Debunking the critics. Claim: the one who does the work receives the smallest compensation

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?

No.

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.

Product PV BV Profit
Perfect Pack 41.95PV 121.66 52.73
Perfect Pack 41.95PV 121.66 52.73
Health Combo 15.75PV 45.67 19.78
Kids Chewable 4.97PV 14.40 6.22
Total 104.62 303.39 131.46

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.

Not bad.

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.

23 thoughts on “Debunking the critics. Claim: the one who does the work receives the smallest compensation”

  1. If anyone still has confusion on whether or not you can make income with Amway by selling the world class products…A guy named Chuck has only been an IBO for 3 months and his second month in business generated $4,700 in profit. He is not on my team but I believe he sold about 10+ Creme Luxuries in 1 month. I know for a fact he sold 8 creme luxuries in one week. Oh by the way…he had 0 IBO’s on his team. Thanks for the online presence IBOFB.

  2. There is another way of earning income from the Amway business, although it is very indirect:

    Applying the knowledge and skills in a different business environment. I am a software consultant, and when I joined Amway, was earning about $40 000 per year.

    I went through the Amway “process” with N21, but was never successful in Amway per se. We are still IBO’s, but no longer actively building a business. (Maybe later?) We are still good friends with our upline, and I am considering rejoining the tools subscription.

    But in my software consulting I now earn more than 5 times as much $200 000+, depending on the number of hours I work.

    Life, and AMWAY, is what you make of it.

  3. Some IBO’s, including yours truly, sell to their customers at or near wholesale just because they can. Amway does not dictate to us what price to sell at. That would be price fixing. There are many ways to reward customer loyalty. Discounts is one way. New IBO’s, needing a quick buck, should sell at full retail (whatever they determine that to be)until they can afford not to. The “I” in IBO is “independent”. That means that if we stay within Amway’s rules, we can just about do as we please. Freedom! See you at Free Enterprise Day.

  4. Just to clarify something about ebay, Amazon, craigslist: those listings aren’t just former IBOs, Joecool.
    Current IBOs are in the mix. Most of the time, it’s new IBOs who aren’t aware of the rules.
    When it comes to Amway’s attention, a letter is sent to the IBO, to their Platinum, and to their Diamond. Amway kindly asks for the listings to be taken down, which they are. If they aren’t then the IBO is in violation and would have their contract revoked.

  5. 1. IBOs consuming the products legitimately don’t leave Amway. Your opinion is irrelevant

    2. Amway would be just fine if you didn’t count their owner’s purchases. Amway is not a buyers club, but yes there is an ability to treat it in that manner.

    3. Anyone who has a garages full of Amway stuff (something which seems to be simply an urban myth, so no surprise to see you promoting it) is likely to have been actively and knowingly defrauded Amway and/or their upline out of bonuses in order to achieve commissions they did not legitimately qualify for.

    As for ebay, Amway has taken action against ebayers who, it appears, were illegally obtaining products through Amway’s employee discount system. One case is already settled and another proceeding.

    A quick finds a few ebay sellers who are selling numerous products at higher than IBO price, ie at a profit. They’re probably just IBOs who are either ignorant of the rules or choosing to ignore them.

    1. Not a buyers club – you still purchase at a reduced price from retail. The advantage is you have a long benefit from the work you do – buys clubs don’t

  6. Internet sales is one thing. What does the “public” have to say about sales at retailers such as WalMart?

    Take out the IBO personal consumption and where would Amway rank?

    WalMart could easily subtract sales to their own employees and still look might impressive.

    1. (1) why would you take out IBO personal consumption?
      (2) where would CostCo rank if you took out their members consumption?
      (3) the majority of Amway products are not purchased for consumption by people operating Amway businesses.

      1. 1. Because most IBOs do not consume said products once they leave Amway. In my opinion, being an IBO creates an artificial demand for Amway products.

        2. Costco would be just fine if you didn’t count their owner’s purchases. Are you saying Amway is a buyer club?

        3. How would you know? Why do we find stories of people selling Amway stuff on ebay and craigslist and having garages full of Amway stuff when the finally quit?

