Amway - How Upline Sells You A Dream To Lure You Into Their Scheme Dreams. One of the big recruiting tools used by upline is to sell you hopes of a dream. A "dream" is basically a long term goal, such as the dream of owning a home. It is why Amway leaders want their groups to show an aura of success. IBOs attend meetings in suits and nice clothing. They will flash picture of luxury items, supposedly attainable by "anyone". Now of course, anyone have a dream or dreams is a good thing. It gives you a purpose, something you are working towards. The part that is unethical by many uplines is that they will basically make you empty or false promises. There are many ways to achieve your dreams. It is unlikely that an IBO will achieve their dreams by running a successful Amway business. Even at the diamond level, it appears that it's not as good as how they promote it. There have been many stories of diamond level IBOs quitting, losing homes to foreclosures, and even a recent story of a triple diamond in bankruptcy court. How these upline leaders lure unsuspecting prospects is quite clever. They will often talk about how they were once broke, but through the Amway business, they now have no job, and they make TONS of money. They will also go onto tell prospects that they too, can have the same success in a few years, if only they will do what upline says (advises), and that the key to this is to subscribe to their "system". The system is usually a website, voicemail, cds, seminars and books. What upline leaders really want is for a prospect to become a dedicated "customer" of their system. There is plenty of evidence and testimony that some upline leaders might be making almost all of their money from the system. Sure, an IBO can rationalize that upline might make only a hundred or two hundred bucks a month from them, but add that times the number of downline IBOs and figure it out.
Transcript
Amway - How Upline Sells You A Dream To Lure You Into Their Scheme
Dreams. One of the big recruiting tools used by upline is to sell you hopes of a dream. A "dream" is basically a long term goal, such as the dream of owning a home. It is why Amway leaders want their groups to show an aura of success. IBOs attend meetings in suits and nice clothing. They will flash picture of luxury items, supposedly attainable by "anyone".
Now of course, anyone have a dream or dreams is a good thing. It gives you a purpose, something you are working towards. The part that is unethical by many uplines is that they will basically make you empty or false promises. There are many ways to achieve your dreams. It is unlikely that an IBO will achieve their dreams by running a successful Amway business. Even at the diamond level, it appears that it's not as good as how they promote it. There have been many stories of diamond level IBOs quitting, losing homes to foreclosures, and even a recent story of a triple diamond in bankruptcy court.
How these upline leaders lure unsuspecting prospects is quite clever. They will often talk about how they were once broke, but through the Amway business, they now have no job, and they make TONS of money. They will also go onto tell prospects that they too, can have the same success in a few years, if only they will do what upline says (advises), and that the key to this is to subscribe to their "system".The system is usually a website, voicemail, cds, seminars and books.
What upline leaders really want is for a prospect to become a dedicated "customer" of their system. There is plenty of evidence and testimony that some upline leaders might be making almost all of their money from the system. Sure, an IBO can rationalize that upline might make only a hundred or two hundred bucks a month from them, but add that times the number of downline IBOs and figure it out.
Sure, some upline may tell you that you can eventually get a piece of the action at the platinum level, but there are no written compensation plans for the "system" that I know of. And so few IBOs ever reach platinum, that your chances of getting a small piece of the action are slim. Upline leaders may tell you that they want your success, but it may or may not be true, as your success might mean less income for them. I believe many upline leaders are just as happy to see new people replace old people, as long as they continue to have dedicated "customers" to purchase their system materials.
The upline leaders want to use your dream to motivate you to buy into their (tools) scheme. That's how Joecool sees it.
Most of you have heard of Amway and other network marketing/MLM companies. Chances are, some of you might be a part of it or faced pressure to join it. These “Business Opportunities” are projected as wealth creation tools or vehicles to achieve financial freedom. But the truth often is otherwise. Those who join these kind of business almost always suffer a loss- financial or otherwise. It may be difficult to blindly agree that these NM/MLM companies do more harm than good and you HAVE to read, Merchants of Deception, to know how exactly these companies fool people with an illusion of financial freedom.
The book is 232 pages long and is free for download in pdf format from author’s website (2.91MB), MerchantsofDeception.com Click here to download/read Merchant’s of Deception for Free.
The book is written in first person, in a sequential order, starting from Eric’s life before joining Amway, his initial days as Amway distributor, how he trusted the company, developed loyalty to his up liners and slogged hard to promote the business and eventually climbed up the ladder to different levels in the chain. Then he gradually discovered that he is not making the amount of money he is supposed to me making at his level (Emerald) and slowly comes out of his pre programmed mind set and starts exploring things. The truths he uncovered and the trouble he faced from his up liners because of that make this book a must read for anyone who believe network marketing can make them rich.
As some of you may not find enough time to read all 232 pages of the book, I have published some key extracts of this book at my blog...
Marketing group merely ‘selling a dream’David Brown
The British subsidiary of one of the world’s biggest marketing groups was accused yesterday of breaking company law by “selling a dream” of unachievable wealth.
Amway, which had 39,000 selling agents in Britain during 2005-06, is “inherently objectionable”, operates as a lottery and is trading unlawfully, the Companies Court was told.
Mark Cunningham, QC, on behalf of John Hutton, the Secretary of State for Business, Enterprise and Regulatory Reform, told the court that the Government was seeking to wind up Amway in the public interest following an investigation into its business practices.
The allegations are seriously damaging to the international group, which claims to have a worldwide salesforce of more than three million people and a turnover of $6.4 billion (£3.2 billion).
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The Government investigation claims to have revealed that just 10 per cent of Amway’s agents in Britain make any profit, with less than one in ten selling a single item of the group’s products. It claims that Amway’s main activity is encouraging other people to join its salesforce so that they pay the registration fee and buy marketing materials.
Mr Cunningham said that Amway attracted new agents, known as Independent Business Owners (IBOs), by offering “substantial financial rewards or easy money”. He said that promise of wealth was “illusionary” and amounted to “dream selling”.
The group, which has been operating in Britain since 1973, claims that agents can earn a substantial income from selling its range of dietary supplements, cosmetics, jewellery and water purifiers. They are also offered bonuses for recruiting other agents. However, an investigation by the Department for Business, Enterprise and Regulatory Reform showed that only 6 per cent of agents bought Amway products to sell on, the court was told.
Mr Cunningham said that the vast majority of products offered by Amway to its agents were overpriced even before they were expected to add a further 20 to 25 per cent for retail. “The unattractive pricing explains some the graver vices that are at the centre of the winding-up application,” Mr Cunningham said.
Agents were encouraged to buy instructions on how to grow their businesses by attracting new agents. The material contained images of success such as luxury cars, boats and foreign holidays.
Mr Cunningham told the court: “The prospect of substantial rewards and easy money has been at all times, and remains, illusionary.”
The investigation discovered that 71 per cent of agents made no income from Amway in the year 2005-06 and that 90 per cent had made a loss after paying the £18 fee to renew their registration. In fact, just 101 of the agents shared 75 per cent of the bonuses.
“The reality of being an IBO is that a substantial majority make minimal financial returns,” Mr Cunningham said. “Our case is founded on the selling of the dream on one hand and the loss or minimal financial return on the other.”
Mr Cunningham told the court that Amway operates a “pernicious” scheme, which encourages agents to recruit family, friends and colleagues to the group so that they themselves could move up to “that very narrow group that makes any money”.
He said that the Amway scheme involved targeting the “gullible”, “deluded” and “vulnerable” to join the scheme and accused the group of “dream selling.”
“Amway presents itself to be life changing and life enhancing – if you choose to participate,” Mr Cunningham told the court. “The millions of aspirational achievers, the idea that this is a success in global terms – we will show otherwise.”
One marketing presentation authorised by Amway offered the opportunity for a “small secondary income or an income which would rank in the top 2 per cent of money earners.” It added that such money “is being achieved in the same time it takes to study for a degree”.
However, Amway’s own records showed that only Trevor and Jackie Lowe, and Jerry and Mandy Scriven among its agents earned more than the £78,000 required to place them in the top 2 per cent of earners, the court was told. The records showed that it takes at least 14 years to make it into the top 20. The top 12 new joiners since 2001 earned an average of just £164 a week, said Mr Cunningham. The “snapshot” of Amway’s records showed that of the 25,000 agents operating at that time, just 37 made more than £25,000 a year.
Amway has claimed that it has substantially changed it business model since the department lodged its petition to wind up the company in April. Richard De Vos, who founded the group in the United States in 1959, has an estimated personal fortune of $3.6billion.
Countdown
39,000 agents working for Amway
27,000 (71%) had no income
11,410 (30%) earned something
7,492 (of the 11,410) received average of £13.53 per year
101 agents received 75 per cent of bonuses
£116K paid to top earner Trevor Lowe
26 number of years Mr Lowe was an agent
Source: Evidence at companies court hearing
Amway is a business that operates on the basis of pyramid selling. It is described as a multi-level marketing scheme in which there are different levels of sellers. The company originated in Michigan, and sales of its products hit six billion US dollars (USD) in 2005.
Products sold by Amway agents range from jewelry to cosmetics and health care. Amway also has product lines including dietary supplements and home care goods. Amway's sellers are called Independent Business Owners (IBO), and they are a link in a long chain that makes up the company.
Amway works by assigning a Points Value (PV) to each of its products. The PV amount of each product determines how much commission the seller makes from the sale. The PV of a given good is the same regardless of the country it is sold in. The PV can be thought of as a common Amway currency used around the world.
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The amount of a product that is sold is known as the Business Volume. This figure is used to determine the value of a product in local currency to the individual country. The commission level for each seller can then be determined and paid monthly.
The multi-level marketing system is very important in Amway's business plan. The company does not market itself as a pyramid scheme, but the multi-platform plan is the same as a pyramid. There are many different levels within Amway. Any person who wishes to join must be
sponsored by an existent member. The new member must purchase an introductory pack and pay a yearly fee to stay within the Amway company.
The different levels within the company are known as pin levels. The higher the pin level a person belongs to, the more IBOs he will have working for him. Each pin is named after a precious gem or metal. Among these levels are the Platinum level and the higher Diamond level. A person who has reached the Platinum level should be earning enough money from her sellers or IBOs to have a full time wage. If a person reaches the Diamond level, he will earn a six figure income from the work of his IBOs.
