Monday, May 15, 2017

The Real Amway Business?

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. There is also the debate of whether diamonds themselves or their "corporations" receive the profit, which is laughable as a defense.

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! Even when you factor in the system employees, you can easily see the math and determine where the real money is made.

If you buy a major function ticket for $125, the cost of that function might be in the neighborhood of $25 to $30 per attendee, so the system may generate $100 profit on a $125 sale. I believe the smaller functions such as open meetings, books and voicemail have smaller profit margins, but still overall, it's easy to conclude that the profit from the system is greater than profits generated by moving Amway products. I might add that the sales on these functions are often made in cash, thus who knows if the diamonds are even paying the IRS taxes on these sales.

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, helping downlines.

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 that the use of tools cannot be justified. 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. But as PT Barnum once said, a sucker is born every minute.

11 comments:

Anonymous said...

The most obvious problem with tools and support materials in Amway is that they are NEVER-ENDING. Every month you have to shell out for new tapes, new CDs, new books, new materials, and new meetings.

In any kind of normal, real-world training, the training experience is finite. There's a certain amount of information to learn, and a fixed number of rules to memorize. After that, you're trained. Sure, you may go back and review a few things later on for reinforcement. but you don't require endless new training and new materials!

The Amway subsystems (WWDB, N21, BWW, LTD) all make "tools" an essential and inescapable part of their membership requirements. And Joe Cool is quite right -- the only reason for this is to maintain a steady flow of money upwards to up-line. How the hell much training do you need, anyway? If you can't be effectively trained within six months, there's something inherently wrong with your mind, and you shouldn't be in business at all.

Joecool said...

The Amway business is selling products, buying products and sponsoring downline. How much training do you really need? I would also mention that upline rarely taught anything about selling products. It was mostly self consuming and recruiting. In other words, they were promoting a pyramid scheme.

Himanshu Shah said...

Pyramid is a universal truth, if you want to become a GM or any other top level position in your company then you have to gain knowledge first, and when you reach on that level obviously you will enjoy the Perk & income, and on that time your peon say this is pyramid scheme & I don't want to work in this company then what will be your reply to him?

John Doe said...

Himanshu Shah said, "Pyramid is a universal truth"

What? Is this another awkward way of suggesting that everything pyramidal in shape has all of the same characteristics of other things pyramidal in shape? Why do you guys have to make things sound so convoluted and awkward? Not only is that not true, but the way you said it is completely ridiculous.

Himanshu Shah said, "if you want to become a GM or any other top level position in your company then you have to gain knowledge first,"

What?! That is not the way being promoted works at all! If you want to be promoted, then you probably need to work your tail off, not screw up, and have a consistent desire to improve the business. That has nothing to do with some mystical "knowledge".

You sound like one of those get-rich-quick gurus like Kiyosaki mixed with a weird fortune from a fortune cookie. I wouldn't be surprised if you made using a microwave sound like some ancient mystical process. In order to make the magical beams of energy cook your food, you must first quest for knowledge in the manual of the gods and learn about the buttons of destiny.

Himanshu Shah said, "and when you reach on that level obviously you will enjoy the Perk & income, and on that time your peon say this is pyramid scheme & I don't want to work in this company then what will be your reply to him?"

Your "Peon"?! Who talks like this?! Can we get a narcissism alert?

If an EMPLOYEE tells their boss they don't want to work for them anymore, then guess what the boss will say? "There's the door!", and the boss will go out and replace the employee. Also, you are confusing a person being paid a wage for a service with someone that gets paid commissions based on recruitment. They are highly different subjects, and the question you postulated comes from a person with no real business experience.

Anonymous said...

To Himanshu Shah --

The normal hierarchy of a company is NOT a pyramid scheme. Levels of responsibility and authority are normal in any big operation.

A "pyramid scheme" is a corrupt and illegal method of recruiting persons into an organization, and making the further recruitment of other persons by them a requirement.

