I have received many comments from both sides of the aisle discussing the performance of the Amway business. Some stating it is a great opportunity and all you need to do is work the business hard. Some stating that the business is past its sell date and that building Amway is a poor use of a person’s time. I have a unique perspective in this discussion. Laurie and I built a large Quixtar business which I was told near the end was only Amway in
Amway mixes all their sales totals together which confuses the analysis attempting to determine the health of their existing markets. The key questions would be answered if Amway would report sales per country in US dollars. An analysis could then be made on how the existing markets are doing in relationship to the new countries being opened. By gathering all the relevant facts that are listed below – I will come close to answering these questions on our ongoing dialogue to help the Amway management team. My thesis is that if your business model is not working then opening up new markets to enhance your sales, while hurting your distributors in existing markets is a poor leadership plan. I believe that Amway has a responsibility to ensure a workable business plan with measurable results in a reasonable time in existing markets or opening up new markets is only a cover for poor existing sales.
Here are the facts we know to start the analysis.
Fact – In 1997 Amway World Wide Sales were $7 billion in 43 different markets.
Fact – Markets in 1997 - U.S., Canada, Australia, United Kingdom, Hong Kong, Germany, France, Netherlands Japan, Belgium, Switzerland, Taiwan, Austria, Italy, New Zealand, Panama, Malaysia, Spain, Guatemala, Thailand, Mexico, Brazil, Hungary, Korea, Brunei, Indonesia, Poland, Portugal, Argentina, Czech Republic, Slovakia, Turkey, Chile, El Salvador, Slovenia, Uruguay, China, Honduras, Costa Rica, Columbia, Greece, Phillipines, South Africa, Romania
Fact – In 2007 Amway World Wide Sales were $7.1 billion in 55 different markets.
Fact – Markets in 2007 - USA, Canada, Caribbean Islands, Argentina Brazil Chile Colombia Costa Rica Dominican Republic El Salvador Guatemala Honduras Mexico Panama Uruguay Venezuela, Austria Belgium Croatia Czech Republic Denmark Finland France Germany Greece Hungary Italy Netherlands Norway Poland Portugal Romania Russia Slovak Republic Slovenia Spain Sweden Switzerland Turkey Ukraine United Kingdom, Australia Brunei, China India Indonesia Malaysia New Zealand Philippines Singapore South Africa Thailand Vietnam
Fact – Amway Asia accounts for nearly 2/3’s of Amway’s World Wide Sales.
Fact – Amway North America (Quixtar) in 2007 was $1.072 billion in Sales.
Fact – Amway is broken up into 4 major sales markets –
Fact –
Fact –
Calculations: If 2007 total sales were $7.1 billion and 2/3 is Amway Asia then $4.686 billion were Amway Asia Sales. Subtracting $4.686 billion from $7.1 billion and you have $2.414 billion remaining for all other markets.
Calculations: $2.414 billion in sales minus North American sales of $1.072 billion leaves $1.342 billion left for Amway Europe and Amway Latin America.
Calculations: We know that Amway Europe is close to North American sales. If we estimate Amway
Calculations: $7 billion in 1997 with 43 countries and 7.1 billion with 55 countries equates to only a $100 million gain in sales with 12 new markets. But we know that
Best Interpolation of Amway Actual Sales - If anyone has better data please provide, but this is in the ballpark and maybe even generous to Amway. I will subtract out the estimated sales in Amway’s new markets since 1997 to determine how the Amway markets that have existed since 1997 have fared in the last 11 years.
2007 $7.1 billion minus ($2 billion in China) minus (.6 billion in Ukraine, Russia and other new markets in Europe) minus (1 billion for India and other remaining new markets ) since 1997.
This means that the Amway pre-existing markets that had produced $7 billion in total sales in 1997 are now producing an estimated $3.5 billion in sales in 2007, if my figures are accurate!
