A recent comment left on my blog asks the question - how does someone actually make money in Amway? It's a great question and one that deserves to be addressed since it seems that so few people actually make any real money in Amway. The Amway corporation reports that the average IBO earns $115 a month. That $115 a month is after disregarding IBOs who "do nothing" and that also includes Amway diamonds. If you have ever been involved in Amway, then you know as a new IBO, you are likely to earn about $10 a month if you are in the lowest PV bracket (100 PV).
One of the things that Amway leaders like to talk about is how Amway returns about 33% of their income to the IBOs in forms of rebates or bonuses. In North America, that turns out to be over 300 million. Sounds like a great deal right? What they don't mention is that for the vast majority of new IBOs, the compensation plan is very unfair, with new IBOs basically getting peanuts while layers of uplines take the lion's share of that bonus. The only way an IBO can move up the bonus bracket is to find downline who will then sit in the unfair positions so you can get a bigger piece of the action.
But it still begs the question. How do you make the serious money in Amway? Apparently, the real money is made by acting wealthy, and showing off wealth, even if you don't have it. By showing off untold luxuries and lifestyles that most people only dream of, you can then get unsuspecting prospects interested and sell them materials such as cds/audios or seminar tickets and convince these nice people that these materials contain the secrets to obtaining the same wealth that you have attained. Even if more than 99% of the participants never make a profit, you simply blame them for not working hard enough or by claiming that they didn't follow your system exactly how you prescribed. Then when someone actually breaks through, you tout them as a shining example of success, just as lottery promoters show the winners but not the harsh reality of the masses. Now Amway is not a game of chance, but certainly, the final outcome is eerily similar to that of a lottery. A few winners and masses of losers.
Even when your faithful followers start to realize that your system is not really working, you can keep them hanging on and purchasing more training materials by convincing them that quitting means they cannot succeed in life, or that quitting means you are doomed to poverty for the rest of your life, or that quitting means you are a broke loser.
So to summarize, you can make a lot of money in the Amway opportunity by pretending to be rich and then selling training materials to unsuspecting IBOs who think they can attain the same level of success as the tenured diamonds. Sadly, that apparently is how many diamonds and above make their "real money".
You mentioned the 33% of sales paid back as commissions, sliced up amongst the IBO and his upline. They boast about the 33%, as if it supports the opportunity as one where serious money can be made. Apart from the caveat you mention, that the typical IBO commission for his own sales is far short of 33%, it is also, in fact, a serious impediment to making any money.
ReplyDeleteIn contrast, the margin on fast moving consumer goods (FMCG) with which Amway competes, at retailers is only about 10-15%, which includes the retailers profit. This margin is getting lower all the time, due to competition, consolidated buying power of big name retailers, and advances in logistics systems.
With such growing discrepancy in margins, it is nearly impossible for Amway products to compete, which is why we can realistically expect the bulk of products that are moved, are done for reasons other than the competitiveness of the product itself. This is why we can expect (as we see) that networks concentrate on recruiting consumer-recruiters, who join hoping to recruit consumer-recruiters, who would in turn join for the same reason. The 33% is responsible for that, and it is the 33% that is one of the biggest red flags.
Good comment. What many IBOs do not see is that they are paying for this 33% and getting back only a small portion of the commission because layers of upline are getting the lion's share.
ReplyDeleteThe "generous" Amway bonus is the reason why Amway products cost so much. WalMart has much smaller margins to cover their overhead but the cost savings is passed onto consumers.
Amway charges much more and the profit is passed onto layers and layers of middlemen who all earn a cut.