Big companies with a structure of hierarchy are NOT pyramid schemes. Those companies produce actual good or services that the general public wants to buy.

Amway and other MLMs are pyramid schemes because they are basically unconcerned with the movement of goods into a general market, for the sake of making a normal profit. Amway is only interested in signing up more IBOs, and bleeding them dry of funds for years.

Wake up, Himanshu Shah.

Unknown said...

1PV:$3 ratio
Retail margin is 35%
Bonuses are calculated through personal & differentials

For an example:
100PV/300BV( personal use)
50PV/150BV (Amount sold to clients also is minimum required to qualify of any bonuses )

Your retail margin total is
35%x150BV= 52.50

Personal Performance Bonus
3%×450BV = 13.50
New IBO performance incentive
= 50.00

So your total for 150PV ( if you actually sold 50 PV to customers) will bet you out to $116

The problem isnt within the compensation plan, it's with people not fully understanding how we get paid. Of course you'renot profitable spending $300, selling only $150 worth of product for the month and only netting back $116.

So how do we fix this? SELL MORE

Another example:
Say if Chris bought $300 worth of products for his own personal use that will bring him 100PV:300BV. Now say instead of Chris only selling the bare minimum of 50PV:150BV to customers, he decides to step up his game & make a goal to sell 500PV:1500BV worth of products to customers.
Here is how much he'll make

Chris retail:
35%×1500BV=525

Personal Performance Bonus
9%×1800BV=162

New IBO incentive
=50

Chris profit after expenses will be $437, $387 if he isnt a new IBO. & btw Chris doesn't even have a team.

Say if he set a goal to buy 100PV:300BV for personal use & sell 900PV:2700BV worth of products. Here is what Chris makes now

Chris Retail margin:
35%x2700BV= 945

PPB:
12%x300BV= 360

New IBO In.
=50

That's 1,355 total.... 1,055 in profit...1,005 if he isnt a new IBO
& CHRIS doesnt have a team.

Now, the other way to get paid is through differentials.
Say if Chris personally sponsored 3 other people(Eric, John, & Matt) & taught them to do the same thing he did. This the out come:

1st thing to calculate is your total group volume which would be 4000PV:12,000BV

2nd thing to do is to know where you're at on the percentage bracket ( which would be 21%) then you need to figure out the bracket level of your frontline (Eric, John, & Matt will all be at 1000PV:3000BV each, which is 12%.

3rd step is to subtract your bracket from each frontline then multiply the difference with the value of each front lines business
1) Eric:
21%-12%= 9%
9%x3000BV= 270

2)John:
21%-12%= 9%
9%x3000BV= 270

3)Matt:
21%-12%= 9%
9%x3000BV= 270

Now this is what everybody makes:

Chris makes after expenses ( also exempting new IBO incentives)
=1,815

Eric
=1,005

John
=1,005

Matt
=1,005


So, with that being stated....no wonder you believe it's not profitable...your not doing the proper work to build a great business. The business works, I just showed you how it works, stop being mad at the work you did not do to build a stable business. 4000PV flowing down 1 or 2 legs isn't profitable either btw because they don't pay out bonuses to poorly structured businesses, that's why the guy at the top do not make all of the money. Grow up & stop running on theory.


Unknown said...

1PV:$3 ratio
Retail margin is 35%
Bonuses are calculated through personal & differentials

For an example:
100PV/300BV( personal use)
50PV/150BV (Amount sold to clients also is minimum required to qualify of any bonuses )

Your retail margin total is
35%x150BV= 52.50

Personal Performance Bonus
3%×450BV = 13.50
New IBO performance incentive
= 50.00

So your total for 150PV ( if you actually sold 50 PV to customers) will bet you out to $116

The problem isnt within the compensation plan, it's with people not fully understanding how we get paid. Of course you'renot profitable spending $300, selling only $150 worth of product for the month and only netting back $116.

