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.