Amway On 60 Minutes - Soap and Hope?

A classic transcript of Amway featured on 60 minutes with Mike Wallace. Seems like not much has changed even after all these years:

http://hunza1.tripod.com/amway/60min.html

WALLACE:
Soap and Hope is the story of Amway. Amway, short for "The American Way", is a national phenomenon. It got it's start as a shop-at-home company dealing mostly in soap and soap products and has now become a one and a half billion dollar a year enterprise. But there is more to Amway than soap. What they're really selling is HOPE. The hope of getting rich beyond your WILDEST dreams. Others insist, however, that Amway is just a clever marketing scheme to enrich a few lucky people. Whatever it is, it has gotten a million people into selling soap and it begins with some old-fashioned motivation.

DEXTER YAGER:
I'm not a god. I'm not somebody to worship. There's a big difference between worshiping and LOVING. Some people are gonna love me because they wanna do what I'm doin'. I'm not one of a kind. Anybody can do what I'm doin'. They've just gotta want ta.

[cut to a man and woman walking through a park]

WALLACE: [voice over] But CAN anybody? Nancy and Valiss Johnson of Conway South Carolina were Amway distributors for 8 months when they finally QUIT. They say not only didn't they MAKE money, they ended up losing money for all of their efforts.

[cut to Nancy Johnson]

NANCY JOHNSON: Uh, when you go to these rallies you have to PAAAY to get in 'em. You have to PAAAY your expenses to GET there. You have to get off of your REGULAR work to get there and that's a lot of money going OUT just for some motivation to come back in.

[cut to shot of distributors entering function]

WALLACE: Beyond that, people who want to make it in Amway are told to buy the books and tapes and other motivating tools [shots of distributors buying books and tapes] that will teach them how to do it. The marketing these items runs into the millions of dollars a year. And that cash goes not to the Amway Corporation but to the high level distributors who run these rallies - paid for by the hopeful Amway novices who come to those rallies by the thousands.

[back to Nancy Johnson]

NANCY JOHNSON:
And then when you get back home and you knock on the door, it's slammed in your face each time you say Amway because people are SICK of hearing it.

WALLACE:
Why then do so many people go to work with Amway?

NANCY JOHNSON:
Well, there are plenty of weak people that you can convince 'em that you can do most anything while you've got 'em under your spell.


[cut to Scenes at a Rally]

FEMALE #1: I would like to make $500,000 a year.

MALE #1:
We're exCITed. We're goin' straight to the TOP.

FEMALE #2:
People WANT something better in LIFE than what they've GOT.

MALE#2:
I wanna be a pilot. I wanna travel. I wanna have more vacation. Than my company gives me after 10 years.

WALLACE:
And so you think Amway can DO that?

MALE #2:
AbsoLUTEly.

[cut to closeup of FTC document regarding Amway]

WALLACE:
But IS it that EASY? The FTC, the Federal trade Commission asked that question when it investigated Amway on charges that it was an illegal pyramid operation.

[cut to shots inside Amway manufacturing plant]

And while the FTC had come to the conclusion that Amway is NOT a pyramid because the money in Amway comes from selling real products. The FTC DID say that Amway misrepresented the kind of money that could be made by the average distributor. But the FTC isn't the ONLY skeptic about Amway.

[cut to shot of Bruce Craig, assistance Attorney General from the state of Wisconsin]

CRAIG:
We're charging them with deceptive business practices because of the use of those hypotheticals because they so vary from what we feel is REALITY.

WALLACE:
[voice over] Bruce Craig investigated some examples used in Amway literature. Examples that said that Amway distributors could make in excess of $1200 a month. Money that some Amway distributors could be earned with just a few hours a week. But after looking at the average income of the 20,000 Amway distributors in Wisconsin, Craig came to the conclusion that such a claim was outlandish.

[to Craig] Surely, SOMEbody's making that kind of money.

BRUCE CRAIG:
Yes. That's correct.

WALLACE:
How many? Percentage wise.

BRUCE CRAIG:
About one percent.

WALLACE:
[voice over] Amway DID make the disclaimer that $1200 a month was ONLY hypothetical but that still doesn't convince Bruce Craig.

BRUCE CRAIG:
If the figure of successful distributors was 1 out of 5 as opposed to 1 out of 100 we wouldn't be in court right now.

WALLACE:
[voice over] And, Craig says that even the distributors who, on paper, earn an average of $14,000 dollars a year in Wisconsin actually earn a lot LESS. How much do they actually make?

BRUCE CRAIG:
After business expenses, a net income of minus $918.

WALLACE:
WAAAAIT a MINute! The direct distributors who make a gross income on average of over $14,000 wind up losing almost $1000 after business expenses?

BRUCE CRAIG:
On average. Yes.

WALLACE:
Can you make $1200 a month on 6 to 8 hours a week?

(RICH) DEVOS:
Not that I know of.

WALLACE:
[voice over] But if the founders of Amway are painting a realistic picture of just how much work it takes at least some of Amway's distributors in the field say something quite different.

[cut to couple sitting at kitchen table]

[voice over] Bill and Julie Greenwood had 120 distributors beneath them in Amway and Julie Greenwood says that she and Bill routinely painted a pie-in-the-sky picture of how easy it is to make to the top and that their sponsors counselled them to keep that story going.

JULIE GREENWOOD:
It was an outright LIE!! Because we weren't doing it [succeeding] ourSELVES! And Bill said "What I wanna do is, in my meeting, I wanna tell the people just how much time it takes, I wanna tell them just how much money it takes to build a successful business" and they said "Well, Bill, you can no longer work with your group if you're gonna tell 'em those things." Bill said, "But they're the trUTH!" and they said "But people don't need to KNOW those things."

Amway Global - IBO Expenses Exceeds Income?

So many IBOs are loyal to their upline but unknowingly get duped. They think that they will all be successful and living in the lap of luxury by following the system and upline advice. However, simple math proves that the system of voicemail, standing order, books and functions are just leeches on IBO resoirces and guarantees that the IBO group as a whole cannot make a profit. Even those who work very hard and do what they are told are hard pressed to earn a profit.

Here's the premise. Let's look at a group of 100 business building IBOs. They all do 100 PV like loyal soldiers. So 100 PV = roughly $300. 100 IBOs would then spend $30,000 a month on Amway products. Since Amway pays about 32% of their take back as IBO bonuses, 30,000 BV would generate about $9,600. If everyone split this up equally, it would be $96 each. But it doesn't work that way. Uplines somewhere get a cut from these bonuses so most IBOs will get about $10 and the upper level ones will get more, based on their personal group volume.

Now since these are the business building IBOs, they are expected to be on voicemail, standing orders, book of the month and functions. Of course, indivudal circumstances will vary, but many IBOs on average will spend between $150 and $250 a month on these various tools. At $150 a month each, the expenditure would be $15,000a month spent on tools to earn $9,600. If the group is a bit more hardcore and spends $250 a month, then the group would spend $25,000 a month to earn $9,600.

This continual system of expenses exceeding income systematically drains the IBOs of their resources and the upline continues to enjoy their luxuries at their downline's expense. How long can any business last with expenses exceeding income? It is for this reason that I believe upline leaders also teach their downline that they are nicer people or better spouses, because it takes the focus off the losses or gives the IBO a justification for the continuous net losses.

IBOs, and prospects should think about this message carefully. Keep track of your income versus expenses. A business exists to make a net profit. If not, why are you in business to begin with?