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Within Amway, there are levels upon levels. The higher one's level, the higher her income and financial freedom. The higher pin levels distribute the material to be sold to the lower levels and earn large amounts from the sales.
Amway is a huge corporation, and like many corporations, they have been targeted often as a pyramid selling scam. A large amount of Amway's profits come from business tapes, books and compact discs rather than from direct selling. Other controversies surrounding Amway include tax evasion and customs fraud. In 1983, Amway was fined 25 million Canadian dollars (CAD) after being found guilty of both. Amway is also very vocal regarding reports of deception and has tried to shut down Internet sites that have run reports on their practices.
All the Amway/Quixtar Business MythsSee the Rebuttals page for more responses to distributors standard lines Another site's list of lies
Change your buying habits and save 30% buying with Amway/Quixtar!
Truth: You need to do your own price study to determine this for yourself. Whether it is termed "buying at retail" or "buying at wholesale" it doesn't really matter. What matters is the price you get for the quality and level of service you expect. My price study showed I would spend up to 43% more using the Amway network than by shopping at local Charleston, SC discount stores. Most distributors will not let you see the distributor price lists until you spend money on a kit, or worse yet, they will get you to one of their motivational weekends after which you will lose all rational business thought. Typical Amway sponsored price comparisons, compare per-use costs of national name brand price leaders, in small packages at grocery stores, against Amway generics in large package sizes. Proper comparisons should compare generic to generic in equivalent sizes, at discount stores. Amway studies compare catalog products against premium competitor mail order catalogs and not local discount stores, where the majority of price-conscientious people shop. If you want to start saving money, check out your local discount store first. There are no minimum purchases or retail sales to customers required just to get a rebate, or up-front joining fees at your local discount store like with Amway/Quixtar.
The SA-8 laundry detergent is cheaper to use. It's concentrated!
Truth: I did a price study, and found that the SA-8 is only cheaper to use against the small boxes of Tide, purchased in a supermarket. One 9.9 lb. box of SA-8 is equal to 150 loads, and at distributor price is $25.56 (includes 4% shipping). If you use only one scoop per load (two scoop are recommended for hard water), the price per load is $.171. The table below, shows the "Power of Buying Large Sizes" at Wal-Mart. Sure, if you are stupid enough to buy the 10 load box at Publix grocery store for almost $.32 per load, then you can save money with SA-8 at $.171 per load. Buying Tide at Publix is almost 87% more expensive than the SA-8. If you really want to save money, buy the 23-lb pack at Wal-Mart for $.119 per load and save 43.4% over the SA-8. Even with the smaller 5.75 lb box at Wal-Mart, you can still save 10.7% over the SA-8, and you don't have to buy as many loads as the SA8 gives. If you buy the USA Detergents brand liquid, you can get down to $.093/load, or a savings of 45% over the SA8. Anyone who thinks they can retail SA-8 will be hopelessly uncompetitive at $.206 per load (no shipping included). In addition, the retail mark up is only 20.7% (16.7% if the distributor absorbs the 4% shipping). The markup is just 2/3 of their widely touted 30% "immediate profit", and this is one of the famous Amway core products! (these prices may not be up to date and are for illustration only)
Brand-
Loads
Box Price Store Lbs Cost per Load Price Savings over 9.9 lb SA-8
(these prices may not be up to date and are for illustration only)
"We have been purchasing core products (Amway). We were lead to believe (again lied to) that these products were competitive with retailers, plus receive a discount up to 30% - plus you got
paid (3% back based on obtaining100 pv)". Site visitor
The Misty window cleaner dilutes down to a cost of $0.098 for 32oz!
Truth: That is the truth. The catch is that you have to buy four gallons of concentrate at $49.99 to get this great price. Diluted out, the Misty would provide 512 - 32 oz bottles, or 16,384 oz of window cleaner which would appear to me to be more than a life time supply for the typical person. The cost is $0.00305/oz. If the typical person used 8.5-32 oz bottles per year over 60 years they just might use it all up before they die. Sounds like the profitable deal is to repackage the stuff and sell it to others already diluted, maybe $1/bottle and make $462 per four gallons. This would be a profit of almost 10x the cost. Anyway, you can sell this one thing of misty to one person and never sell him another one. If you are a direct distributor you get a $12.49 profit from the wholesale price just once per non-commercial customer/lifetime. You need to find a new customer if you want to sell more . If you took the $49.99 and invested it at 8%, you still would generate $4/year forever. This $4 will be more than enough to cover yearly purchases of store brand window cleaner, and you won't have to drag around 4 gallons of concentrate for the rest of your life.
The A.C Nielson Company did a price survey. They say I will save money.
Truth: If one looks into the Amway/Nielson cost comparisons (available from Internet Services corp.) you will find comparisons of major name brand price leaders in small packages sold in grocery stores to the Amway generic in larger packages. A more valid comparison would be to compare the Amway generic brand to the equivalent sized discount store generic brand. Nielson used, for example: FORMUCARE Aspirin Free Tablets 150ct - $7.60 + .26 (S&H) = $7.86, $.0524 per tablet. If you buy just the 24 ct. Tylenol, in a grocery store, sure you will spend more money per use. It is a name brand in a small package! If you bought the 175 count Tylenol, you have almost the same cost per use as the Amway product. If you are looking to really save money, go to Wal-Mart, and buy their generic, and save almost 50% per tablet over the Amway price, and buy fewer tablets. The Wal-Mart product is made by the same company as the Amway generic brand. If you really consume the stuff, buy the 500-ct package and save almost 2/3rds over the Amway price.. My price study My price study summary
Store Brand Size / Cost Cost / unit % difference
Amway Formucare 150 ct / $7.86 $0.0524 Na
Wal-Mart Tylenol 24 ct. / $2.97 $0.12375 Wal-Mart136% more
Wal-Mart Tylenol 100 ct / $7.43 $0.0743 Wal-Mart 41% more
Wal-Mart Tylenol 175 ct /$8.97 $0.051 Amway 2.2% more
Wal-Mart Equate 100 ct $2.87 $0.0287 Amway 82% more
Wal-Mart Equate 500 ct $7.57 $0.0161 Amway 224% more
Wal-Mart never gives me a rebate. I get one from AmQuix!
Truth: Distributors are right, Wal-Mart never gives you a rebate, but who really cares? I get this argument all the time. I always respond the same way. "What difference does a 3% rebate make when you are paying 40+% more on average for the products from Amway?" Unless you are a complete idiot, you would want to save 40% now rather than get 3% back later. At Wal-Mart, you get your rebate immediately at the cash register. You don't have to wait to get if from your upline, and you needn't spend a minimum of $200 in one month to get a measly 3% rebate either. If you only spend $50 at Wal-Mart you still get your 40% savings on average over Amway prices.
"We determined that without the Vitamins you needed to spend between $200 and $300 to obtain 100pv Close to the end of the month our sponsor called us and said that "we were nearly at the next level. All we needed to do was purchase a little more." As it turned out we were about 30 - 40 PV short. To obtain that next level we need to spend about $60 to obtain $12 back?? I could not justify this!" IBO site visitor
" Other problems included greatly inflated prices even at pseudo-wholesale that made many customers just about swallow their tongues when we quoted prices ("$40/month for daily multivitamins! What the ...!")." Site visitor
Spend $200 with AmQuix, save $60 and get a $6 rebate.
Truth See above "save 30%", for the $60. The $6 rebate assumes a reaching a volume of 100 points (100PV). It is possible to obtain 100PV on $200 of sales only on the core Amway Brand product lines. A product mix with increasing share of non-core products, such as catalog items, will require much higher spending to maintain 100 PV. 100% non-core products would require over $400 in expenditures to attain 100PV, and yet the resulting bonus would be only about $3, or .7% of sales! Open meetings routinely imply that $200 will yield a $6 rebate, when in fact this
is the absolute best case, only with Amway Branded products and some of the new Quixtar partner stores. The rebate could be zero when $200 were spent, and only 99 PV points or less were earned. Amway rules also stated that if you do not service a minimum volume to retails customers, you are not entitled to any rebates or performance bonuses.
AmQuix returns 55% to 68% of sales to distributors
Truth: If this were true then, Amway would be woefully uncompetitive (see above "save 30%"). Wal-Mart overhead and profit is only 21.2% of sales. Proctor and Gamble sales and marketing expenses are 9% of sales.
Assume an Amway product cost the same to manufacture at P&G. A $10 product from P&G, less the 9% sales and marketing expense, now is $9.10. With 55% of the selling price returned to distributors, the product would have to cost $20.22! ($20.22*(1-.55)=$9.10. At 68% returned to distributors, the price would need to be $28.40! The same product would cost $12.68 retail at Wal-Mart ($12.68*(1-.212)=$10.00). The combined Wal-Mart and P&G distribution costs are ($.90+$2.68)=$3.58 of the $12.68 retail price. This is 28.2% of sales compared with the Amway claim of 55%! Which system is more efficient to you?
As additional support, Quixtar reported sales of $443Million excluding partner stores in the first year of operation payments of $143 million in performance bonuses to IBO's resulting in a pay out ratio of 32%.
From the 1979 FTC case against Amway, Amway reported US sales of $169.1 Million and paid out $60 resulting in a pay out ratio of 35.5%. This was before the advent of less profitable catalog sales.
How do they end up making this claim or returning 60% of sales to distributors? Assume that a core product has a 30% suggested retail markup from "wholesale". The maximum performance bonus level is 25% of IBO "wholesale" price, which is paid to platinum distributors. Adding these to up: 30%+25% is equal to 55%. The misleading point here is that few people sell at
"suggested retail price" and obtain the 30% markup. IBOs try to trick you into thinking that the "phantom income" from the suggested retail markup is an actual cash flow into your business. Since anyone can become a distributor and buy from themselves at "wholesale prices", the suggested retail markup is not realistic to include as a source of income.
AmQuix products are higher quality. The extra cost is worth it.
On one hand they want you to switch buying habits to save money on commodities, then once you find out you aren't saving any money they try to justify the costs with the "higher quality", "premium products" argument.
