Amway Business Analysis - International

Amway Business Analysis

Welcome Amway information seekers! This page presents practical business analysis and realistic views of the Amway business model. If you are looking at Amway as a way to earn money, you will want to take some time to understand the business. This site is here to spark your curiosity to ask better questions so you can make a more informed decision.
Anyone starting a business should make a business plan. Write down the business's competitive advantages and disadvantages. If you were told you would save money buying the Amway products, then you should compare their prices to products you already buy. Try the products for yourself. Study the rules and regulations, and how bonuses are paid. Calculate how much money you and your friends would really make for your time. Study the many motivational organizations and understand the various ways they can operate the business. You should research the business. You will not only be risking your time and money, but that of your friends you recruit. Do not risk your reputation on inadequate research.

Amway Business Results

Amway is a Network Marketing business owned by Alticor Corporation, which is based in the United States. Amway North America has changed its name to Quixtar, due to the change to Internet product ordering and also due to the bad reputation the Amway name had in the United States.

Worldwide sales peaked in 1997. Amway has been growing quickly in new, unsaturated markets such as Korea and China. Write Amway in your country for its sales history and see if they will even give you this simple information.

Study the sales trend and understand what the market is saying about the business. Study the growth in the number of new top distributors in your market to see if the opportunity is getting more or less popular. Unfortunately for the curious, Amway releases very little data that could be used to help evaluate the opportunity.

Analysis of the Business

Amway pays their independent salesmen commissions for sales of Amway products according to a pyramided compensation schedule. Distributors can recruit other people and earn higher commission percentages when they combine the product sales of their recruits.

In order to attract the most participants in the United States, many groups teach their prospects to change their shopping habits by purchasing $200-$250 per month of products from their own business.

Some groups sell their distributors motivational tapes and seminars. It is not uncommon for some distributors to spend more on motivational tapes, seminars, and other expenses than they have in product sales. It is also not uncommon for the top distributors to earn more from selling the tapes and seminars than they earn from selling Amway products. It is common practice for the motivational organizations from the United States to move into new markets just so that they can sell their more profitable tape and seminar systems. Numerous lawsuits concerning the tape and seminar business provide sufficient evidence that the lavish lifestyles portrayed by many Diamonds comes from the tape and seminar profits.

North American distributors were paid an average of 28% of their sales volume. Each distributor buying $200 per month would generate just $675 per year in commissions despite possible annual expenses of $2,000 or more. The sales from one hundred such $200 per month businesses would generate total commissions of about $67,500 per year. This would be Platinum Distributorship sales volume. Once the upline is paid, there is about $48,500 remaining for those inside the platinum group.

If only 10% of distributors in the platinum group actively promoted their business and spent a conservative average of $2,000 yearly on motivational tapes, seminars, and other expenses, each active business would have an average net profit of just $2,850 per year. This assumes the other 90% of distributors earned nothing. If these distributors were married couples spending just 7 hours per week on the business, a couple's time would have an average net compensation of just $4 per hour. The legal minimum wage in the United States is over $5 per hour. The low sales productivity per distributor is the primary reason the majority of North Amrican distributor's incomes are so low. Average distributor income can only be increased by increasing personal sales, not by recuiting more distributors.

In 1999 The average gross income for an active Amway distributor was $1056 per year.
Amway Corporation North America

Is Amway A Better Way to Distribute Goods?
"Network Marketing is the most focused, most efficient way to market, that you will ever run into"
Double Diamond Greg_Duncan tape: "EDC Attitude" RP419

Those curious enough to look at how much time is spent promoting the business, will see it is terribly inefficient at distributing products. It makes very little money for most of its participants. Only a few distributors will make money.

Lottery players accept terrible odds and are willing to consistently lose a small amount in exchange for a remote chance of winning a large jackpot. Lotteries make money by exploiting their participant's willingness to ignore the unfavorable odds. Lotteries leverage the small losses from the masses so that one or two can claim a large prize. In the same light, Network Marketing companies like Amway employ highly leveraged payment schemes, exploiting the fact that some people will work for substandard income in exchange for the hope of making a lot of money.

Due to each distributor's low sales productivity, the Amway Corporation could never afford to pay distributors even a legal minimum wage for the inefficient way distributors promote Amway products. Distributors willingly trade their time for very low compensation so that they can participate in this legal pyramid scheme. The pyramid is financed in part by the expensive products. Compare the prices for yourself.

"One must turn outside the world of business - to religion and politics - to find people who work as hard for as little financial reward as most Amway people do." Forbes Magazine Dec 9, 1991

New distributors will soon find out that without selling products, that their profits will be very small. Many North American Amway motivational organizations teach their downline not to be concerned with selling and to just buy more from their own business to increase their sales. This may be because they believe selling is not duplicable, or the prices are not competitive enough to risk time trying to retail. Since retail customers don't buy the higher profit margin tapes and seminars, it is more profitable for the Diamonds and Emeralds to stress recruiting instead of getting retail customers.