So how do we fix this? SELL MORE

Another example:
Say if Chris bought $300 worth of products for his own personal use that will bring him 100PV:300BV. Now say instead of Chris only selling the bare minimum of 50PV:150BV to customers, he decides to step up his game & make a goal to sell 500PV:1500BV worth of products to customers.
Here is how much he'll make

Chris retail:
35%×1500BV=525

Personal Performance Bonus
9%×1800BV=162

New IBO incentive
=50

Chris profit after expenses will be $437, $387 if he isnt a new IBO. & btw Chris doesn't even have a team.

Say if he set a goal to buy 100PV:300BV for personal use & sell 900PV:2700BV worth of products. Here is what Chris makes now

Chris Retail margin:
35%x2700BV= 945

PPB:
12%x300BV= 360

New IBO In.
=50

That's 1,355 total.... 1,055 in profit...1,005 if he isnt a new IBO
& CHRIS doesnt have a team.

Now, the other way to get paid is through differentials.
Say if Chris personally sponsored 3 other people(Eric, John, & Matt) & taught them to do the same thing he did. This the out come:

1st thing to calculate is your total group volume which would be 4000PV:12,000BV

2nd thing to do is to know where you're at on the percentage bracket ( which would be 21%) then you need to figure out the bracket level of your frontline (Eric, John, & Matt will all be at 1000PV:3000BV each, which is 12%.

3rd step is to subtract your bracket from each frontline then multiply the difference with the value of each front lines business
1) Eric:
21%-12%= 9%
9%x3000BV= 270

2)John:
21%-12%= 9%
9%x3000BV= 270

3)Matt:
21%-12%= 9%
9%x3000BV= 270

Now this is what everybody makes:

Chris makes after expenses ( also exempting new IBO incentives)
=1,815

Eric
=1,005

John
=1,005

Matt
=1,005


So, with that being stated....no wonder you believe it's not profitable...your not doing the proper work to build a great business. The business works, I just showed you how it works, stop being mad at the work you did not do to build a stable business. 4000PV flowing down 1 or 2 legs isn't profitable either btw because they don't pay out bonuses to poorly structured businesses, that's why the guy at the top do not make all of the money. Grow up & stop running on theory.


John Doe said...

To Unknown @ 12:20 PM --

Thank you for your interesting math lesson. Let's try and make it a little less convoluted next time as this is an extremely important concept.

First thing, "Retail margin is 35%". WOAH! Good luck getting those margins! This little line alone is the only thing anyone needs to read and understand how warped the rest of that post is going to be.

If distributors are already paying 400% higher than their competitors versions in retail stores, then what makes you think you can make an extra 35% mark-up on these products? Has anyone ever actually done this?

Unknown said, "Personal Performance Bonus
3%×450BV = 13.50"

Ah, that's the important number! Amway will only pay you 3% back on the dollars you and your team, spend with them. This is the only relevant number as the other number "35%" was some weird made up nonsense. So, you should expect that 97% of your dollars spent on Amway products "Prosuming" will be divided up between Amway and your uplines. It is up to you to try and turn a profit on the useless left over crap you have to buy in order to maintain eligibility for bonus.

Here is the real catch that "Unknown" baked into his equation. He kept that weird "Prosuming" figure in there, regardless of whether you sell or not. This is what makes people go broke. Hypothetically if you did get the "35%" margin, and you did get to sell as much of the Amway products as you wanted, then why the hell would you still need to spend a certain amount on monthly products yourself? No other business forces you to do that, and that alone is what makes this a pyramid. The only numbers that ever actually matter, because they are the only numbers that 99+% of distributors encounter, are the "prosuming" numbers a.k.a the PV that you have to spend monthly.

Nice try "Unknown" with that well rehearsed and manipulative comment. It won't fly here, but I will give an A for a**hole for trying to pull the wool over more people's eyes.

Anonymous said...