I used the products and I wasn't impressed. They did the same work as the competitors. The concentrated items such as Zoom and LOC were more complicated to handle because of diluting, and took up more space to store the diluted version as well as the concentrate. Items such as Zoom and LOC I use so infrequently, that it is not worth the 25-30 cents a year I would save using the product due to its lower cost per use. If you lose the bottle of concentrate, then you are out some serious money compared to a smaller bottle of a competitor.
It is my opinion that most distributors are just parroting the quality issue. If they didn't have a vested interest in trying to build a group of dedicated buyers for their products, they would probably have a different opinion. This opinion might be reflected in the millions of US distributors who have quit Amway. If the products were so great and such a good value, how come the millions who've quit don't just "buy for themselves and save a little money"?
I knew a guy who had a restaurant. He said you could not beat the Amway oven cleaner. It was more expensive, but worth it in reduced effort. That's the only good thing I've heard from a true consumer not being biased by being a distributor. (The oven cleaner has been discontinued per IBO feedback)
AmQuix has created more millionaires than any other business!
Truth: This is not officially documented anywhere. No one that I have challenged can give me the source of this infamous "Amway urban legend". If you read the book "The Millionaire Next Door", you do not even see Amway or MLM listed.
For an in depth discussion with calculations click here.
Distributors claim to have businesses in several states and other countries
Truth: Amway/Quixtar is made up of Independent Business Owners. Each IBO owns his or her own business. Distributors may have a downline in another state or other in another country, but
at no time does he "have" or "own" these businesses. These downline distributors possess their own business and no one else has control over them. Distributors say this to create hype and to cover the fact it is just a MLM operation.
The Quixtar WEB site is receiving millions of hits a day.
Truth: From www.pcdataonline.com
Amway is the new distribution method taking the retail industry by storm.
Truth: Simply looking at the Amway sales growth number for the country you live in could show the market acceptance of this "new wonderful and amazing system". Amway is so proud of their sales performance in the United States that they refuse to release actual corporate year-by-year US data! Existing distributors should be complaining that Amway is not doing enough to show the success of their concept via publishing hard facts and statistics of sales growth, and distributor counts. Amway's former public companies Amway Japan, and Asia Pacific had all this information in their annual reports. A stockholder or new distributor needs the same information to see if this business is worthy of investment, whether time or money!
AmQuix is on the verge of "critical mass" and explosive growth.
Truth: The chart below, which depicts the rate of Amway's sales grow, shows a cyclical sales-growth pattern with decreasing peaks. It looks like Amway's sales are on the verge of collapse instead of explosive growth as some say! It would appear that the years of good growth as measured by percent-change-in-sales is already behind them from the late '70's. (Sorry, I don't have access to the '60's data). Another good growth spurt kicked in the early '90's, mostly from expansion in Asia. Trend analysis suggests that Amway's growth rate is trending down in the long and the short term. This type of growth rate action is characteristic of market saturation. The prospects for explosive growth don't look promising, from the trends shown in their rate of growth. An Amway distributorship will be very difficult to grow in this market environment. The
25% drop in sales in 1983 was the same year when 60 Minutes did a negative story on Amway. Forbes magazine reported in Feb 1991 that there were 600,000 US distributors. USA Today reported in March 1999 a US distributor count of 750,000. Over eight years that comes to a 2.85%/year compounded growth rate.
Procter & Gamble spent $1.5 billion on Advertising. Amway spent just $10 Million. Those advertising dollars go in the Amway distributor's pockets.
Truth: The money Amway doesn't pay in advertising can be made available to distributors so that they can do the product promotion. P&G had 1997 sales of $35.764 billion, and advertising and marketing expenses of $3.468 billion. I guess Amway forgot about marketing costs in their comparison. The May 11, 1999 USA Today article only listed "advertising" expenses. Anyway, P&G's1998 advertising and marketing costs were 9.7% of sales. From "Fun with Math", actual corporate Amway US sales were $1.28 billion. My estimate of cumulative Amway distributor expenses is $718 million. US Amway distributors received at most 31.5% of sales from Amway or $511 Million, compared to the estimated $718.million they spent promoting Amway distributed goods. This makes the real Amway sales and marketing expenses amount to 56% of sales! (.718/1.28) Amway distributors spent over six times more per sales dollar than P&G to advertise and market products! This is true inefficiency!
AmQuix is more efficient since there is no advertising or marketing.
Truth: Amway does have Wal-Mart and P&G beat when it comes to dollars spent on advertising, but it doesn't have them beat on a total cost basis. Amway would have to be able to produce core products (soaps) for at least 14% cheaper than a discount store could purchase them for from P&G, in order to pay the bonuses and stay competitive. This doesn't even figure in estimated
Amway overhead or Amway profit margin. When these are factored in, Amway must produce the products for 38% less than what a discount store can buy from P&G or some other soap company. The following bar chart shows the distribution of costs on a typical "core" type product which, Wal-Mart would purchase from Proctor & Gamble for $10. This assumes that P&G and Amway are equally efficient at manufacturing, R&D, and administration. The P&G advertising and marketing costs are broken out in white. Additionally, this analysis does not include time or money spent by distributors in marketing the products. For an analysis from the distributor's side, click here.
AmQuix is more efficient. They eliminated the layers of middlemen!
Truth: Amway might buy direct from manufacturers, but so do Wal-Mart and a host of others. Amway hasn't eliminated the middleman; they have just replace it with new middlemen. The new middleman is the long line of Amway distributors who are now in between the end consumer and the "servicing company". There is a Diamond distributor taking a small cut. There is an Emerald distributor taking a little larger cut. There is a Ruby distributor taking a cut. There is the sponsor of the direct distributor taking a 4% cut. There is the direct distributor taking a 25% cut. The direct distributor cuts his 25% into several different rebate levels. All in all the Amway method of distribution has more layers of middlemen as the systems they compare themselves to. These middlemen take about 31.5% of BV, which many distributors falsely assume to be sales dollars. Wal-Mart by contrast buys from the manufacturer and has 21.2% of sales as overhead cost. An interesting development now is that Quixtar will market Amway products. Amway has just added another middleman, Quixtar corp. to the scheme.
The overhead costs of an AmQuix business are low when compared to a traditional business
Truth: The total dollar amount of Amway overhead is very low compared to other business, but as a fraction of a distributor's personal sales, the overhead costs are terribly high! Distributor expenses can exceed personal sales by a 2 to 1 margin. The "optional" expenses of the typical AQMO could be between $1,000 and $3,200 per year, even more if you drive a lot out of town to recruit people. I agree, the sheer dollar amount is low, but correspondingly the sheer sales dollars of an Amway distributorship is also very low and can't support the typical expenses of the AQMO system! The SA4400 states that the average distributor consumes/sells about $1700/year. Take for instance, from "The Plan", a self-consuming distributor doing little or no retail sales, trying to build his downline by saying "buy from yourself and show others how to buy from themselves". At $200/month the sales of this distributor, amount to about $2,400/year. One cannot count the personal consumption/sales of the downline. These sales belong to each downline distributor. To be mathematically correct, you cannot double count sales, as is done with Amway "pin levels". In effect, the absolute low dollar terms, the overhead costs of an Amway distributorship is not even exceeded by the sales volume of that distributorship. Typical
distributors are spending more dollars on their business overhead than their distributorship has in its own sales! A typical self-consuming distributor is generating about $600/year in gross margin, which can be divided up within a direct distributorship. So yes, the overhead of a distributorship is low, but the sales are so pathetic, and the resulting margin so low that on average all distributorships will be losing money. The only way to make a profit it to recruit more money losing distributors on the bottom of the pyramid. If Amway/Quixtar products were popular enough and competitive enough, continuous sales growth could move these money-losing distributors into a profit state. Most distributors will quit before they can build a downline big enough to be profitable. Sales do not grow quickly since few of these "quitting" distributors see no true economic value in the products, prices, or system. Only a few very good salesmen and motivators will manage to build large groups using the "dream" as their vehicle.
You are only investing in the kit. The financial risk is very low.
Truth: Most distributors spend many times the cost of the kit employing the "success system" of their upline Diamond distributors. The cost of the kit is negligible when compared to the money spent on motivational events, tapes, books, and business tools. [Overhead Cost Summary] Distributors can invest hundreds of man-hours a year trying to build "the business". High level distributors and Amway would rather have you "experiment" with a distributorship, and spend your money on their products while finding out for yourself whether it works or not. If they can turn over 500,000 US distributors a year, each spending $2,400 ($200*12 months) before they quit, they can cover $1.2 billion in US sales. Experimenting distributors could provide almost 100% of their annual North American sales. It is far better for them to get the incremental sales of the experimenters and beginners, rather than turn them away by providing solid data that might not be attractive enough to hold their interest. See case studies of former distributors who lost many times the cost of the kit.
You only risk your time when you start an AmQuix Business.
Truth: There are opportunity costs associated with any decision you make. An opportunity cost is the value of the next best alternative you have. There are three opportunity costs with starting an Amway distributorship. People can and do lose money in Amway. It is not risk free. Click here for site visitor responses.
The first cost is the price premiums you might pay on personal consumption of Amway distributed products. Assuming one spent $200 per month, and the price premium was equal to what my price studies show, one could spend an extra $960/year. (12*200*40% premium)=$960.
The second is the cost of the time you invest in the business. Assuming you could pick up additional work at $7.50/hour @ 500 hours/year, the after tax value of the lost time is $2,250.
The next cost is that of running the business. Based upon the typical "success" systems one could spend $3,600/year for a single person. The example below assumes growing rebates and bonuses progressively offsets the $3,600 after 5 years and compounding at 10% (tax deferred), one would have and opportunity cost after 5 years of $33,461!
The future compounded value of the $33,461 "opportunity" cost from above; invested at 10% tax deferred is depicted below. Instead of experimenting with an Amway distributorship, but rather investing the time, money, and product premiums, you would have spent with Amway over a 5-year period; you could have an investment nest egg of almost $1 million after 35 years. This investment would spin off almost $62,000 per year risk free after 35 years, or $100,000 per year invested more aggressively. The stock market has historically yielded 10% over the long term. Making a million dollars with this method has a higher probability of success than making a million with an Amway distributorship.
