Wednesday, March 9, 2011

Even if you don't make money, you can still save!

In the last post, I glossed over "the little white lie" of Amway, i.e., that you can avail yourself to exclusive savings on consumer products by signing up.  When I was prospected in the fall of 2002 and lured to an "e-commerce seminar", a dynamic speaker (likely emerald) showed the plan at an open meeting.  What he illustrated was surely too good to be true.  One could start his own internet business for a reasonable and refundable fee and instantly save 30% over what he might spend on typical consumer goods at Walmart or Costco over the course of a typical month.  What's more, if he could "help" others do the same, he could earn a percentage rebate on the purchases they made. 

The speaker asked "How many of you could use just an extra hundred dollars a month?"  Many raised hands.  Others laughed and exchanged knowing glances.  He continued, "What would you do with that money?  Could you buy a new computer?  Upgrade your car?  Save it up and take a trip next summer?"  The crowd grinned and nodded, imagining each scenario with glazed over eyes.  He then took a typical $300 dollar basket of goods (baby diapers, cereal, paper towels, dish detergent) and multiplied by 30% to generate $90.  He then introduced a 3% rebate we might be generating at this level of business and multiplied by the $300 to yield ~$10 per month.  He added $90 and $10 together to yield $100 and circled the figure, noting "there's your extra hundred bucks!"  A buzz was generated throughout the room, as if an auditorium of mathematicians had just watched their peer prove Fermat's last theorem for the first time.   Many who'd been irritated a few minutes ago at having been suckered into a MLM meeting while promised an "e-commerce seminar" now changed their tune.  Indeed, what we were hearing was too good to be true.  In fact, many of us thought "I'd be stupid not to do this". 

I shamefully admit to being slightly excited by what I'd learned that night.  My would-be sponsor, encouraged by my positive energy, gave me a fistful of CD's to listen to, as well as a few catalogs.  I have since learned the latter is discouraged, and this was a fatal mistake for him.  Eager to see these savings for myself, I flipped through the pages, but item after item had me rubbing my eyes at the prices.  "Surely these can't be discount prices," I thought.  I took the catalog to a grocery store to compare costs.  I found about 70 items that were identical-branded items (such as "Sweet Baby Rays" BBQ sauce or Sun-Maid raisins), and compared them unit for unit at the grocer's.  I compiled an excel chart and compared my findings.  The result was that the Amway products were consistently 70% higher priced than the grocer's.  Now, keep in mind that I was comparing Amway products sold in wholesale quantity (such as 12 bottles of BBQ sauce) with single units at the grocer's.  Such a comparison should largely favor the wholesaler, since quantity generally comes with a discount! 

I would later find out that the 30% discount was to be taken off those products, lessening the cost disparity.  However, even if all products were discounted 30%, I was still left with a 20-25% cost increase to buy from Amway.  What's more?  The 30% discount is a "best case scenario" of sorts.  Certain products are offered to distributors (IBO's) for up to 30% off the retail price.  However, very few products were discounted so heavily.  Worse yet, the branded products, such as those I mentioned earlier, had the worst distributor discounts.  Only Amway products were discounted as much as 20% off the inflated retail price. 

I wasn't the only one to find such price inflation with Amway.  There is a list of comprehensive price comparisons online.  Some were less favorable even than mine.  Here's a summary:
  • Sidney Schwartz found a 63% increase at retail and a 41% increase at distributor cost.
  • Bradley Orner found an 89% increase at retail and a 49% increase at distributor cost.
  • Robert Deering found a 87% increase at retail and a 56% increase at distributor cost.
These comparisons are somewhat dated, but they agree closely with my finding of a 70% increase at retail.  Joecool recently did a much smaller price comparison on his blog.  Many commenters argued that the Amway items were superior quality, but you'll note that the only identical branded product he chose, Progresso soups, was nearly double from Amway for the same quantity. 

Back to my price comparison--when I again met with my would-be sponsor, who happened to be my boss at the time, I showed him my results.  I posted our dialogue previously as a comment on Joecool's blog:

Me: you said i'd save 30%

boss: well you won't save money on every little thing

Me: but every item I checked is grossly overpriced

boss: well you haven't taken the 30% off yet

Me: even after that, they're still overpriced by 20%! and that 30% doesn't even apply to these non-Amway branded items! and that's not to mention I'd be paying over retail for wholesale items!

boss: well, you have to factor in gas money going back and forth to Wal-mart

Me: but I'd still have to pay for shipping, and I'd still have to shop for perishables (milk, eggs, meat) and make just as many trips

boss: look, you have to change the way you think. You can't get rich saving money!

