In recent weeks I’ve done a couple of posts where I’ve highlighted some of Amway’s online critics and their hypocrisy and sometimes downright fraudulent behaviour. But what about the claims they make about Amway? Do they make legitimate points? Occasionally they do. But not often. Here’s a recent example:
Over the weekend Joecool aka Steve Nakamura did a blog post that claimed -
One of the issues I have with the Amway plan is that the newest IBO, possibly the one who does the most “Work”, receives the smallest compensation. Amway pays about 32% of their income back in the form of bonuses. An IBO who does 100 PV receives a 3% bonus and somewhere, uplines and sponsors receive the rest.
Later he says -
Here’s a challenge for IBOs and/or prospects who are being recruited into the Amway business. 100 PV will cost around $300 a month and dedication to the tools system will cost you around $200 a month on average. Would you not be better off simply writing a check to your upline for $100 and not even joining?
Let’s examine these two claims. Joecool points out that Amway pays back around 32% of their income, and the IBO doing 100PV (points volume) will receive 3% volume rebate, or a little less than 10% of this. It sounds like the “upline” makes more, right?
There are several ways to generate income in the Amway business. Joecool dishonestly only includes one of them, the volume rebate. The first income source for IBOs is retail margin, which on Amway products ranges from 20 to 30%.
Let’s take an example. Say an IBO sells 2 x Perfect Packs and a 1 x Farmers Market Vibrant Health Combo and 1 x Kid’s Chewable Multivitamin. IBO cost is $244.19.
First of all you’ll note that the IBO cost for *more* than 100PV is only $244.19. Joecool, who was an IBO for less than a year in the mid 1990′s, claims 100PV will cost the IBO $300. He is still stuck in the mid 1990′s and completely ignores the fact that Amway increased the PV/BV ratios for their major brands several years ago.
So, the IBO profits $131.46 in retail margin, then gets a 3% volume rebate (on 303.39 BV) which is an additional $9.10.
Total gross profit for the IBO “doing the work”= $140.56
What does the upline get? In the US the volume rebate scale goes up to 25%, then there’s an additional 4% leadership bonus, plus various other Emerald, Diamond, Depth etc etc bonuses. I believe it averages roughly 32%, so less the 3% given to the original IBO, that’s 29% of the BV (business volume) or $87.98.
- The new IBO doing the work gets $140.56
- The upline IBOs who helped share in $87.98.
So for the total profit available, the IBO gets 61.5% and the upline share in 38.5%.
Joecool’s claim is false.
Joecool gets to this point because he completely ignores retail profit and is most likely assuming an IBO is only “buying for themselves”. Of course, if that’s all they do, then they’re not even operating a business and they have done no work. They’ve merely shopped! If they bought the above for their family (say 2 adults, a teenager, and a younger child), then they’ve saved $131.46 by shopping at the wholesale price and got an additional $9.10 discount.
But Joecool isn’t talking about a shopper, because in the next statement I cite from him he says this person is spending $200/mth on “tools” . If they’re building then they’re trying to recruit customers for the products, and other IBOs to market them. As such that IBO must have at least 50PV in customer sales in order to receive a bonus on downline sales. Where does he account for that? He doesn’t. What about increased volume from their work recruiting others? He ignores that too. As he does an increased bonus thanks to that extra volume.
Even more ridiculous, he seems to think that the money spent to obtain 100PV is 1) a business expense and 2) you receive nothing in exchange for the money!
Both are absurd. Firstly of course, you receive products in return. Products that are some of the best in their categories and have won awards around the world.
As for it being a business expense, have you run that past the IRS, Joecool? Can a business owner who withdraws stock for personal use, or accounts for it as a sale to themselves, claim that as a business expense?
It’s absurd, and sadly Joecool isn’t the only MLM critic who asserts this.
If anything, a $300 product purchase for personal use is an income for their Amway business, from a sale to a customer (themselves). There’s no profit since it matches the $300 expense for the IBOs business to purchase the stock from Amway.
Was this how Joecool ran his Amway business? Spending money not for products he wanted and thought were good value, but merely to try and qualify for a bonus? That’s not only stupid, it’s also potentially defrauding his upline of commissions they should have received.
Unfortunately, we already know Joecool has no problem committing fraud.