You know there's a bonus scale right? 3% is the bottom of the chart, 31% is the top the more volume flown through your business, the higher your % bracket level is. Also, Amway retail margin is 35% on exclusives products. IBO' s buy at wholesale, then sell at retail. We don't buy retail then sell it at a even higher rate. But of course you wouldn't know that because you never seen or fully understood the compensation plan. How about you utilize a more useful source rather than a moron who can't give you true facts

John Doe said...

"Anonymous", formerly "Unknown said, "You know there's a bonus scale right? 3% is the bottom of the chart, 31% is the top the more volume flown through your business, the higher your % bracket level is."

For the record, the top percentage is 25%, not "31%". You should check your statements again.
http://www.reitenbachstaekwondo.com/the-amway-compensation-plan/

If you take a look at the Amway income disclosure statement, then you will see the top of the bonus scale is mathematically impossible to reach. The only people getting access to that top bonus are the people with seats at the top, and most people aren't even qualifying for the 3% bonus since most IBO's aren't considered "Active".

Also, according to the graphic, Amway retail margins are 30%, which is still BS, because distributors are paying 400% higher for Amway versions of products compared to the competitors. http://themlmsyndrome.blogspot.com/2016/12/mlm-and-product-value.html

Again, you can make up whatever you number you want for a retail margin, but it doesn't matter if you can't sell the product competitively (which clearly 99% of "distributors can't do). So your mathematical example is inherently flawed and deceptive.

Unknown a.k.a Anonymous said, "IBO' s buy at wholesale, then sell at retail. We don't buy retail then sell it at a even higher rate."

There is no such thing as "Wholesale" and "Retail" in Amway because it is a closed market. The only people buying and selling the products are the members of Amway to their downline. If you take a more critical look at the income disclosure statement, then you will come to understand that if 99% of Amwayers don't make much of any money per month, then the majority of the sales are from the upline distributors to the downlines. There is no other logical explanation.

If you want to see some real math, then you should check out this website: https://www.cs.cmu.edu/~dst/Amway/AUS/stats.htm

Anonyknown said, "But of course you wouldn't know that because you never seen or fully understood the compensation plan. How about you utilize a more useful source rather than a moron who can't give you true facts"

I'm willing to wager I understand the compensation plan a lot better than you think I do, and I would also bet that you are just repeating some stupid crap an upline told you. There is no evidence to suggest that anyone has EVER had a success "Retailing" these products to customers instead of downline, and there is no evidence that the bonuses are actually attainable if you don't have an outrageously large downline.

I have utilized very valuable sources and attached them to this comment. Feel free to include some of your own sources that show my math and sources are incorrect.

kwaaikat said...

[Anonymous/Unknown said:]
>> no wonder you believe it's not profitable

You bet, especially now. Your example illustrates that perfectly. You say in the example "Chris makes after expenses" and in another place "profit after expenses". Yet you did not include any expenses, only cost of buying from Amway - that is not an expense, it is cost of sales. In other words this is gross profit, before expenses. You need to factor in overheads like training, seminars, accommodation, phone costs, transport and whatever other expenses you have. Especially since Amway is quite infamous for some of these. Even in a basic example, and if you are different from the rest, and if you think the training expenses reported are exaggerated, you've got to assume something.

Even without these expenses,and with your dodgy assumptions, the hero of your story "Chris", if he spends only the advertised 15 hours per week, he makes the grand sum of only 1,815 / (15*4) = $30.25 per hour. Much of that is working in the evenings when others relax and spend time with loved ones. Plus there's the self respect factor, since he has to mince words when someone asks him what his business is about.


That attitude is very typical to the superficial Amway attitude towards "business". It's all "business" when it comes to dressing formally and deriding the virtues of employment. But when it when it comes to the basics then there is no insight into what business is, and I mean none at all. Even a young child with a lemonade stand counts what he takes home, and asks himself or herself whether it's worth the time.