I'm glad this has been moved to the business forum, since I was unable to post a reply when it was in the Christian-only area. When it first appeared, I responded to ohgin by PM, making the following points:
I'm not qualified to pass moral judgement on Amway, but I was a distributor in the UK for two years. We spent a lot of money on business 'tools', motivational tapes, seminar tickets etc' in the hope of building a decent, honest business - the $30 starter pack is just the beginning.
We lost a lot of money - a little at a time, never in one big chunk. There are many ex-Amway distributor sites on the net, and you will find that the vast majority tell similar stories. Please look some up before you get involved.
In regard to your moral integrity, I would make two points:
Firstly, some people may urge you to emulate 'leaders in the business', repeating their facts and figures and duplicating their techniques. This can lead you to make dubious statements as though they were hard fact. I trustingly used projected growth figures provided by my upline, but when I asked them for the basis for these they could never provide any - they were pure fiction. It is easy to slip into habits of deception and dishonesty by small steps.
Secondly, most Amway motivational organisations are fixated firmly on material wealth and encourage you to focus on houses, cars and money. Not unusual in our society, but hardly very spiritual.
Do most people fail to make respectable income in Multi-level marketing. Yes. Do most traditional businesses fail in the first 5 years of operation. Yes. What's your point?
This seems a crude equation: MLMs and orthodox both have non-zero failure rates, therefore there is no difference.
It is not really a valid comparison - people who start MLM trading might invest relatively small sums and simply let their distributorships lapse after a year or two of making no money. They do not appear in any official statistics about business failures.
Traditional business startups and failures usually involve much larger sums and are documented by banks and government agencies.
I can find no information on the Amway website detailing:
the percentage of distributors who quit every year
the average sales per distributor
the average amounts paid in bonuses to Direct Distributors
This kind of information would allow people to make an informed choice about the quality of the business opportunity.
If it is such a great way to make money, why do they not publish such data?
Is it closer to the truth to say that about 99% of MLM distributors either lose money, or make so little that it is not worth the time and money invested?
Amway is not a scam. They sell hundreds of products and market them all through individual distributors, same as any other business. How they pay is different though.
Corporate structures and MLM's both look like pyramid structures. They are mirror images of each other. In a corporate structure, the person at the top of the pyramid makes most of the money. 99% of us work in this hierarchy everyday. In an MLM structure, which looks like a pyramid too, the person who does the most work gets paid the most money. Pay is not based solely on where you are in the structure, rather, it is paid based on the actual work that you do. Now, for those that think MLM's are scams.....which structure is the most ethical now? Hmmm?
Amway is not a scam. They sell hundreds of products and market them all through individual distributors, same as any other business. How they pay is different though.
Corporate structures and MLM's both look like pyramid structures. They are mirror images of each other. In a corporate structure, the person at the top of the pyramid makes most of the money. 99% of us work in this hierarchy everyday. In an MLM structure, which looks like a pyramid too, the person who does the most work gets paid the most money. Pay is not based solely on where you are in the structure, rather, it is paid based on the actual work that you do. Now, for those that think MLM's are scams.....which structure is the most ethical now? Hmmm?
...sell hundreds of products and market them all through individual distributors, same as any other business...
With other businesses, most sales are to retail customers. Some of Amway sales come from distributors buying their own products, since they are highly-priced and therefore difficult to sell to others. How much is actually sold retail and how much is bought by distributors? You will not find the answer to that question in any information I have seen published by Amway - but if you have authoritative data, I would like to see it.
Pay is ...based on the actual work that you do.
No - that is in a conventional business. You do an hours work, you get an hours pay.
In Amway, you might spend 20 hours a week working your business and not sell a single product. Pay is based on sales volume, not work.
Pay is not based solely on where you are in the structure...
If you are at the top of a large MLM sales group, you can just sit and wait on the bonus checks rolling in, based on the sales of your downline. You can stop working and make money on the efforts of your downline. Indeed, this is one of the main selling points of many MLM sales plans. I do not believe that it often works out like that in practice, but it is the basis for the 'financial freedom' they claim to be able to give you.
