Thursday, June 30, 2016

Amway "Tools Systems" Expenses?

It is my observation that people who join Amway usually end up losing money in the end. They may get involved to make a few bucks or because they are mistakenly led to believe that they will become millionaires in Amway in 2-5 years. I know my sponsor convinced me that we would be millionaires in a few years. These folks who recruit new IBOs into Amway are often associated with a "system" such as Worldwide Dreambuilders (WWDB)or Network 21 (N21). These system promoters, often diamonds, may mislead the recruits by showing them pictures of mansions or other luxuries, implying that they attained these goods with their Amway business. In many cases, it is a deception, especially when we know for a fact that some diamond leaders who proclaimed that they only make cash purchases, had their homes foreclosed. Without the hype, I am sure there would be fewer sign ups. But what is the evidence?

It is simple. Amway reports that the average active IBO earns about $00 a month in gross income. This average includes diamonds and other higher end IBOs. I believe if you calculated the median, the average would be much lower. This figure does not include factoring in business expenses.

But what makes most IBOs operate at a loss is the system expenses. The system generally consists of voicemail, standing orders, cds, functions, books and other materials. An average business building IBO might spend an average of $250 a month or so on these expenses. Amway defenders like to decry the amount, but there are couples who would likely spend more and IBOs who must travel by air to functions would spend more. Single IBOs who buy only the minimum might spend a bit less. Some IBOs with abusive uplines might spend much much more than $250 a month on tools and functions. I believe my former sponsor probably spent easily an average of $1000 a month on average. (I am from Hawaii so the average cost of functions is greater due to long distance air travel)

Thus if the average IBO earns $200 a month gross, but the same average IBO spends $250 a month on tools, the average active IBO is losing $50 a month, with lower level IBOs (i.e. 100 PV) would lose more as they wouldn't earn anything close to $200 from Amway.

Look at a group of 100 IBOs at 100 PV. (This is just a model). If a 100 business building IBOs average $250 a month on tools, they as a group would expend $25,000 a month on tools. Their volume would be 10,000 PV, or about 30,000 BV. This would generate about $7500 in bonuses per month. Thus this group spent $25,000 to learn and be motivated while the group splits up $7500 a month in bonuses. The platinum would get the lion's share of the bonus but most of the rest of the group will suffer net losses. As the group grows, the bonus may grow, but so will their expenditures on tools. And I might add the collective losses would grow as well.

The only way the group can make money as a whole is to avoid participation in the tools altogether. The evidence is right here with simple math. The systems do not work because the cost of the system is likely to consume all of the Amway generated bonuses and more. I gladly challenge anyone to explain in detail how this post is not reflective of the reality of being in Amway and a system such as WWDB or Network21.


Anonymous said...

Well, Joe, I think you'll have a long wait before anyone from Amway comes here and tries to explain (much less defend) the tool racket. It's simply indefensible in terms of finance.

What they might do is try to defend it in terms of learning and maturing. They'll say that you need to "find out how to be a success," or that you have to "discover the secrets" of MLM. In that sense, what they mean is that the tools racket is like going to college -- very expensive, but a big payoff in the end.

Of course, we know that this is untrue -- the tools don't really teach you anything practical, and are just motivational hype for the most part. And they are mindlessly repetitive, saying the same dreary propaganda over and over, month after month.

I knew Amway back in 1970, before any of the "systems" came into existence. Retail sales of Amway products were still a major factor in the business, and you were expected to push for retail sales just as hard as you pushed to recruit a down-line.

All that has changed, largely because of the "systems," which are like leeches attached to the original Amway idea. They push nothing but recruitment, and personal IBO consumption of Amway products.

Joecool said...

I believe the introduction if tools was a genuine desire to be able to teach distance groups and to help motivate people who the upline did not see in person regularly. But then the diamonds realized how much money could be made from tools and then it became a corrupt system.

Amway apologists will deny it but if you do the math, you can easily conclude that the system is the real business and Amway is just a front. Just like the mafia did their business in the backroom of some Italian restaurant.

I believe most diamonds make half of their income or more from the tools. It could be more if they are diamonds who fell out of qualification and no longer have the larger numbers of downline.

Lorikeets said...

I loathe Network21 for so many reasons.
I don't know if all the different amway supra scam groups do the same thing but I've heard the N21 members declare that their leg or down line structure is different to the other groups (is that even allowed by scamway) and permits the maximum chance of success. I've heard them mocking the other scam way scam groups that also use the scam way centre (a drab building located on the edge of a very busy highway in the fringes of the worst suburbs of where I live), saying that they have to call up lines 'sir' etc (not sure what upline ladies get called there are so few of them I suppose). For someone not indoctrinated these are only a few of the many bizarre parallel universe gems one hears when a friend is in deep.

Joecool said...


All groups in Amway operate more or less the same. They claim to be the "best" or the most profitable. And of course, the IBOs believe but really have no way of knowing who is the best or most profitable.

When you can see the trees from the forest, this seems like irrational and bizarre behavior for sure.

Anonymous said...

Back in 1970, if you were prescient you could see how the subsystems were going to develop. They didn't exist back then, but the ATTITUDE of savagely competitive greed that would bring these systems into existence was already in play.

Ironically enough, De Vos and Van Andel sensed it too, and they did in fact try to clamp down on the crazier types who were eventually going to begin the subsystems. I recall one tape on which one of them (I forget who) recounted how someone in Amway tried to get his newly recruited down-line to purchase $5000 worth of Amway stuff, just so that the guy could "Go Direct" immediately. ("Going Direct" back then meant becoming a Platinum.) The speaker raged against the man who did this, and forced him to take back all of that $5000 worth of stuff and pay for the shipping costs. And he said "Amway doesn't tolerate ripping off the people underneath you! You don't force people to buy stuff they don't need or can't reasonably sell! Nobody in this business goes direct by pumping up fake sales! I told the guy that if he tried this again I'd kick him out of Amway!"

Similarly, a communique from Amway was sent out to all distributors and their up-line, saying that one could NOT tell prospective recruits that they could "walk away" from the business after a while and that money would just continue to roll in. "This doesn't happen," the communique said. "Persons who are prospering in Amway are still very much involved in the business!"

Would there be a peep out of the Amway bigshots today if something like this happened? Would they give a damn about anything that the scum in WWBD or Team21 or BWW or URA lied about? Would they complain if some dumb IBO bought $5000 worth of stuff at one time, and got stuck with it?

No -- Amway has been colonized by the motivational subsystems. The tail is wagging the dog.

Joecool said...

I believe Amway has a symbiotic relationship with the systems. Amway turns a blind eye and reaps profits. In return, the systems to the recruiting of new IBOs, teach them 100 PV minimum and product loyalty.

The systems leaders are rewarded by selling tools to unsuspecting IBOs and prospects while Amway looks the other way.