It was clear that the "30% savings!" claim was a lie, as 1) you do not by any means "save 30% over Walmart!" 2) you do not by any means get a 30% IBO discount on every item.  What I didn't realize at that time, though, was that his responses, which were delivered rapid fire, were well-rehearsed Ambot speak, gleaned from hours of listening to repetitive tapes.  This made clear a far more sinister truth:  those who propogated that little white lie knew it was a lie, and they developed an extensive line of reasoning to deflect questioning recruits when this lie was confronted. 

There are many things wrong with Amway: exaggerated claims of wealth, false promises about time commitment and time to financial independence, cult-like AMO's and tool scams, but I believe this "little white lie" is the most insidious of all.  The problem is that in those open meetings, the savings is the bait.  For all those people who shudder at the thought of prospecting friends/family into a pyramid scheme, the thing that makes them say "well I'd be stupid not to do this" is the savings.  For all those people who "could use an extra hundred dollars a month", the promise of such comes from the savings.  Of course, the trouble is that  there is no savings.  There won't be an extra hundred dollars.  And those grinning recruits, so in need of cash would soon be spending far more than they ever thought possible on consumer goods each month.


  1. You are making the same simplistic, sophomoric error of other price comparisons. The high PV/BV items, the ones made by Amway and pay back the most, are much more price competitive than the brand name items, which pay out much less. I thought this might be a different type of blog, but this is another run of the mill version....

  2. Tex, I agree that Amway made items are *more* price competitive than brand name items, but they are still inflated in price. Multiple consumer reports gave them mediocre to poor reviews in performance and stated they were the most expensive of the options. Further, many price comparisons have compared BOTH branded items and items made by Amway (comparing them to similar brand-name products).

    Also, the point of this post was not that the prices were inflated. The point was that I was told I would be *saving* 30% over Walmart. Even in the very best case, I could scarcely hope to break even with what I might spend at Walmart, let alone save. The truth is, most IBO's end up spending much, much more on consumer goods than they would've otherwise because the prices are inflated and because they are pressured to buy more than usual.

    Tex, the truth is, if Amway's products were competitively priced, they would be retailed heavily. Consumers want value. Amway provides none. Hence, personal use by IBO's is far and away the chief means by which product is shifted.

  3. The whole point is Ambots mislead you. Generally the speakers would mention, you would save 30%. Audience would assume that Amway prices are 30% cheaper than regular stores like Walmart, Costco etc. But what Ambots mean is you will as an IBO, the products cost 30% less than what a Amway retail customer would pay.

    Classical example of my upline's famous statement "Not stating the truth is not the same as lying."

  4. 'Not stating the truth is not the same as lying."

    Actually, it's lying by omission.

    It's like being told by a car salesman all the glorious wonders of a new car, i.e., great color, 5000 miles to the gallon leather interior, awesome tires, bucket seats (way cool), V-8 engine (extremely cool), etc., etc. It's got everything you need in a way cool car!

    You order the car. You go to pick it up and, oops, it has no steering wheel.

    New car owner: Hey, Dude, where's the steering wheel?

    Salesman: Well, it's a great car, right? Now you gonna whine cuz' there's no steering wheel?

    I couldn't believe how much more money we were spending in amway than before we got in. It was an immediate financial relief (not to mention physical and emnotional) to break free of amway.

  5. Anon,

    I agree 100%, and that's the crux of the Amway Tool Scam, lying by omitting where the vast majority of the uplines' profit comes from.

  6. Most people do not realize it, but what gets glossed over is the fact that Amway's bonuses have to come from somewhere. That somewhere is by overcharging the IBOs and then returning disproportinate amounts, depending where you exist on the pyramid. If the saying about doing the work and getting paid were true, then the lower tier IBOs at 100 PV should get the 20% bonus with uplines getting the smaller portions of the bonus.

  7. I would love to know the actual Amway sales numbers, Personal Use Sales vs Retail Customer Sales. I have no doubt the Personal use number is at the very least 70% of Amway's total sales number.
    We may never know the real number.