UpdateIII: Let's do the most conservative scenario. If China had existing volume of $200 million in 1997 and say volume has dropped to $1.7 billion in China from over $2 billion then we would only subtract $1.5 billion. Russia plus Ukraine plus other new Europe markets may be more than $.6 billion, but we will keep that number. India and all the remaining new markets on the conservative side will add only $.5 billion. Even with the most conservative of calculations it is $7.1 billion minus $1.5 billion minus $.6 billion minus $.5 billion which equals $4.5 billion. This is a $2.6 billion drop or over a 36% decrease in sales over 11 years.
Based upon the previously released market information from Amway and subtracting the estimated new market volumes we have a major die back going on! The 43 markets that had produced $7 billion in sales now produce approximately $3.5 billion in sales. This is a 50% reduction in sales over the 11 year period.
An MLM that does not grow in 11 years would be considered a poor business opportunity for a new distributor, especially when other MLM’s are having high double digit growth every year. But an MLM that is dying back nearly 50% is an unacceptable performance level for any business claiming to be an MLM opportunity. If the data presented was off by an order of magnitude – it would still be a 25% reduction in 11 years! No growth is the death knell for MLM opportunities. Die back is the funeral in my opinion. I have not calculated the rate of inflation over the last 11 years, but this would make the results even worse! This is hardly the results worth advertising which is why I presume that Amway does not present their sales results in total sales per country market. It would reveal too much information.
Amway claims to be the business opportunity company, but after studying their results - I am confused by what they mean by “Business Opportunity.” I welcome anyone to crunch the numbers and come up with their own estimated sales. With the major growth markets like Ukraine, Russia, India, China and others entering the Amway world after 1997 – your calculations will display the same dismal performances in the existing markets. In order to make an intelligent rational choice on whether to invest time and money into a business – you will need to gather all the relevant facts on the business results. One of the major facts is the growth opportunities available in the market where you will be doing business. Every business should be a win-win venture or no deal according to Stephen Covey. This means the company wins when the distributors win in any proper MLM. In this case, Amway still receives their profit margins from the new markets, while the existing distributor leaders lose their market share and confidence. Please study the numbers and help me in my analysis. I believe we all want the same thing and that is the truth.
I never help a company confront reality without also offering my opinions to fix the brutal reality. I believe Amway must double their compensation plan across the board and reduce their retail pricing by no less than 25% to create the right value story. If they would do these two moves - they might be able to compete in the market place again. Amway must stop camouflaging poor business results by opening up new markets. Instead, Amway must learn to compete in their existing markets for the sake of IBO's across the world. Ray Kroc said that a business must prove its model works and then expand to new markets - not expand to new markets to keep people from proving your business model doesn't work! What do you think Amway will do with their business model? God Bless, Orrin Woodward
Update I: A commenter gave the inflation rate over those 11 years at just over 33%! A $7 billion dollar business in 1997 would have to be over a $9 billion to stay up with inflation. This means the in 2007 real dollars a drop from over $9 billion to $3.5 billion in the pre-existing 1997 countries. An unbelievable $5.5 billion dollar drop (over 61% decrease) and the corresponding IBO communities ruined - all layed at the hands of the Amway managers. This is a disgrace to leadership in my opinion and should be rectified by doing something to help the existing markets - not just opening up new ones! But to open up new countries for Amway's profitability while placing non-competes in existing countries to keep people in an unprofitable business that is not working is sheer madness! Isn't Dick DeVos running for governor of Michigan on a campaign of proclaimed business success for Michigan's needs? Dick DeVos was the driver for Amway's international focus from what I understand. If managing a failing business model, forcing people to stay in Michigan against their wills, and running to the newest country when the going gets tought is Dick's plan for Michigan's government - then I say thanks, but no thanks.
Update II: Another commenter was kind enough to point out that Amway changed the way it reported its sales from the retail price until 1999 to the wholesale price starting in 2000. This is a 32% difference in a negative direction which is almost exactly the inflation rate (33% in the positive direction) during the same 11 year period. In summary, the original data with a 35-50% reduction is accurate and the inflation increase and retail to wholesale pricing decrease cancel each other out. Now that we have this clarified - what will Amway do with their 35-50% actual reduction in sales in their existing markets in the last 11 years or does this not concern the Amway managers?
