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.

5 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.