AMWAY SPARED EXTERMINATION IN UK

It was reported today in the UK Times that Amway has been spared from extermination in the UK. The entire UK Times article can be viewed here. In large part Amway appears to have been spared because of some of its "radical" modifications it has initiated since the UK lock down on its business. I am sure Amway will shamefully claim this to be one of their finest victories. The reality of this decision is Governments , Judges, and regulatory agencies have an ultimate goal of compliance with the law. Apparently Justice Norris felt the changes initiated by Amway as well as the punishment they have endured of not operating for nearly a year to be sufficient. In other words, Amway was spared due to their "radical" changes and were sentenced to time served.

One of the "radical" changes made by Amway was their drastic price reductions. Amway has yet to adopt these reductions in North America. In an article written by Chris Knappe he lists the four changes promised in the UK and goes on to quote Steve Van Andel:

• Eliminating fees to become a distributor;
• Taking control of sales and distribution of motivational materials and events;
• Agreeing to publish average distributor earnings in England;
• Offering orientation classes to give a better idea how much new distributors can expect to make and how long it might take to earn at a given level.
  

Van Andel stopped short of saying Alticor will implement all the practices in all its markets. "As we go along and do business around the world, we try to go along and learn what we think are the best practices," he said. "As we learn those best practices, we'll bring them to other countries."

In other words we will continue charging excessive prices as long as we can. Mr. Van Andel doesn't sound to be endorsing any of these changes as good ideas.

Of course no report of Amway would be complete without the usual blaming of IBOs. In a statement issued by Devos and Van Andel, they seem to dismiss their own faults and again focus on blaming the IBO as the cause of their problems.

"Even though he dismissed all three claims against us, the judge also had harsh words for Amway. He was not pleased with the way some IBO organizations had misrepresented the opportunity in the UK, and held us responsible for failing to enforce our rules."

Wouldn't this make you want to do business with these guys? What, no mention of your pricing and horrible opportunity?

The UK Times article also pointed out Amway's dismal financial performance:

However, the High Court heard that in Britain the company had faced "serious and sustained financial difficulties" in recent years. Between October 2000 and December 2005 it made an annual average losses of £2.9million. The firm was dependent on the support of its European parent company which in turn derived most of its income from its shareholder in Amway Korea, the court was told.

In recent years, Amway has expanded rapidly in Asia and the Far East, especially in China, Japan and Thailand. The region now accounts for an estimated 80 per cent of its business.

It appears Amway's ability to survive is dependent on new markets where their history of being what some call an inferior business model is unknown. One has to ask how much of Amway's success in Asia is driven not by being a good business model and more by the insatiable desire of Asian consumers to buy and own American goods. After all even Buick's are a hot commodity in China.

It is good to see Amway UK changing. It was more than obvious that something had to change given the shamefully anemic results or lack there of for UK IBO's.

The High Court heard that between 2001 and 2006 the number of British agents not earning any bonus income at all varied between 69 per cent and 78 per cent. In 2004/5 only 74 agents out of 25,342 earned more than £10,000 in bonuses.

Finally, Amway has agreed to greater transparency. Income disclosure has never been a strong suit for the company. The refreshing nature by which companies such as Monavie handles income disclosure should embarrass Amway. Compare for yourself what prospective business owners can examine (Amway SA-4400, Monavie Income Disclosure Statement; Monavie Compensation Plan). As much as Amway may claim victory they may have just agreed to their own demise. Amway UK was unable to make profits during a time when very few IBOs were making any money and prices were extraordinarily high. One struggles to imagine how they will succeed with reduced prices and while holding orientations to explain how miserable their opportunity really is. Unless of course the family was just over milking the cow. The orientations, along with the publishing of incomes in the UK, will do nothing to perpetuate their business. It may come to pass that though the judge has spared Amway UK an immediate death he may have sentenced them to a slow painful one instead.