Thursday, September 1, 2016

How Money Is Made In Amway?

I have been reading some ongoing debates about whether the system income for higher pins is more than their Amway bonuses. I believe the systems such as BWW, WWDB, N21 or LTD, does generate more profit for upline than the sale of Amway products. How the system income is divided though, is still a mystery as it doesn't appear that there are bonafide written contracts explaining how tools income is split up among the higher pins.

But it's very easy to determine that more income is made from the system than from Amway. If you move $100 worth of Amway products, Amway will pay about $33 back in the form of bonuses. These bonuses will be split among the Amway IBOs (middlemen), depending on your level. On the other hand, if your group bought say 20 cds at $5.00each, the system will profit about $90 as cds cost about 50 cents each to produce in bulk. Some Amway apologists will cite the fact that some groups sell cds for $2.50 or $3.00. While this is true, there is a "member's fee" which must be paid. And when you add in the member's fee, the profit for the system is the same or possibly higher!

If you buy a major function ticket for $100, the cost of that function might be in the neighborhood of $25 to $30 per attendee, so the system may generate $70 profit on a $100 sale. I believe the smaller functions such as open meetings, books and voicemail have smaller profit margins, but still overall, it's easy to conclue that the profit from the system is greater than profits generated by moving Amway products.

The only question is how much each individual earns. I have "heard" that platinums get a discount on the sale of standing orders and cds, but I have never heard of a platinum sharing any profit for functions, voicemail, or any of the other materials. This is puzzling to me as I believe the platinums do the most work in the system.

So for the lower level IBOs, if you move $300 in Amway sales (Approximately 100 PV), you will receive about $10 or 3% while upline enjoys the rest of the $90+ in bonuses from Amway. And then when you purchase and move tools volume, you receive nothing and some of your uplines enjoy all of the profit. While I don't see any problem in upline making a profit for selling training materials, I see a problem in the fact that the tools don't work. So few IBOs progress to levels where an actual profit is earned. Amway supporters will point out the new platinums emerging each year, but do not mention the platinums who do not re-qualify.

Based on my observations, I can only conclude (quite easily) that there is substantially more profit from the sale of support materials for upline to enjoy, and I can also conclude that the support materials are ineffective in training downline IBOs so they can progress to higher levels of the business.


Anonymous said...

Joe, your analysis is right on target. And for rational, disinterested persons, it is absolutely convincing.

But people in Amway are neither rational nor disinterested. They have a completely different take on the whole matter.

Consider what you say about how you don't see a problem in up-line making some profit from the sale of tools, but you do see a problem in the fact that the tools don't work. Amway freaks simply won't understand this, because their counter-argument goes something like this:

"The tools most certainly work, if you manage to get more IBOs under you to form your own down-line! You will be able to sell tools to them for a profit!" In other words, the idea that Amway freaks operate on is the idea that selling the "Plan" or the "business opportunity" is the core of what Amway does. If you can generate down-line, eventually you too will make money from the tools racket. Moving Amway products is completely sidelined and unimportant.

You're right about the Platinums doing most of the hard-core work in Amway. My spy at WWDB confirms this. He says, "Without the unending labor of Platinums, the whole structure collapses." And this is the structural weakness in Amway that the higher-ups are constantly worried about. They want Platinums because of all the unpaid work they do. But they don't want to cut them in on the very profitable "Tools" racket. So they give Platinums a few perks such as discounts to keep them happy. But they are not especially keen on those Platinums rising to higher pin levels, so the movement of Platinums upwards is carefully micro-managed to prevent a destabilizing change in the split of the Tools-and-Functions take. If your up-line doesn't want you to move higher, you won't move higher.

Some Platinums force their way upwards by sheer energy and aggression, and usually Amway will accommodate their desires in order to avoid trouble. But think of the many Platinums who fall out of qualification, or who quit, or who decide to move their entire organization to a different MLM. This shows the core weakness of the Amway operation. They simply DO NOT WANT success for everyone. Unlike a normal business enterprise where growth is welcomed, Amway is a zero-sum game. The pie can only be cut up to serve a limited group of people. The smouldering anger of Platinums is the fatal weakness in the Amway empire.

To put it more simply, the entire thrust of Amway is not towards growth, but towards "churn." New IBOs to replace inactive ones, new Platinums to replace ones who quit, new and fresh sources of fees and tool-and-function money from naive losers who have never heard of Amway before. It is a classic pyramid scheme, or more concretely, a carnival barker's hokum racket to get new rubes to pay their dime to see a hootchie-kootchie show. Just keep barking, and just keep collecting those dimes.

Anonymous said...

Joe, I added a lengthy comment to this thread several hours ago, but it hasn't appeared. Has it gone to your spam folder?

Joecool said...

It's now posted. It went to spam.

Anonymous said...

Yes, Amway is all about "churn." It's about sucking IBOs dry, and then replacing them with naive, new IBOs who can also be sucked dry.