Direct sales is fine as a way of making money as long as the deal is clearly explained.
The problem with some schemes is that they make unrealistic claims about how much money can be made and deceive people by associating their business with the lifestyles of rich people whose wealth comes from other sources of income.
The Amway business is legal and legitimate.
Whether it is a worthwhile investment of time and money for most of its distributors is a different question.
You claim that pay is not based soley on where you are in the structure. yet you contradict this staement in your answer. If you don't believe this works out in practice, what is your explanation?
Originally Posted by Martin^^
...sell hundreds of products and market them all through individual distributors, same as any other business...
With other businesses, most sales are to retail customers. Some of Amway sales come from distributors buying their own products, since they are highly-priced and therefore difficult to sell to others. How much is actually sold retail and how much is bought by distributors? You will not find the answer to that question in any information I have seen published by Amway - but if you have authoritative data, I would like to see it.
Pay is ...based on the actual work that you do.
No - that is in a conventional business. You do an hours work, you get an hours pay.
In Amway, you might spend 20 hours a week working your business and not sell a single product. Pay is based on sales volume, not work.
Pay is not based solely on where you are in the structure...
If you are at the top of a large MLM sales group, you can just sit and wait on the bonus checks rolling in, based on the sales of your downline. You can stop working and make money on the efforts of your downline. Indeed, this is one of the main selling points of many MLM sales plans. I do not believe that it often works out like that in practice, but it is the basis for the 'financial freedom' they claim to be able to give you.
Direct sales is fine as a way of making money as long as the deal is clearly explained.
The problem with some schemes is that they make unrealistic claims about how much money can be made and deceive people by associating their business with the lifestyles of rich people whose wealth comes from other sources of income.
The Amway business is legal and legitimate.
Whether it is a worthwhile investment of time and money for most of its distributors is a different question.
You claim that pay is not based soley on where you are in the structure. yet you contradict this staement in your answer. If you don't believe this works out in practice, what is your explanation?
The italicised statement: Pay is not based solely on where you are in the structure...
is not mine, it is a quote from your post.
My point is based on the presentation of the sales and marketing plan which I saw.
This stated that bonuses were paid as a percentage of the sales volume of your downline distributors. Therefore, once you had built a large enough sales organisation, you could 'retire' and live off the proceeds of the sales group you had built up. In this sense, payment is based solely on your position in the group and does not depend on your individual sales.
There are reasons why this will not work:
The lowest level of distributors in any organisation are making little money. Many drop out after a few months. In order to maintain your organisation, you must continually sponsor new distributors and encourage your downline to do likewise. Without a continual stream of new distributors to replace the drop-outs, your sales organisation will quickly disappear.
The Amway rules stated that bonus checks can only be paid to distributors who made a certain minimum level of sales each month. This was supposed to be certified, and was an important requirement of the business. In my experience, this was routinely ignored by my upline. However, unless you are willing to ignore the rules, you must continue to generate sales volume in order to qualify for the bonuses which make the business plan attractive.
The central message of the AMO I was in was that others will duplicate your example. Unfortunately, this also implies that when you begin to 'take it easy' and stop working hard at maintaining your business, your downline will too. Unless you continually work to motivate your downline, their enthusiasm will fade and sales will quickly dry up. And so will those fat bonus checks... This was never explicitly stated, but was hinted at by some of the diamonds I heard telling their stories on the motivational tapes.
For these reasons, I believe that it would not be possible to stop working in an Amway business and simply 'retire', living off the proceeds of your downline bonuses. Yet this was often cited as a reason for 'building the business' - to retire and spend time with your loved ones.
In my experience, most of the people working at building a direct sales organisation spend much less time with their families than people with ordinary jobs. They spend many evenings and weekends at business meetings and motivational seminars, often leaving the kids with babysitters.