From a site visitor: "I was doing some research on my investments and I thought the numbers were interesting when compared to the 2-5 year plan. I used some of your numbers for business support material expenses but didn't use food, travel, mileage etc. expenses because I wanted to do a simple, some true believers would say simplistic, analysis and didn't want to bring in tax ramifications. I used a start up expense of $780 (kit, suggested BSM's) and an annual BSM expense of $1620. These figures are extremely conservative.
I like to shop at two retail establishments, Wal-Mart and Best Buy. In fact probably 60% of my non-grocery household purchases are at one of these two stores. Since I use them I've also invested in them.
I looked at a 3 1/2 year investment plan, half of the 2-5 year plan. I took start up costs and first year BSM cost and divided them equally between the two companies. I then put half of each year's BSM costs into each stock. I used the stock closing costs on Dec 31, 1996 as the staring point for the 3 1/2 year plan and used after crash prices on April 14, 2000 as the end price. Best Buy does not have a dividend reinvestment plan, Wal-Mart does. Dividends are reinvested if possible. Based on these numbers you will have invested $6445 in the two companies.
Your investments will have grown to a value of $44,222 and you will have been aid $1200 in dividends (if you had invested only in Wal-Mart you would have $20,657). You could take this money, put it into a 6% CD and make over $200 a month and never touch your principle.
The reason I point this out is to ask the true believers who have been actively building the business during this time how many are making a residual profit of $200 a month?"
AmQuix is the only option some people have to financial freedom
From the example above, there are opportunity costs of opening an Amway distributorship. Distributors are told if they don't follow the "success system" of the upline, then they will not make it. If distributors have the money to finance the "success system" then that money ($3,600 for our example) is also available for investment. If the money were available to buy $200/month of Amway products, then there would be money ($960/yr) available to invest from the price premiums. If one had 500 hours to invest in Amway then there is $2,250/yr after tax in outside work @$7.5/hr, especially given today's job market. All told with the same effort and expense as an Amway business, one could possibly save $7,110 per year for investments. A better paying part-time job or more hours could speed the process up. Amway sales decreased last year. The average new distributor will not make direct even in 45 years assuming an unrealistic10% Amway sales growth rate! Some of course will make it; you just have to decide which odds are better for you. Risk it and try being a super distributor, or spend wisely, work, save and be a successful investor. People following the typical AQMO success plan, of "buying for your self, and show others how to buy for themselves" on average will always lose money. See Amway is a "negative sum game". The "Amway Business paradox", and the Tax Court cases.
Nobody makes money off of motivational and training tapes.
Truth: The wholesale cost for duplicated tapes is $.88 each in 100 pc lots, and $.60 each in lots of 5,000, packaged in a case, printing on the tape, shrunk wrapped, and without a paper insert. Most tapes sell for a minimum of $6.00, and up to $9.00. There is a minimum of $5.40 missing from the equation. Who gets the money can be debated until the cows come home. The fact is that there is at least $5.40 missing from the math. CD-ROMs in lots of 1,000 cost $1.56 each, and are being sold for $10. There is $8.46/CD missing here. See how the "tools" money gets split up in some groups. Additionally, the second largest MLM, Nikken, which sells the therapeutic magnets, only charges $0.95/tape! Based upon the cost to reproduce and package tapes, and the fact that another, smaller, MLM can sell tapes at a fraction of the cost of Amway AQMO's, somebody is making a tremendous profit off of tapes.
"I was taught and therefore taught that the system was put in place to assist people in building their "Amway" business. This is as far
from the truth today as you can get as when you are making 80% of your income off of the system, it is totally reversed, Amway is in
place so people can sell their system!"
Don Lorencz: Diamond Direct Distributor Other Lorencz Quotes
Cassette tapes in stores cost $6 or $7, what's the problem with making money off of tapes, tools or seminars?
Truth: There is certainly nothing wrong with making money on tapes or seminars. Free enterprise is free enterprise. If people will buy them, then sell them. I just see a very large conflict of interest, and an integrity issue, which can easily be abused. Many new distributors are
never told that the uplines all benefit by each tape they buy; those tapes that were recommended to them for purchase by their upline. The weekly purchase of a $6 "standing order tape" (SOT) puts at least $5/distributor/week in extra gross margin into directs' and above businesses. Now, everyone knows why high level distributors recommend that new distributors order the weekly SOT. If the distributor were a 100PV/$200/month distributor, then he is only generating at most $13/month ((31.5%-25%)*$200) in bonuses and rebates for the complete upline over direct distributor status, but just SOT distributor will generate $20/month/distributor in gross margin! If a new distributor kit comes with, say, 10 cassettes or so (this depends upon your organization) you bet your upline DD and above was very happy you joined as they cleared more on the sale of the cassettes than they did on the product in the kit. There was probably $50 worth of margin in the tapes, and only around $7 in product related rebates and bonuses to the high pins. Over the course of a year at $200/month a distributor would produce about $156 ($2,400*.065) in gross margin for those above Direct Distributor status. If this distributor bought SOT, 20 recruiting tapes/year, and attended four functions he just generated about $460 in gross margin for the upline or almost three times the gross margin from Amway product bonuses! Again, it is not bad to make money on the tapes. It only presents an integrity issue when the margins are so attractive.
The real business of the high level distributors turns out not to be promoting Amway product, but actually selling tools and motivational supplies to lower level Amway/Quixtar distributors who are promoting the Amway products. The new distributors think the money is in the Amway bonus structure, while their "high integrity" upline is more concerned about selling business support products and services than Amway product. It would seem to me that if the real business, of the high pins, was to make money from Amway bonuses, they would reduce the cost of tools so that more distributors could be profitable sooner, and expand their businesses faster. I had a 20-year Amway, supposed high pin, write me. I asked him if he could maintain his life style today on the money he makes from just Amway and not tools. He never answered the question. Not answering a question is a simple way for Amway/Quixtar distributors to say NO. He had also stated that some organizations are setting up bonus schedules for tools in their organizations, to get around the problem of only high pins making money on tools. This is an interesting concept as the organizations can now just sell themselves tapes and tools; they won't need Amway anymore so they can sell each other product. What are they going to do; raise the price of tapes so that there is more money to give away to the low distributors? Pretty soon they will be selling each other tapes and holding seminars to teach themselves how to improve their tape and tools business!
AmQuix is AmQuix. It doesn't matter who your upline is.
Truth: I have been asked several times by site visitors who my upline was. They implied that I had a bad upline to have the experiences I had. My upline diamond is head of the Amway ethics committee. Meet my former upline ruby direct! Do they both look like "bad uplines"? They look like any other nice, respectable successful distributors. Many distributors claim they are reputable and that a few bad apples are ruining it for them. This then leads the question: "how do I search and select a reputable upline before I invest a lot of effort". I can't answer this question. But, I can tell you that there are many uplines (AQMO's). This will complicate your decision greatly if you are thinking of joining up. How do you know before hand which
organizations are really reputable until you spend tens if not hundreds of hours with them? It gets even more complicated since much will depend on your upline Direct Distributor, and there are thousands of those form which to choose. Be aware that there are also differences in motivational tape prices between organizations. Some organizations also keep statistics of their performance versus others or Amway as a whole. Access to this data may help you decide which ones have a better probability of success. Anyway, here is a small listing of the major AQMO's just so you know what is out there. I.N.A, Network 21,Internet Services, WWDB, Britt International, Storms & Assoc., Ambassadors Int'l, Executives Int'l, F&J Enterprises, Mazzeo Inc., Distributed Marketing Technologies, Miller Enterprises, Midwest Industries, Foley & Company, Mc Ewen & Assoc., Distribution Training, Independent Distribs., Stranney Organization, Bovill Organization, Cherry Organization, I.B.S., Lowell Organization, Int'l Leadership, Bergfeld International Inc., Jerry Boggus Company, Bulmer Holdings Inc., DÁmico International, Mark Day Enterprises Inc, LTD Partnership, Eckman Enterprises, Gilewicz Enterprises Inc.,The Golden Inc., Hopper Enterprises, Howard & Associates, King Associates, Kinsler Enterprises, PRO NET, McConnell Family Enterprises Inc., Crown Enterprises, Paullin International, Diamond J Enterprises, Inc, Shoffler Ent., Ken Stewart, Wilson Enterprises, Downeast, Jevi, Convington International, Globalnet, and Youngblood International. It will be a big research job figuring out who is reputable!
"I have met my upline Diamond. I have seen that success is possible."
Truth: No doubt some people do take home some money from an Amway business. People take away good money from lotteries as well despite the poor economic fundamentals of the "negative sum game". As long as people play both games there will be a few winners and lots of losers. More people could be successful in Amway if it actually sold to the general public and not just those in the "game".
Distributors are commonly introduced to groups by the highest level they have ever achieved in Amway. According to Amway/Quixtar rules, IBO's must always maintain their sales volumes and downline structures to re qualify for their Diamond, Emerald, or Platinum status on a certain frequency. There are Diamond distributors, too numerous to count, who fail to meet the requirements of re qualification and still refer to themselves or have themselves referred to as Diamond distributors. These distributors are lying about their actual status. Ask your Emerald or Diamond if they have re qualified this year. If you're banking on living off the residuals of this business you might ask why so many don't requalify to understand how stable your residual income will really be.
Distributors/IBO's proclaim to have extremely high ethical and moral standard, but at the same time have neither the credibility nor the integrity to be truthful about their actual pin status in Amway/Quixtar. This is just another example of "white lying" which distributors commonly use to paint the Amway picture nice and rosy.
You don't need any sales growth information about AmQuix. The business is based upon individual effort.
