Amway recently reported their yearly sales and it has declined second year in a row. Till date Amway is the biggest MLM company in the world and has most number of people associated with it but there are many factors which doesn’t let these sales numbers go up every year. Most people believe this decline is due to drop in sales in emerging markets like China, India but there has to be more fundamental reasons which are causing this decline. Unlike Amway, there are other online businesses which are still going in up in these countries.
Let’s see what has changed in last 8-10 years and what are the factors which helped Amway earlier but not working anymore.
1. Concept of exclusive range of products doesn’t work any more – Consumer market is highly competitive at this moment and there are lot of ways people can save money while purchasing any product. Online websites and brick and mortar stores have huge competition within themselves which benefit consumers. Plus there are times in a year when retailers can save more money like black friday, long weekend sales etc but for Amway products there is nothing like that. Retailers are bound to purchase products at prices which Amway decides.
2. Expensive Products – Unless somebody is looking Amway as a business, he/she won’t use their products on retail prices. Amway products are good in quality but now with the whole “Organic” trend in the market, there are many authentic certified products available at cheaper rates. Only people who want to use their products are IBOs who have no other choice but to use that. Amway claims that you buy directly from the company and there are no middle men/stores where they need to spend money but the reality is that they still have to pay around 10%-50% of commissions to different people at different levels. For example in Snacks space, Amway IBOs boast about wellness bars but if you compare their price with the kind of good quality bars available in market, it’s really hard to justify the marked up prices.
3. No new products launched every year – In today’s competitive market, companies are bound to launch new products to lure consumers and make them buy things. Even if we look at companies like Coke, Pepsi, Lays etc they keep on introducing new flavours, new products to attract the consumers back but if somebody is gone from Amway products, they don’t have any new products or ways to get the person back in using Amway products. Only reason people may come back is if they are looking it as business and want to sell it further. Amway IBOs talk about clean supplies which were one of the first green supplies but in todays world there are much better and less expensive options availbale in market.
4. Not many new markets available to expand – In last 50-60 years, Amway is able to grow because of new markets available to expand. When North America got exhaused, Amway went on to China/India/Brazil but now most of the emerging markets have exhausted too. Because of premium expensive products, Amway can’t just grow in countries where average house hold incomes are very less and basic necessaties are not available. Even if you take an example of North America, Amway IBOs are targeting the immigrants by showing them their old Time/Money presentation which doesn’t work with people who understand this whole model well.
5. Business strategies by IBOs – In regions like North America, Asia etc, Amway has got a bad name over time which makes people not to associate themselves to this whole MLM/Amway business. Upline is always enforcing people to come to paid meetings, over consume products which initially puts a big dent on wallet and most of people drop out during intial days only. People are forced to attend 2-3 meetings everyweek where they keep beating the same dead horse. Any sensible person can’t listen the same stuff 1000 times with no new business expansion ideas. Also, there are certain IBOs which use unethical business practices like approaching people with some fake business idea and ultimately showing them the Amway plan.
6. Outdated business techniques – Just to show that Amway IBOs are doing some serious business, people wear formal clothes and conduct their associations with the same outdated business techniques. Today is the time when most of the people work remotely from home, wear casual clothes at work places, Amway’s meetings look like superficial because end of the day everythings comes down to salesmanship .
7. Not much innovation and new patents – Amway claims to have more than 1000 patents, but if really go through the patent list and year when those were issued, they mostly go back to 1990s. It means there are not much new innovation done in last 10-15 year when the overall competition in retail market has grown multifolded.
8. Commitment required till end of your life – During Amways plan showing, people are made to dream that they can retire after some years and they won’t need to work till end of their life. But in reality, even to get decently paid from Amway, people are required to keep expanding business even if they reach diamond, double diamond levels. In their whole business plan, once your downline becomes platinum, you are entitled to only 4% of their whole organization’s business. It means that even if a person is diamond and has 10 platinums, he is getting only 4% of their sales and has to keep pusing them to increase volumes. Like any traditional business, everything comes down to volume/sales and person has to keep pushing and motivating people to keep the volume up.
9. Not much transparency in terms of what people are actually making – In Amway business, people are told not to ask about anybody’s commission checks or income. Due to this people are always guessing what people are actually making in their upline. Due to this lack of transparency, sometimes IBOs tell fake numbers of what upline members are making. Person putting time and effort into the business is always in flux and by the time he realizes the real story it’s too late and he himself has put in so much effort and is part of this whole game.