not, mathematically can not, get what they sign up for.
People make all kinds of defensive claims, they have products, your are not paid for recruitment itself etc. These are irrelevant, it is the idea that you and everybody who sign up effectively need downline to succeed that makes being an Amway distributor a lousy business opportunity. It is doomed for the same reason in practice, that classical illegal pyramid schemes are.
Let's suppose an Amway IBO decided not to recruit a down-line at all, but simply do his best to sell Amway products at retail to the general public. And suppose he made a real go of it, and was able to profit from it.
ReplyDeleteThe response of his up-line (and maybe even the higher-ups in his LOS) would be to harass and attack him constantly. First off, he would be forbidden to advertise his Amway products, since this might allow him to undercut the prices asked by other Amway IBOs in the vicinity. Second, his success in sales might stir up envy and resentment from others in his line, and even others who are cross-line to him. Third, he wouldn't need to go to meetings or functions, or buy any of those stupid "tools," thereby depriving his up-line of a source of monthly income. Fourth, he'd be specifically forbidden to open any kind of store or place of business for the general public to visit.
In short, if this guy tried to act like a genuine and sensible businessman, he'd have all his Amway associates screaming at him. They'd shout "That's NOT how the Amway operation works! You're expected to show leadership, and help others!"
In other words, this IBO would show up everyone else as losers and con-men who are in the Amway racket solely to recruit down-line and bleed cash from them for as long as possible.
Very likely, upline would label that person as "unteachable" and a paraiah of sorts, for not following the design laid out by upline.
ReplyDeleteUpline likes for you to sell stuff, but they completely frown upon the absence of tools and functions.
To make money from retailing Amway products to the public, at say $400's worth of monthly supplies per customer, and let's assume you ticked to boxes for 20% commission, you need 80 customers buying $400 to have a $32 K turnover that would get very average $6,400 per month if you do full time. (Part time would be more difficult to justify reward to effort, as the volume and with that the commission would be lower, starting at a paltry 3% if I'm not mistaken).
ReplyDeleteSince one would want to more than match average wage, and factor in overhead expenses, and some customers may buy little or not reliably, one might want least double at 160 customers to make it worth it over doing something else. One customer every hour on an 8 hour day, every working day.
That is a lot of people to support and signup to buy monthly household consumer products. Offerings that aren't that compelling, that most distributors who quit don't even continue to buy for themselves. You'd need to be quite a salesmen who work very hard, for not that much, to sell deals on products that are not that compelling.
Compare that to, say, car sales where you need to sell to 1 to 2 customers per day, customers who usually approach you saying they are looking for a car. Then there are opportunities to sell machinery, real estate, computer software to big companies.
So even if there is an IBO who is determined to make it selling Amway stuff, who he has an upline that somehow supports that, and even if he manages to sign up a few dozen or hundred loyal customers, that IBO would be able to making a killing elsewhere, make more elsewhere, have an easier time and have more self respect. That is to say even if sales is your thing, most people who get signed up and prospected are far from natural salespeople.
That is why it boils down to recruiting people for self consumption, and why groups unashamedly focus on that, the aim is to recruit recruiters who want to recruit recruiters themselves, each one buying products for self consumption as part of the deal, which brings every IBO right back to the problem discussed above - a plan that guarantees (and requires) a majority of participants to loose.
kawaaikat, you are spot on. Someone with such exceptional sales skills that they could (in theory) peddle that much volume of Amway products, would easily be successful and more well off financially selling real estate or cars, or some other product or service that has a greater demand than generic household products that sell for premium prices.
ReplyDeleteRemember Arthur Miller's play "Death of a Salesman"? The main character, as he got older, couldn't move enough product anymore to make a living. He had to drive further distances, his established customer base began to die off or retire, and he simply didn't have the youthful energy that he once had. He was a good salesman, but after a while his business collapsed.
ReplyDeleteHow much worse will the situation be for Amway IBOs? The products they push are not especially great, and their down-lines (no matter how wide or deep) will slowly fall apart as individual IBOs come to realize that making a profit in Amway is highly unlikely. Recruitment in Amway becomes essential, but recruitment without strong retail sales behind it is nothing but a house of cards.
This is why the "prosuming, buy-from-yourself" idiocy was invented by the AMO subsystems. It's just a way to convince persons who are not natural salesmen to join the Amway plan.
Many years ago, someone defended Amway here at this site by posting the following: "Amway is a business opportunity ABOUT business opportunities!" This struck me as meaningless and absurd, but after a while I figured out what he really meant. It was this:
"My business opportunity in Amway is about talking YOU into taking the same business opportunity!" In other words, it was just a complex way to describe recruitment. And if a business is all about recruitment, it is by definition a pyramid scheme.