"Recruits are brainwashed into spending a fortune on peripherals while consuming Amway products. They either lose their shirts or begin making money by getting enough people underneath to do the same."
Don_Gregory former speechwriter for Amway's Co-founder Jay_Van_Andel Forbes Magazine March 25, 1985

What is the Business really?
No doubt distributors learn valuable interpersonal skills, and grow personally from the experience. Many love the association with like-minded, positive individuals. I believe the business has been held together for over 40 years because of the education, inspiration and hope the motivational system provides the constantly changing distributor force, not because of superior business fundamentals. Cult experts believe the business is really a commercial cult.
"You see, what do really you see it as? What this crazy business is.....it's Hope."
Diamond Distributor - Randy_Haugen - Tape: "This is Amway" DBR 932
The business is really about selling motivation, hope and self-improvement. It is not about distributing products efficiently. The Amway business opportunity for many is just a disguise to gain customers for their more profitable venture of selling motivation tapes and seminars. Some distributors use the business as an opportunity to expand Christianity. Most diamond distributors could not afford to promote the business as heavily without the substantial profits from their "systems". Diamond distributors could not afford their lavish lifestyles without the profits from the masses who buy their tapes and seminars. Emerald Distributor Jeff Probst (English) makes the tape and seminar profits public knowledge in his website.
Crown Ambassador Yager "Most of you are not doing half the tape business that you could be doing"

"I was told by friends and relatives if I got in that I would have a garage full of soap. Instead I have a garage full of motivational tapes!!" Amway Distributor

Do Your Own Research

Ask numerous questions and see if you get answers. Write Amway in your country and see if they are prepared to answer your questions. In most cases you will be unable to obtain any business statistics on Amway in your country. If you are told something that sounds to good to be true, verify it by contacting Amway in your country. Observe it they promote the products and slling products or if they just use the business to promote their tape and seminar business.
Almost 50% of the distributors quit each year in the United States. This indicates that prospects did not have all the information needed to make a good business decision before signing up. Many were given hyped and exaggerated information. Many leave because they feel they have been deceived. Many had the wrong expectations about product costs, rules, income levels, or the actual time and money commitments needed to do the business. There are people who love the business. There are also many times more who have left the business for one reason or another. For whatever reasons, the product quality and prices were not enough to retain most of them even as customers.
There will be two groups of people who make money in the business. One group being those who reproduce large retail sales businesses. The second group being those very few smooth talking promoters who can put new distributors in the business faster than they leave the business. These will be the few who earn the majority of their money by selling distributors their tapes and seminars.

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What is the Business really?
No doubt distributors learn valuable interpersonal skills, and grow personally from the experience. Many love the association with like-minded, positive individuals. I believe the business has been held together for over 40 years because of the education, inspiration and hope the motivational system provides the constantly changing distributor force, not because of superior business fundamentals. Cult experts believe the business is really a commercial cult.
"You see, what do really you see it as? What this crazy business is.....it's Hope." Diamond Distributor - Randy_Haugen - Tape: "This is Amway" DBR 932
The business is really about selling motivation, hope and self-improvement. It is not about distributing products efficiently. The Amway business opportunity for many is just a disguise to gain customers for their more profitable venture of selling motivation tapes and seminars. Some distributors use the business as an opportunity to expand Christianity. Most diamond distributors could not afford to promote the business as heavily without the substantial profits from their "systems". Diamond distributors could not afford their lavish lifestyles without the profits from the masses who buy their tapes and seminars. Emerald Distributor Jeff Probst (English) makes the tape and seminar profits public knowledge in his website. Crown Ambassador Yager "Most of you are not doing half the tape business that you could be doing"
"I was told by friends and relatives if I got in that I would have a garage full of soap. Instead I have a garage full of motivational tapes!!" Amway Distributor

Do Your Own Research
Ask numerous questions and see if you get answers. Write Amway in your country and see if they are prepared to answer your questions. In most cases you will be unable to obtain any business statistics on Amway in your country. If you are told something that sounds to good to be true, verify it by contacting Amway in your country. Observe it they promote the products and slling products or if they just use the business to promote their tape and seminar business.
Almost 50% of the distributors quit each year in the United States. This indicates that prospects did not have all the information needed to make a good business decision before signing up. Many were given hyped and exaggerated information. Many leave because they feel they have been deceived. Many had the wrong expectations about product costs, rules, income levels, or the actual time and money commitments needed to do the business. There are people who love the business. There are also many times more who have left the business for one reason or another. For whatever reasons, the product quality and prices were not enough to retain most of them even as customers.
There will be two groups of people who make money in the business. One group being those who reproduce large retail sales businesses. The second group being those very few smooth talking promoters who can put new distributors in the business faster than they leave the business. These will be the few who earn the majority of their money by selling distributors their tapes and seminars.