Truth: Any business not accepted by the market place will have poor or slow sales growth. All distributors, added together, cannot out pace the growth rate of the Amway Corporation. That is a mathematical truth. If the business doesn't expand, then the market has not embraced the business as having a value to the economy. It is easy to sell and grow a product line that consumers readily accept, and the evidence of the acceptance is double-digit sales growth. It is difficult to sell a product or service which, people do not accept or is not competitively priced. An Amway distributor needs to recruit people to grow his business. If the current growth in sales or distributors in your country is not growing quickly, it says the market has not embraced the concept. Data can show you just how fast or slow the business is growing. Knowing if the business is growing slowly, can tell you whether your investment of time and money in the business is warranted. If Amway's sales, in the country where you live, are growing rapidly (20-30% per year), you will be much more successful than if the sales are only growing 3% per year. Would you rather invest your money at yields of 3% or 10% per year? The theory of compounding is the same for Amway or for investing! Ask Amway for their US growth rate of sales and distributors. They won't tell you. I guess they don't feel that has anything to do with evaluating the success of Amway.
The chart above shows how much sales you would have after so x-years based upon different sales growth rates. If the US Amway business is growing on average 10% per year, $200 first month sales would grow on average to $800/month after 15 years! Even if your business grew an astounding 35% per year, much greater than the North American Sales of the Amway Corporation, you might qualify for direct distributor after 15 years (7,500PV*$200/100PV=
$15,000/month)! This even uses the highly inflated $1=1BV! This is why the sales growth rate in your country is so important. If it is not growing quickly, then it will take a very long time on average for the new recruit's to get a profitable amount of sales. Remember, all distributors, added together, cannot out pace the growth rate of the Amway Corporation. If some distributors in the US are growing at 35% per year, then others must be shrinking at huge rates to balance out the overall growth rate in the US, as Amway Worldwide hasn't grown over 15% per year for the last two years.
The 2-5 year plan
Truth: The two to five year plan is a commonly used "plan" to sell the idea of becoming financially independent in 2-5 years of concentrated effort building your Amway Distributorship. The 2-5 year plan is that, just a plan. It has no basis upon proven track record or is even verifiable to have been attained by any significant percentage of distributors. In an equally absurd manner, I could show you a plan to make a $1 million in the stock market in less than two years, with starting capital of $2,000. Of course you need the right stock and the proper leveraging with margin. It will be that, just a plan and will be equally low in probability that anyone will actually do it. Someone most likely has do it, just like Amway with the 2-5 year plan. It is possible but not probable.
Sales growth rates needed to attain even Direct Distributor status in such a short time are phenomenal. The chart below shows the monthly compounded rate of sales growth needed to achieve Direct status in 1, 2, 3, 4, and 5 year. The calculation uses the best case of 1PV=$2, which implies 100% core products, which is unrealistically conservative. The sales growth rate to achieve Direct in five years needs to be 7.5% compounded monthly, which translates into 238% yearly sales growth =((1+.075)^12), when starting with personal sales of $200, or 100PV. These numbers dwarf the Amway Corporate sales growth rate, which last year was negative. This means that a very small minority of distributors can grow this fast and keep it in their own downline without it splitting off. It would be interesting if Amway would release the statistics to see if the Distributors claims can be substantiated. I asked for this information, but they would not release it. Ask your upline whom in their group retired from their job after 2-5 years in Amway/Quixtar. You will not find many or any at all, and if you do, they probably had money saved to live on. If you are prospected ask all the people you meet if they have been in more than 2 years and live solely off their Amway business. You will find that most, if not all of the people still have jobs to finance their losses in Amway.
Amway tripled in size between 1990 and 1997
Truth: Amway's overseas sales increased significantly in this time period. Sales growth from Japan, China, and the Far East were the main contributors during this period. Growth in North America did not keep pace with these rates. The growth of the North American market is the most important if you live in North America. Amway does not release this information so you are left blind to how well they are growing in N.America. Worldwide sales decreased 18% from 1997 to 1998, and also decreased 12% from 1998 to 1999.
Sales are down 28% from 1997 to 1999. Maybe the number of new markets Amway can enter is shrinking. Now they must rely on selling more in existing countries rather than the easy sales gains they get by moving in to untapped territory.
Just buy from yourself and show others how to buy themselves
Truth: Direct/Platimun Distributors must ensure that every distributor within their "downline network" sells Amway products at retail to non-distributors. There is a retail sales rule in Amway and Quixtar which must be met before being paid a performance bonus ( or also called a rebate). Amway rules prohibit the Direct Distributor from paying performance bonus to any individual
within his network in the absence of proof of such retail sales to non-IBO's each month. This rule is largely ignored. If everyone "bought from them selves" and recruited in this manner, see how it is a "negative sum game". When everyone follows this "AQMO success plan" on average, people will always lose money. See the Amway business paradox. See "Fun with math" See what the Amway WEB site has to say about this Strategy
Amway is producing ten's of Directs and several Diamonds every month.
Truth: For those in the North America, let's review some numbers. Amway North American sales reported to me for 1997 was 1.8 Billion. To qualify for Direct Distributor status one needs 7,500 PV, and one must be able to maintain this level. If the sales level cannot be maintained then the distributor loses his Direct Distributor qualification. Assuming a 2BV=1PV=$2, this requires a minimum monthly sales of $15,000. This assumes core products only, which are more favorable point wise than catalog products. A direct distributor would need $180,000 in annual sales to continually requalify. Based upon this it means that there can only be a maximum of 10,000 qualifying Direct distributors. The North American Sales can not support more. Diamond status requires six direct distributors, plus himself. 10,000 Direct Distributors allow for a maximum of 1420 requalifing Diamond Distributors. If Amway NA sales grow at 5% this year, to $2 Billion then 500 new Direct Distributors and 70 new Diamond Distributors could be supported from the North American sales growth. When the Amagram reports 60 new Directs for the month and sales are only growing 5%, that implies that 18 Directs fell out of qualification, since sales growth only supported 42 new directs. If catalog sales amounted to 50% of Amway's sales then the number of new directs supported by business growth will drop about 25% to 30. Base upon sales growth projection of 5%, and the 70 new Diamonds this sales could support, this year is ending poorly, as only 18 new Diamonds were reported for 1998, as of October. The implication of this is that US sales growth for 1998 is about 1%, which is less than inflation. From the graph below you can see the correlation of sales to number of new Diamond and Emerald pins being awarded.
Just keep trying and you can make Diamond.
Truth: Taking a look at the graph below one can see that the number of diamonds peak at an average of 7 years in the business. After 17 years in the business there are fewer and fewer people "Going Diamond" as time goes on. If one hasn't made Diamond after 7 years, history
shows then with each passing year it will be less and less likely that one will ever make it. If you aren't Emerald by 10 years in the business, there is a low probability of getting there since only 13% of the Emeralds get there after 10 years.
From the chart below, less than 50% of the distributors who go Diamond, do it after 8 years in the business. Of the people who "go Diamond" less than 25% go diamond after 11 years. In another light, only 15% of the people who do "go Diamond" get there in 5 years. From the data in the 1992-1998 Amagrams, there are no people who have "gone Diamond" in less than 3 years.
You can't be fired or laid off from Amway
Truth: Any business is at the control of the market it serves. True you can't be "fired" from Amway, unless you violate rules, but the Market can fire you never the less. Your distributorship could lose profitability as people quit, or buy fewer products through Amway for themselves. There are many stories where legs in a downline quit, or go with some other MLM idea. So, your Amway business is in no way secure forever either. It can rise and fall with the good and bad times just like any other business.
A Direct Distributor can keep you out of your own business. In short, they can simply tell you that you cannot contact anyone but the people you personally sponsored. This has happened to specific people and that's how a Diamond took over a business that another built. Dave Kruer of Amway has confirmed that the Direct Distributor can do this.
Also, the other way they can "fire you" is to pay performance bonuses around you and allow all your people to pick up products from them. The compendium says the Direct Distributor can pay bonuses any way they want. That's how Amway supports it when they take it away. In short, you no longer have a business anymore. These methods are used so that you cannot work depth. Your Diamond of course will not work with any of your width so every line disappears except one, which is all the Diamond cares about as long as it is a 7,500 leg. That's how one can be "fired".
A distributor is also not entitled to any support from his upline. A major portion of recruiting is to "parade" the successful Diamonds and Emeralds (who have quit their full time corporate job to take a full time Amway job) in front of the new recruits. Without the support of the "successful" role models, a distributor cannot effectively grow his business. No one will believe it is possible unless they see and meet warm body who has "made it". Being cut off from this support for any reason can stop a distributor's growth.
The tax return for my Amway business is only for the IRS and me.
Truth: I get this reply all the time when people respond to my site. "That's personal information, you have no right to that", "it is for the IRS and me", blah, blah, blah, blah....... Face it, if you are purchasing an existing business, you want to know how much that business is making, wouldn't you? You EXPECT to see the books before you buy it. If you don't see the books you should walk away. They guy is trying to sucker you into buying his problem! Why is Amway any different? Most likely you will be presented with a "success plan" which will be your road map to Amway success. Why not ask the guy who is following the "plan" to PROVE how he is doing? If he is following the plan, and says he is financially successful, why not PROVE it! Just like you would ask an investment advisor what his track record is, why not ask your sponsor how his track record is? You are supposed to reproduce what he did, aren't you? If you were to invest in a mutual fund, you would ask the fund for its performance, wouldn't you? If the guy is really making money, what skin is it off his back if he shows you his Schedule C of his tax return? Would showing people how profitable the business really was, help his business grow? Will it help his business grow if he is showing a loss? Decide for yourself. See proof that most people are taking a loss on their taxes when following an "AQMO success plan". The numbers assure it. See Amway- A negative net sum game? The Amway business Paradox. Fun with math! See how profitable distributors are with Tax Court records.
Your employer is paying you a very small fraction of what he makes off you.
Truth: This is another unfounded statement that distributors use. First of all people who have a job walk away from the game with money in their pocket, unlike most Amway distributors. . People with jobs get paid in cash, most people in Amway get paid with a dream. Now, let's play with some number from the one of the most profitable and well-run companies in the world, General Electric. Using GE, we will be using the most favorable numbers, from the pro-Amway position, to show the point that most distributors just can't perform simple math.