Thursday (10/6/05) I met with two (husband and wife) Quixtar reps who, ostensibly, presented me with an 'opportunity' to become an Independent Business Owner (IBO). They weren't selling anything; rather, they were appraising my eligibility to become an IBO. I agreed to have them over because I have known them for several years. I have to admit that I was fairly certain of the scheme/scam ahead of time, having been in door-to-door encyclopedia sales in my youth. As I listened to the pitch, it occurred to me that these people really believed in what they were hawking. They went on and on about money, vacations, wealth, etc. Very little about products except something very nebulous about Fortune 500 companies. In the end, it was same old, same old. When first approached, I was told you could make 250K with 10 to 15 hours a week. I should have asked "So what do you need me for?" At any rate, my view of this "business" is that it is targeted at well intentioned adults who have low to moderate incomes and little education. I cannot imagine anybody falling for this pie-in-the-sky BS, but people do. Buyer beware. Google quixtar (and 'quixstar') to get the lowdown.
In any business, you need to take a look at the value provided. There is little value provided in residual commisions, unless a customer is being serviced. Now, one could argue that residual commisions serve to keep a sales staff motivated, and they do. However, they also lead to stagnation in growth. The net result, is that most companies, tie the commision structure into some level of customer support, or that will decline or go away over time if no further action is taken. Thats a reasonable approach to providing incentive and growth.
However, this is counter to the line that many MLM sales people present their recruiting effort. Only when you get into the fine print, do you really see that unless value is provided, will a commision be paid. There are vast differences in commision structure, and of course, they are all subject to change. What might have been a great deal in residual commisions at the beginging may end up being zero residuals when one needs them due to changes in the business climate. Thus the incapcitation, or retirement income stance may or may not be valid.
The example would be a Oldsmobile franchise. One might have built up an established clientale of Old's customers, thus the amount of work needed to maintian a dealerships sales goals decreases over time. In fact, it may work well to be an absentee owner. However, when GM killed the product line, the exisiting Old's franchises had their workload shoot through the roof when they were forced to change franchises.
A simliar deal went on with Melaluca (not sure of the spelling), they are an MLM. They changed the residual commision contract, and a number of people lost a lot of commision dollars. And the worse case was Excel (again, not sure of spelling). They went bankrupt, and thus all residuals were gone.
Its a risk involved with any type of franchise or commision based oppurtunity. If you want income from passive activities, you need to diversify. All your eggs in one basket makes for a very risky proposition, and usually the rewards do not justify the risk. Its one of the reason, sales rep firms carry multiple lines from a wide range of companies. One other thing they do is make sure the contracts are offset, such that renewals occur on different months. Locking yourself into one entity, unless they pay some insane type of commision such that you can diversiy into the market, or real estate is way too risky.
That being said, I do know of people making some money in the MLM field. Not enough to live on, or to be a sole source of income when you figure in oppurtunity costs, but as part of a diversification strategy. It may make some sense, provided one has the time to put into it. I will also add that their is big money to be made in MLM training and seminars. Its no longer truely MLM at that standpoint, but the margins are huge, and 6 figure salaries are not out of the question. However, few people are cut out to be motivational speakers and create training, but it is very lucrative. I guess its yet another method of diversification.
Ron
__________________ [SIZE="1"]To those that are cast down on account of their sins Christ must be introduced as a Savior and Gift, and not as an example. But to sinners who live in a false assurance, Christ must be introduced as an example. The hard sayings of Scripture and the awful judgments of God upon sin must be impressed upon them. Defy Satan in times of despair. Say: "O cursed Satan, you choose a nice time to talk to me about doing and working when you know very well that I am in trouble over my sins. I will not listen to you. I will listen to Christ, who says that He came into the world to save sinners. This is the true Christ and there is none other. I can find plenty of examples for a holy life in Abraham, Isaiah, John the Baptist, Paul, and other saints. But they cannot forgive my sins. They cannot save me. They cannot procure for me everlasting life. Therefore I will not have you for my teacher, O Satan."[/SIZE]
[CENTER]Martin Luther, Commentary on Galations 5:8[/CENTER]
Linear Mode