    ***Former WWDB Lemming***

  8. I think it's obvious to most people the bonuses come from those buying the products. The "work" isn't just the effort of making a sale, but sponsoring and teaching others how to make sales. The pay plan is fair if you consider the whole picture, and not just a portion of it. What you suggest is called socialism, not capitalism.

  9. WWDB Lemming,

    Robert Fitzpatrick of PSA published a figure of 82% of Amway's sales coming from personal consumption. When the DTI investigated Amway UK, they found that over 90% came from personal use.

    I suspect even those paltry retail sales figures (10-20%) are boosted by false claims and pity purchases.

    "sponsoring and teaching others how to make sales"

    replace "make sales" with "buy from themselves and recruit others to do the same", and I'll agree.

  10. The internal consumption figure is well over 95%, or at least it was during the TEAM dustup. However, I've already noted a 2004 FTC letter on another thread that indicates internal consumption, by itself, is not an indication of an automatic problem. If 100% of sales was internal AND the products were priced competitively (and that's the REAL primary purpose of retail sales), there would be no problem, according to the FTC.

    However, this ENTIRE discussion is the hang nail, and the Amway Tool Scam is the compound fracture. Always has been, always will be....

  11. It is no wonder Amway does little to enforce their retail sales rules since the main source of their sales is IBOs buying expensive Amway crap to make their PV.

    4.22. Retail Sales Rule: In order to obtain the right to earn a performance Bonus during a given month, an IBO must: (a) make not less than one sale to each of 10 different retail customers (e.g., Members or Clients); or (b) have at least 50 PV of sales to any number of retail customers; or (c) have $100 at Retail Sales Rule Cost. Retail Sales Rule Cost shall mean the published IBO cost for all items on any orders sold to a Member or Client, or the actual price paid to Partner Stores by Members or Clients. If applicable, Partner Store Retail Sales Rule Cost is applied in the month when the Corporation credits Partner Store volume to an IBO's business.

    4.22.2. If such IBO fails in any month to make said retail sales and/or to produce such proof of making such sales, then he or she shall be denied his or her Performance Bonus that month and may subsequently lose all registration rights if he or she continues to fail to meet this requirement.
    This Rule shall apply to an IBO until he or she attains the status of Platinum or above.

    4.18. Seventy Per Cent Rule: An IBO must sell at least 70% to clients, members and downline of the total amount of products purchased during a given month in order to receive the Performance Bonus or recognition due on all the products purchased. If the IBO fails to sell at least 70%, then such IBO may be paid that percentage of Performance Bonus measured by the amount of products actually sold, rather than the amount of products purchased, and recognized accordingly.

    ***Former WWDB Lemming***

  12. The following comment was posted by Tex and inadvertently rejected:

    use the current ones, which can be found here:

    4.22. Customer Volume: In order to obtain the right to earn a Performance Bonus on downline volume during a given month, an IBO must (a) make not less than one sale to each of 10 different retail customers; or (b) have at least 50 PV of sales to any number of retail customers.
    For purposes of obtaining the rights referred to in this Rule, sales must be to retail customers who either: (a) place an order directly with the Company; or (b) place an order with the IBO that the IBO reports to the Company through a system established by the Company for tracking such sales.

    4.22.2. If such an IBO fails in any month to make said customer sales and/or to produce proof of making such sales, then he or she will be denied his or her Performance Bonus that month on downline volume. It is the obligation of the IBO to ensure compliance by the official deadlines published by the Corporation, in order to qualify for his or her Performance Bonus. This Rule shall apply unless the IBO is currently qualified Platinum or above.

    4.18. Seventy Percent Rule: An IBO must sell, at a commercially reasonable price, at least 70% of the total amount of products he or she purchased during a given month in order to receive the Performance Bonus or recognition due on all the products purchased; if the IBO fails to sell at least 70%, then such IBO may be paid that
    percentage of Performance Bonus measured by the
    amount of products that can be shown to have been actually sold, rather than the amount of products purchased, and recognized accordingly. For purposes of this Rule, products used for personal or family consumption or given out as samples are also considered as part of the sales volume.

  13. My lead sentence started with, "If you're going to refer to the rules, at least ...."