GE 's 1997 sales were $90.84 Billion, had after tax profits of $8.2 billion and had 276,000 employees. Sales-per-employee was an eye popping $329,120/employee. This is outstanding, consider that most self-consuming, non-retailing Amway distributors have personal sales of only $2,400/year! (You can't count your downline, since the downline claims their sales for themselves) Most other companies come in below $200,000/employee. Now the after tax profit is an outstanding $29,721/employee. Even if the worst paid employee were to get $11/hr plus 30% benefits, the total compensation package is $28,600/year. It seems here even with the best numbers that employees still gets at least half of what they earn for the company. Not a very small percentage, as distributors claim. GE also has invested equity of $8.23 billion or about $125,000/employee. Given the capital employed and the after tax profits, GE's return on equity is 23%. In less efficient companies, the employees will get much more than 50% of what they earn for the company. If you invested $125,000 in a risky business you would like it to earn 20%+ too. The capital must be employed in order for the people to earn the wages in the first place.
AmQuix creates wealth. It is a more efficient method of distribution
Truth: Amway AQMO success plans are a tremendous waste of resources and are destroyers of wealth. Imagine a distributor motivated, following what their upline tells them. Buy tapes. Attend all rallies and functions. Give out free product samples. An active distributor in most cases is just trying to get another person to consume product, and then the new person recruits other people to do the same. This distributor consumes $2,400/year at 100 points (PV), enough for the 3% rebate level. To follow the AQMO plan and grow his business, he must spend anywhere from $1,300 to $3,600/year on overhead costs (tapes, travel, functions, rallies, postage, etc). Now if the person he recruits copies his plan, that new person consumes $2,400 in product and also spends $1,300 to $3,600 per year trying to find people to "just buy from themselves". If you had 75 people in a group each doing 100PV this group would qualify for Direct Distributor status and the 25% rebate level. 75 people would generate $180,000 in sales, and at the 25% rebate level, get $45,000 back as a rebate. On average each distributor entering the system brings in $600 of revenue from the rebates, but each distributor is spending $1,300-$3,600 per year on their businesses. All 75 distributors are spending 75*$1300= $97,500/year to try and get a piece of the $45,000 in rebates returned from Amway! It sounds like a very poor business proposition to spend $97,500 as a group and only get $45,000 in income to split up. Even if you assume the Amway products are cheaper (bad assumption of course!) and this "savings" is counted as income which would add at most $720 per year to the average income. The distributors as a group still lose money! And, this doesn't account for the time they spend trying to find new recruits. See Amway - A Negative Sum game? The Amway business Paradox.
People will always need soap, even in the worst economic times.
Truth: This is true. Although, people may not be willing to pay $7+ for a bottle of Amway shampoo, or $3+ for a tube of Amway toothpaste, $5 for a bottom of liquid hand soap or 110% price premium on Amway bar soap when the economy gets real tight. Amway markets "premium" products at premium prices. In tough economic times people will most likely shop for value. People will be unwilling to pay such terrific price premiums in a hard economy. Just take a look at Amway in Southeast Asia and Japan. The economy is in shambles and Amway's Sales in local currency dropped like crazy. For the quarter ending Nov. 30 1998 Amway Japan reported sales of 39,320 M Yen, versus 51,321 M Yen in 1997, or a 23% drop in sales. Net sales for the fiscal year ended August 31, 1999 totaled 143.8 billion yen ($1.3 billion), down 25.3% from the previous year. So much for the theory that people will always buy Amway soap in hard times. For a little Amway satire: President Clinton proposes plan to help Amway Japan
95% of all people retiring are broke.
Truth: Data from the IRS suggest that this common claim of Amway distributors is untrue. The graph below shows the total income of retired taxpayers for 1995. The data show that 50% of all retires have incomes greater than $20,000, and 20% have incomes greater than $40,000. If any income under $100,000/year classifies you as "broke", then the distributors' claims are true.
AmQuix has a "good" or A-1 rating with Dun and Bradstreet
Truth: This is irrelevant. Dun and Bradstreet is a credit rating agency. D&B rate the credit worthiness of businesses, not whether a business is ethical, moral, or a good company to work
with. Since you won't lend money to Amway, or supply them products on credit, this statement is useless. Unknowledgeable distributors use this to establish credibility, all the while showing their lack of business understanding. It just means Amway has the capability to pay their bills on time.
AmQuix is a debt free, private company.
Truth: This is also irrelevant to a business decision about becoming a distributor. Certainly having no debt is plus for the company and its image of stability. But from the standpoint of a distributor it doesn't do anything to make an Amway/Quixtar distributorship more profitable than a company with debt or is publicly held. It only provides bragging rights for business neophytes.
Just a s side note, a company that is totally debt free is not maximizing its return on investment by having 100% equity financing. A public company can increase shareholder value by borrowing money. This replaces the relatively more expensive equity financing with lower cost, deductible debt financing. The interest on the money is a deductible business expense where the return to equity holders of dividends is not deductible. A company can borrow until its debt rating becomes A, and still increase shareholder value. In this case the borrowed money is used to repurchase shares of stock. As the shares are retired the profit per share increases despite the small amount of additional interest costs, thus increasing the earning per share and thus the price of the stock.
From: Amway Corp. To Reorganize Feb. 2000
By LISA SINGHANIA. The Associated Press
Mark Bain, Amway spokesman
"Our cash position is solid, our debt is manageable, we're financially very strong,'' Bain said. ``Our sales are a bit behind what we hoped they would be, but that's not the driving force here.''
It would seem, Amway distributors can no longer claim Amway to be debt free.
See page on issuance of Debt for the Amway help Amway Japan.
AmQuix has "joint ventures" with hundreds of name brand companies like Coke, etc.
Truth: Amway may have agreements to market products produced by these companies, just as Wal-Mart does. Amway, however has not started a joint business with all these companies where they both share equity stakes in the newly formed business. Again over zealous unknowledgeable distributors are trying to give credibility to their story, and showing their true lack of business understanding. An excellent page on Amway "partnerships"
You can even buy Coke through AmQuix..
Truth: You can't buy a two-liter bottle, or a six-pack of coke through Amway. You can however buy a wall mounted single cup-dispensing unit, which was proven to be a marketing failure. There was so much negative press on these units in 1994; I'm surprised they still try to sell the thing. It amazes me how some distributors will grasp for straws in order to establish credibility for themselves. They all know the Coke dispenser is a total market failure, but still go on bragging about the "Coke" relationship!
Any losses from my AmQuix business are tax deductible.
Truth: According to the IRS, losses on a home business can be deducted for up to three years. After that, they consider it a hobby. Distributors have been audited and have owed thousands of dollars in back taxes and penalties when the IRS caught them taking losses even before three years. See the Tax Court records. The point of having a business is to make money. Every dollar of loss is only partially offset by the reduction of your taxes. If you are in the 28% tax bracket, and spent $1 on your Amway business, which resulted in a loss for your business, it only reduces your taxes by 28 cents not $1. You are still out 72 cents. This is 72 cents you could spend on something else. The value of this is even worse for people in low tax brackets. If you are in the 15% tax bracket, then it will cost you 85 cents. The lower your tax bracket the more it costs you to take a loss. If you want a tax deduction send me $1, and I will give you the tax deduction of 28 cents back. Does that sound like a good investment? You should be in business to make money, not to report losses to avoid taxes. See the IRS Position Letter IRS document of the "3-year loss rule"
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Amway & Amway North America News
• Amway News• Contact Amway North America
Growth Incentive Program Personal PV Requirement Clarified
IBOs are asking what role the 300PV plays in the current Growth Incentive Program for the annual Q12 and Expansion Awards. Here’s a clarification:
• Each IBO who participates in the current Growth Incentive Program must have a personal PV circle of at least
300 PV with a minimum of 50 QCPV (qualified customer PV) each month to earn the annual Q12
and/or Expansion Awards.• IBOs may average their 300 personal PV for the year (3600 total for fiscal year), but note that the 50 QCPV
must be done each month and not averaged.• QCPV can only be done through Auto Capture or CSA and not through CVR.
If you have additional questions, be sure to ask your upline.
Amway India targets 22% growth for 2010
Plans to expand its Nutrition & Wellness category, Targets Rs. 2,500 crore by 2012
Kolkata, West Bengal, June 23, 2010 /India PRwire/ -- Amway India Enterprises Pvt. Ltd, the country's largest Direct Selling FMCG Company, has set itself a 22% growth target for the fiscal year 2010. Last year (2009), the company recorded a sales turnover of Rs. 1407 crores.
Addressing a press conference here at Kolkata today, Mr. William S. Pinckney, MD & CEO, Amway India, said, "we have grown from Rs. 799 to Rs. 1128 to Rs. 1407 crores over the past three years, essentially as the quality of the Amway pick-up centres have undergone a sea change and are more experiential for the consumer. The ability to place orders on the web has also led to higher productivity from distributors and our TV ad campaigns have definitely enhanced the brand Amway on a national scale. Going forward, we will focus on four key strategic pillars to drive growth - business excellence, consumer experience, distributor experience and products & brands".
Mr. Pinckney added, "we currently have 9 brand experience centres. Going forward, we plan to add another 20 more over the next year and will also be expanding our infrastructure by setting up more Amway Touch Points. Our lead categories - Nutrition & Wellness and Cosmetics, contributing 60% to our revenues and with two Rs. 100 crore brands (Nutrilite Protein Powder and Nutrilite Daily), will witness a slew of new product launches. All these initiatives will take us to the projected growth"
Throwing light on the business in Eastern region, Mr. Pinckney said, "Eastern India continues to be one of the major contributors to our revenue and also one of the fastest growing regions. With our dedicated distributors of Eastern market and quality products in place, the Eastern region will soon be a top market for us".
Notes to Editor
About Amway India
Amway India is country's leading direct selling FMCG Company. The company has invested more than Rs 151 crores in India, and has 130 offices and 55 city warehouses across the country, covering over 4000 cities and towns through its home delivery network.
Almost 85% of the products sold by Amway India are now manufactured within the country through 7 third-party contract manufacturers. Amway does not have its own production facility in India. Amway India currently offers over 115 products in five categories of Personal Care, Home Care, Nutrition & Wellness, Cosmetics and Gift catalogue.
Amway India now ranks amongst the top FMCGs in India, a feat achieved in just over 10 years of commercial operations - making a truly fast moving FMCG.
