Amway or the highway

Amway is an interesting company, and like any corporation, there is a focus on their supplying goods/services with the intent to generate a profit for the company owners and stakeholders. I'm writing this as I was recently contacted by an ex-colleague who I hadn't been in touch with for years. Out of the blue they called to invite me to join in generating residual income.

Now Amway's approach is essentially to make members into stakeholders. The amount of stake that you have is dependent on essentially the revenue that you directly or indirectly generate for the corporation. The basic premise is simple and not a problem on face value. The issue though is on how they go about their business.

Firstly, you can only buy from Amway if you are a member. There is a basic annual membership fee, and in many ways, this is not different from a number of wholesalers or "Cash and Carry" stores. This membership provides you access to their buying their goods. (If you want to see what they sell and some prices you can check out the Australian site here https://www.amway.com.au/).

Increasing sales and market share is where things get interesting. Amway leverages MLM (Multi-Level Marketing, see http://en.wikipedia.org/wiki/Multi-level_marketing), so rather than putting money into advertising to the general community, instead they offer incentives to members for them to recruit new members and shoppers.

The incentives work on the following returns:

• For purchases you make, you get a percentage back.
• For members that you have recruited, you also get a percentage of the purchases they make.
• If your recruits then bring in new members, you also get a percentage of the purchases they make, and so on.

The percentage you receive of the purchases, reduces the more you are removed (in recruitment layer terms) from the member who made that purchase.

If you didn't already know about these schemes, then you can probably already see the problems; that for online shopping the discounts are reduced due to all the extra people who have to get paid commissions, and the people who want to use this as an income source now have ulterior motives when talking to people about Amway specifically recruiting.

A number of years ago, a Whirlpool forum user posted a basic guide for the number of sales needed to create a $400 / week income. You can see it in this Whirlpool link http://whrl.pl/Rck5QR . Essentially the combined total of purchases that I, and the members I've recuited, need to make in a week to earn $375 is about $20,000. This is not easy to achieve, considering that the regular purchase items from their website number 77. That's correct, 77 items fall under the category of groceries, and none of those are perishable items like dairy, fruit, vegetables or meat. The rest of the shopping categories are cosmetics, nutritional pharmaceuticals, and some basic home appliances and cleaning chemicals.


To give you a comparison, Coles "specials category" had 1,311 items alone. That's just the "specials and discounts" section, not including the rest of their regular full price items. Everything you can get in store, you are also able to buy online and have delivered.

Amway is not cheaper than your general supermarket brands, and considering that you now have to wait for that to be delivered while you also still have to go to the store to get your regular stuff (or pay a separate delivery fee for your regular shopping)? Not convenient. If you like the Amway products for yourself, that's well and good, but remember that you're also paying almost $100 per year for the privilege so you need to be making some good savings over equivalent quality brands for this to be worthwhile.

Of course Amway wants more sales, as they are a business after all, so there is the offer for you to make money by bringing in new members and encouraging them to buy. This is where Amway's reputation, and that of MLM schemes in general, have run into real trouble because of the conduct and behaviour of people trying to get new members in.

Because the system is not consumer focused, i.e. there aren't significant savings and you can't get all the things you want, then the pressure falls on the member to cajole or hook people into becoming members. This is where the sales pitch falls on the lure of riches, rather than any merit of the products or the system itself.

Amway has been around for more than 50 years, so the stuff above is already something you probably know. If a friend starts to talk to you about Amway, then be polite but firm; you don't need this in your life.

But if you really think you'd like to get into sales and make some good money, then go into an industry that properly rewards the effort you'll be putting in and consider finance brokering, real estate, vehicles, insurance, or travel.

Actually, no. Don't go into vehicle sales...