Recently, Amway has tripled production capacities at its leading vendor facility at Baddi, Himachal Pradesh by commissioning four new production lines at an investment of Rs. 55 crores.
Globally Amway had posted revenues of US $ 9.2 billion in 2009.
Case Study – Corporate Social Responsibility – AMWAYPosted on Thursday, January 17, 2008 by BullsEye
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By the end of your reading, you should be able to answer the following questions:
1. What do you understand by the term Corporate Social Responsibility (CSR)?2. Explain two actions that Amway and its IBOs are currently taking that involve CSR.3. Analyse the key ingredients in Amway’s CSR strategy. Show how the strategy is designed to
translate the vision into practical steps on the ground.4. Recommend ways in which Amway could enhance and develop its impact on making every child
matter.
IntroductionCorporate Social Responsibility (CSR) means businesses and organisations working responsibly and contributing positively to the communities they operate in. It involves working with employees, their families, the local community and society at large to improve their quality of life. Companies that operate in a socially responsible way strengthen their reputations. In
business, reputation is everything. It determines the extent to which customers want to buy from you, partners are willing to work with you and your standing in the community.
The companyAmway is one of the world’s largest direct sales organisations with over 3 million Independent Business Owners (IBOs) in over 80 markets and territories worldwide. It is a family-owned business with a strong emphasis on family values. Its IBOs are often couples. Many of these are raising families. They therefore have a strong bond with children. These families are more than happy to partner with Amway, who, as part of its Corporate Social Responsibility strategy, works with UNICEF, the United Nations Children’s Fund.As a family company, Amway is committed to playing a part in improving the lives of children in need across the globe. In this way, the company is able to show its commitment to the support of global causes. Amway defines a global cause as ‘a social issue affecting many people around the world engaged in a struggle or plight that warrants a charitable response’.This case study shows how Amway is a business that does more than provide customers with good quality products. It shows the practical realities of Amway’s global commitment and how it plays a key role in the communities in which it operates.
Growth and responsibilityAn understanding of how Amway operates as an organisation gives a clearer picture of the contribution it can make to help children in need across the globe. Amway’s vision is to help people live better lives. It does this every day by providing a low-cost low-risk business opportunity based on selling quality products.
What does Amway do?Amway distributes a range of branded products. These products are sold to IBOs worldwide. The IBOs are Amway’s links with consumers and the communities in which they operate. The IBOs are self-employed and are highly motivated. They work within the guidelines of Amway’s Rules of Conduct and Code of Ethics, which are about being honest and responsible in trading. IBOs sell to people that they know or meet. They can introduce others to the Amway business.Typical products that IBOs sell include:
personal care – fragrances, body care
skin care and cosmetics
durables such as cookware and water treatment systems
nutrition and wellness products such as food supplements, food and drinks.
IBOs play a key part in helping Amway to deliver its Global Cause Programme.
Amway programmesIn order to give many of the world’s children a chance to live a better life, Amway launched the global One by One campaign for children in 2003. The One by One programme:
establishes Corporate Social Responsibility at a high level.
Amway encourages staff and IBOs to support its One by One campaign for children.Since 2001, Amway Europe has been an official partner of UNICEF and has been able to contribute over €2 million (about £1.4 million). The focus is on supporting the worldwide ‘Immunisation Plus’ programme. This involves, for example, providing measles vaccines to children across the globe. The ‘Plus’ is about using the vehicle of immunisation to deliver other life-saving services for children. It is about making health systems stronger and promoting activities that help communities and families to improve child-care practices. For example the ‘Plus’ could include providing vitamin A supplements in countries where there is vitamin A deficiency.Since 2001, Amway and its IBOs across Europe have been supporting UNICEF’s child survival programme. The need is great. One out of ten children in Kenya does not live to see its fifth birthday, largely through preventable diseases. Malaria is the biggest killer with 93 deaths per day. Only 58% of children under two are fully immunised.The work of the One by One programme is illustrated by a field trip undertaken by Amway IBOs to Kenya. The IBOs travelled to Kilifi in 2006 to meet children and to find out what the problems are in various communities. They act as champions spreading the message throughout their groups. In Kilifi, the focus is on trying to reach the most vulnerable children and pregnant mothers. The aim is to increase immunisation from 40% to 70%. Other elements of the programme involve seeking to prevent the transmission of HIV/AIDS to infants. As the Amway organisation grows and prospers, it is able through CSR actions to help communities to grow and prosper too.
Developing a strategyA strategy is an organisational plan. Implementing a strategy involves putting that plan into action. In other words a strategy shows how a business will achieve its goals. The strategy thus enables an organisation to turn its values into action. Values are what a company stands for. An important value for Amway is being a caring company. Amway believes in demonstrating this caring approach and this is why it has partnered with UNICEF.All Directors design strategies for the whole of an organisation. Effective strategies involve discussion and communication with others. The views of IBOs are influential in creating strategies for Amway. Amway’s strategies for corporate social responsibility are cascaded through the organisation as shown below.Amway’s Global Cause strategy involves creating responsible plans that make a difference. However, the strategy is flexible. In shaping the strategy, research was carried out to find out which global causes IBOs support. The results showed that many favoured a cause that helped children. There was a clear fit between Amway’s aims to help children and UNICEF’s ‘Immunisation Plus’ programme for children.
ObjectivesFrom the outset, Amway set out some clear objectives for its strategy. These were to:
build loyalty and pride among IBOs and employees
enhance Amway’s reputation as a caring organisation
make a real difference to human lives.
Child mortality is particularly high in developing countries because of infectious diseases. Many children could still be alive if they had been vaccinated.For under £12 a child can be vaccinated against these diseases and has a fighting chance to reach adulthood. UNICEF’s world child ‘Immunisation Plus’ programme is a fitting focus for the activities of Amway UK and its IBOs.The UK initiative is part of a European-wide fundraising campaign for children. It recognises the importance of building good working relationships with UNICEF in each market in order to launch fundraising programmes through Amway’s IBOs and their customers. The objective is to raise €500,000 (about £350,000) every year until 2010 across Amway Europe.In 2005 Amway UK’s partnership was deepened through becoming an official Corporate Partner of UNICEF UK. The Corporate Partnership is a closer longer-term relationship which benefits both partners. Working together the two parties raise money for UNICEF.
Identifying stakeholdersAmway’s Corporate Social Responsibility strategy has been developed with the interests of the following stakeholders in mind:
Communicating the strategyGood, clear communication is essential in making sure that the CSR strategy relates directly to the company business objectives . Communication also helps in putting the strategy into practice.A number of communications media are used:1. Face-to-face communication: Regular meetings take place between UNICEF, Amway and its IBOs. Through meetings with UNICEF staff, Amway is able to discuss the vision and objectives. It then passes the message on by meeting with IBOs. In 2005 the two organisations arranged a joint briefing day for IBO Leaders. They were able to hear firsthand experiences from UNICEF staff about their roles and UNICEF’s work as well as where the money goes.2. Printed material: Amway produces a monthly magazine for all IBOs called Amagram.3. Public relations materials are also important, particularly at launch events for the initiative (e.g. in Milton Keynes in 2006).4. Email communication: Email is very important in the company – it plays a significant part in keeping IBOs up-to-date.5. Online activities: There is a micro-site dedicated to the Amway UK/UNICEF partnership on the UNICEF UK website.
FundraisingAmway Europe provides support for fundraising to the extent of €500,000 (about £350,000) per year through selling items such as:
However, Amway UK’s support goes well beyond these activities. In addition, it involves staff fundraising events and raffles organised by the IBOs. UNICEF attends IBO major events (usually supported by 1,000 or more IBOs) where requested. A UNICEF stand outlines the work with speakers, literature and merchandise.
ConclusionAmway is a family business with family values. Its IBOs are people who want to make a difference to the communities in which they operate and to the wider world community. This is Corporate Social Responsibility (CSR) in action.
The clue to Amway’s success is the careful planning of its strategy and its involvement with many stakeholders in getting the strategy right. Of course, it is early days in the latest chapter of a strong relationship between Amway and UNICEF. Evaluation is taking place to measure the success of the initiative in terms of meeting fundraising goals. Customer research is carried out to test customers‘ views on the relationship and to find out how aware the general public is about what Amway is doing in the field of CSR.
A comparison & analysis of product sales, PV/BV, tools expenses, miscellaneous overhead and profits for Quixtar & Amway IBO's in North America
There is a great deal of material on the internet regarding the Amway/Quixtar tools and motivational and personal development systems. Few look at it purely from a "numbers" point of view.
At the same time, after nearly a decade as a distributor/IBO, never once have I seen an itemized list of expenses and overhead related to building the business, except on my own tax returns. (That would naturally tend to be de-motivational for some people, so it tends to not be discussed in those terms.)
Amway IBO's are not exactly encouraged to analyze things this way, but as I looked at my own experience in the business, I felt that breaking down the tools business versus the product business would reveal a lot of things.
It may take a bit of patience to understand what is being presented, but the table below details product movement vs. tools investment. Here's what you're seeing here:
The vertical columns show 7 different types of IBO's, going from "most committed" to "least committed" from left to right.
As you can see, the most committed people show the plan more, purchase more products, generally purchase more tools, and generally incur more miscellaneous expenses such as tanks of gas and long distance phone calls. The least committed, of course, do less of everything.
The 'proportions' of expenses, product purchases/sales and tool investment shown here is a conservative estimate based on my own experience. However, I am open to hearing from other experienced business builders, who are interested in sharing their actual product volumes, tool volumes and earnings. This chart is not authoritative by any means, it is only a generalized example of what is probably typical.
So take a look at this chart, see how things add up in the bottom column, then below I will offer some explanations of what these numbers really tell us.
Type of IBO >>
"Mach 2 With
Hair On Fire"
"All Fired Up"
"The Motivated Minority"
"Thinkin' Real
Seriously 'bout this"
"Going to Get Around
to This Someday"
"This ain't a bad deal for
$25/ year membership"
"Gee Martha,
Didn't we sign up in
some deal
awhile back?"
% of IBO's like this 2% 8% 10% 20% 20% 20% 20%
# Times per month: Shares The Plan with prospects
15-20 STP/ month 5-10 STP 2-5 STP 1-3 STP 0 0 0
Book of Month $10/month $10/month $10/month $10/month Weekly Tape #1 $30/month $30/month $30/month $30/month Weekly Tape #2 $30/month $30/month $30/month Opens (2-3 per month) $20/month $20/month $20/month $10/month $10/month
Rallies (8 per year) $15/month Avg.
$15/month Avg.
$15/month Avg.
$15/month Avg.
Functions (5 per year)
$60/month Avg.
$60/month Avg.
$60/month Avg.
Mileage (assuming 20 cents per mile)
1500 mi @ $0.20/mi =
$300
1000 mi @ $0.20/mi =
$200
500 mi @ $0.20/mi =
$100
100 mi @ $0.20/mi = $20
Coffee, Tips, Lunches, etc. $75 $60 $40 $20 $10
Amvox Voice Mail $19 $19 Long Distance Telephone $60 $40 $20 Organization Newsletter
$3 Avg. ($36/yr)
$3 Avg. ($36/yr)
Organization Website Access $10 $10 Replacing Lost Overnight Info Materials
$40 $30 $20
Replacing Lost Ad-Packs/ Buying Tapes, Handouts, Catalogs, Literature
$30 $20 $10 $5
Babysitters $50 $40 $25 $25 Monthly average $ for Hotels (5 functions / year x2 nights each)
Now let's take a look at this and see what it tells us about the dynamics of a typical IBO organization:
If you average the columns together, you get an average PV/BV per IBO of 40 PV / $80 BV based on 1 PV (point volume) = $2 BV (business volume). I believe this is about the average for North America - someone correct me if I'm wrong.
Total The Numbers for a "Platinum" IBO
Now let's suppose we collect enough people to form a "Platinum IBO" or "Direct Distributorship." In this example, this IBO has a total group volume of 8000 PV / $16,000 BV, which is just above the minimum requirement of 7500 PV for Platinum.
Here's what this "Platinum IBO" would have within his or her group, based on the example table above:
200 total IBO's (note: 1 IBO = 1 distributorship, which is sometimes one person, sometimes it is a couple)
8000 PV, or Point Volume $16,000 BV, or Business Volume = sales of products by the group and to the
group 4 IBO's who show the plan 15 times per month or more and do 200 PV (Column
#1 - "Mach 2 with hair on fire") 16 IBO's who show the plan 5 times per month or more and do 150 PV (Column
#2 - "All Fired Up") 20 IBO's who show the plan 3 times per month or more and do 100 PV (Column
#3 - "The Motivated Minority") 40 IBO's who show the plan 1 time per month or more and do 40 PV (Column #4
- "Thinkin' real seriously about this") 40 IBO's who don't show the plan and do 20 PV (Column #5 - "Goin' To Get
Around To This Someday") 40 IBO's who are card carrying members and do 10 PV (Column #6 - "This Ain't
A Bad Deal For A $25/Year Membership") 40 IBO's who do absolutely nothing and got in for no apparent reason (Column
#7 - "Gee Martha, Didn't We Sign Up In Some Deal Awhile Back?") They move 120 tapes each week into this group They move 80 books each month into this group They have about 80 IBO's show up at rallies each month They sell $12,148 of tools to this group of 200 IBO's each month This group of 200 IBO's invests $16,480 into miscellaneous expenses such as
gasoline, hotel rooms, babysitters, phone calls, etc. Based on $16,000 BV and 25% bonus chart level for 8000 PV, this group is paid
$4000 per month in performance bonuses, plus some amount of special incentives, trips, and profit sharing paid to the Platinum IBO. Let's assume the additional bonuses paid to the platinum IBO are $1000 per month.
Let's also assume that 25% of the $16,000 sales volume is sold to customers at retail. Let's assume the retail profit margin on these sales is 20%. Therefore 25% x $16,000 x 20% = $800 retail profit going into somebody's pocket for selling retail.
So let's summarize:
200 independent businesses (perhaps 300 people) collectively sell or consume $16,000 of consumable products.
This group of 200 IBO's presents the sales and marketing plan to about 400 prospects each month.
They invest $28,628 in tapes, books, business functions, hotel rooms, restaurant tabs, babysitters, etc.
Collectively, they get paid $5800 in bonuses and commissions: $4000 performance bonus, $1000 profit sharing etc., $800 retail profit.
Therefore, a direct distributorship has $16,000 of product sales, $5800 of income and $28,628 of expenses, plus a substantial investment of time ("man hours").
Now this example only looks at things at the Platinum / Direct Distributor level and below. It does not consider the following:
Tools bonuses paid to the Platinum IBO himself/herself 4% bonus, 1% leadership bonus, Ruby Bonus, Emerald Bonus, Diamond Bonus,
Q12, etc. Tools bonuses paid at the Emerald level, Diamond level etc.
I am not an authority on this subject, and I would like input from those who know more than me. But this is what I generally believe to be true at these higher pin levels:
An additional estimated 10% of BV is paid out, by Amway/Quixtar, to Platinum / Emerald / Diamond IBO's and above - in this example that would be $1600 in leadership bonuses for the $16,000 BV.
I estimate that about 50% of the $12,148 of tools/function money is available to Platinum / Emerald / Diamond IBO's and above in the form of speaking fees, profits on ticket sales, and margins on tape and book sales. For this group of 200 IBO's we've been considering, that would be $6074.
Note that "information products" like tapes, books and meeting tickets naturally have higher profit margins than "consumer products" such as soap, electronics and cosmetics.
ADDING IT ALL UP
So taking the higher level bonuses into consideration, here's what total bonus money we have from this same group of 200 IBO's:
$16,000 of product is purchased, and $16,000 worth of product is received and consumed
Monthly "expenses" (tools, gas, etc.) = $28,628 Monthly "gross profit" = total bonuses paid out to everyone involved =
$13,474 Net profit / loss for the entire group = -$15,154 (loss)
Therefore, a Platinum level business (or "Direct Distributorship"), as a whole, taking all expenses and bonuses into account, loses $15,154 each month.
(Now let me clarify that the Platinum IBO himself or herself is probably making money. Maybe a couple of thousand dollars per month, whatever it happens to be. But you can subtract him, and his profits, from the group, and you end up with the rest of the group in the red.)
A few more observations:
$4800 of these bonuses is available to IBO's in this group who are below the "Platinum" level
$8674 of these bonuses is available to IBO's in this group who are at or above the "Platinum" level.
0.5% of the IBO's (1 out of 200) are at or above the "Platinum" level. Therefore 64% of the money is paid to 0.5% of the people. 99% of the expenses are incurred by the group of people who receive the
remaining 36% of bonus money.
"OK, so how should I interpret this data? What are you really saying???"
It is not my intent to pass judgment here; you as the reader are perfectly capable of doing that. Is it OK for a Platinum distributorship, all things considered, to collectively lose $15,154 each month? You decide. Here are some things you should consider:
You must understand that most business that are experiencing fast growth have "balance sheets" that look like this. They lose more money than they make because it costs money to expand the business quickly. Most businesses borrow this money from investors. In the Amway / Quixtar business, the majority of funding for business growth is provided by individual IBO's instead of outside investors. Of course, this is the basic principle of the Multi-Level Marketing concept.
Please note that in an MLM business with a strong retail focus, there is a realistic opportunity for everyone to be profitable, even at the lowest levels. When there is no retail focus, entry level distributors will invest more money than they earn.
Consider www.amazon.com - Last year, their sales were something like $1 Billion, and they lost $350 million in the process. That's very heavy losses compared to sales! Is that OK? The marketplace (and ultimately, Wall Street) are still deciding.
So far, Amazon stock is valued far in excess of its profitability, because investors believe that Amazon has enormous long term potential. But Amazon must ultimately become profitable, because this high stock value cannot go on indefinitely without the company showing a profit.
Is Amway experiencing the fast growth that would justify this heavy investment in tools, gasoline, etc.? We can only look at the most recent sales numbers: 1996 - $6.3 Billion; 1997 - $6.8 Billion; 1998 - $5.7 Billion; 1999 - $5.0 Billion. So during the last two years the company's sales have dropped 26%. (Note that some of this loss is due to the Asian crisis, and Amway does not divulge sales figures specifically for North America.) Amway has recently (May 2000) announced layoffs.
It's reasonable to assume that IBO's and Distributor's profits have similarly fallen. So at least during the last couple of years, the investment in tools etc. has not paid off for most IBO's.
How well will the new Quixtar brand do in Fiscal Year 2000? Will fast growth return? We don't know yet, but that's what IBO's are betting on.
Is the Amway/Quixtar performance bonus plan fair in terms of how it distributes money? You must decide for yourself.
Is the distribution of money in the tool systems fair to everyone involved? Again, you must decide for yourself.
Do the tools, in themselves, have value above and beyond their ability to teach IBO's how to move products and make a profit in their business? Most IBO's would say: Yes, definitely. Others may disagree. Again, you decide.
The webmaster encourages feedback from experienced business builders who can comment on the numbers presented here. This is only a careful estimate based on my knowledge and experience. Different distributor organizations use different methods, and specific cases can vary considerably in terms of tools to product ratios etc.
Also, different tool systems have different bonus structures, and even different organizations within the same tool system distribute bonuses differently. Email us with your comments [email protected] if you have credible data to share. Unfortunately we are not always able to respond to each of the opinions submitted by the thousands of people each month who browse this website.
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The data presented above is only an example of the possible internal workings of an Amway / Quixtar IBO organization. These are not intended to be representations or promises of actual income, nor is this in any way intended to be a formal presentation of the Amway / Quixtar sales and marketing plan. You should request a copy of the SA4400 from Amway which discloses legal parameters and statistical data regarding the Amway sales and marketing plan.
Legal Notice: Amway is the registered trademark of Amway Corporation. The opinions expressed in this site are the opinions of various individuals and are not necessarily those of the Amway Corporation or its personnel. This site is NOT a product of the Amway Corporation, and has not been endorsed, reviewed or otherwise approved by the Amway Corporation.