        1. being an IBO creates an artificial demand for Amway products.? No it doesn’t – they are consumers just like everyone else. The difference being they benefit from the work they do and opted to also purchase at wholesale.

    2. Take out personal consumption? That’s the point: People can buy at wholesale – they don’t have to retail and get residual income

  7. Retail profit? How do you explain groups that still promote “buy from yourself”? Why do they promote that? Because IBOs can’t sell products? The prices are too high?

    Even if an IBO makes “some” profit from sales, any dedicated IBO attending functions will still lose money after expenses. Who profits from the functions and cds? Isn’t it the upline? Therefore it is absolutely true that the ones “doing the work’ make the least money.

    1. As I mention in the post, Amway requires registration of customer volume in order to receive bonuses on downline volume.

      Which groups are telling people not to do that and encouraging new IBOs to (a) not get bonuses on downline volume or (b) not qualify for Fast Track bonuses?

      IBOs qualifying for tool rebates are doing so for the same reason IBOs qualify for Amway product rebates – they achieved particular volume requirements.

      Platinums are the ones responsible for “the work” of tool/ticket sales and they make the greatest percentage from tool/ticket sales.

      Any *new* dedicated IBO may very well be losing money after expenses. It’s a rare business of any sort where your expenses don’t outlay your income initially. It usually takes time to develop a profitable business of any variety.

      Amway is no different – why do you think it should be?

    2. From my experience, it’s way, way easier to sell Amway-exclusive products at retail, than it is to register IBO’s who buy from themselves. Especially when you’re “small potatoes”, the retail profit is significantly more money than the PV/BV bonus. And you don’t share the retail profit with your up-line (unless they help you, and you make some kind of an agreement). I’d be really surprised if there are any groups left who haven’t smartened up yet, regarding the “buy from yourself, and teach others to do the same” model. The Yager Group has ditched that years ago.

    3. Give me ONE example where Rich (or Jay) is promoting a “buy from yourself” model. If the group and the people you are talking about are, or were doing so 10 years ago, it was their mistake, not Amway’s mistake. If Rich has been talking about retail consumers for more than 5 decades and you still don’t care, then the question is who is the stupid one? Wanna hear the answer? 🙂

    4. Joecool,
      This notion that the prices are too high is really getting old. Amway’s got hundreds of exclusive products, and you’re saying that none of them are marketable?
      Seriously?
      Look, Rich and Jay had a very successful Nutrilite business, in which they had one product, a multi-mineral/multi-supplement in the 1950s for $20.
      Supplements weren’t even heard of during that time, and they were selling a month’s worth for 20 bucks, at a time when a loaf of bread cost 25 cents.
      And back then, you had to have 20 customers before you could even sponsor someone. Since Rich and Jay sponsored a lot of people, I think they were able to get a few customers, yes?
      History shows that it was a lot harder of a sell yesterday than it is today.
      If prices are too high for someone, then they are not the right person to buy the product. It’s a matter of changing your target audience.
      It’s really quite as simple as that.

      1. Bridget, some of you here were complaining about prices on the Amway Talk forum. In general, Amway’s prices are fairly high. I didn’t say there was nothing of value that can be purchased from Amway, but overall, people can get better value from discount retailers. I believe the public (and sales) confirm my belief.

        @SP75, are you seriously saying that the groups such as BWW, or WWDB never promoted “buy from yourself”? Seriously?

        1. “the public” and sales, say – #1 Internet Health & Beauty Retailer. #1 Nutritional supplement company. Top 5 in premium skincare and cosmetics. #1 in home water treatment systems. If you want to buy at discount stores, that’s your prerogative. The fact remains that there is demand for Amway’s products.

        2. Joecool,
          Amway has been very clear, they even wrote a long blog post,
          http://blogs.amway.com/adatudes/2007/08/31/not-walmart-and-never-want-to-be/ that they are not a discount retailer. While they respect such business models used by Wal-Mart and Costco, their exclusive products are not in the same category.
          Amway does offer some products that are at that lower level, though the majority of their product offerings are higher in value and quality than those offerred at the discount stores.
          BTW, I have a Costco card. I do buy some things there. And I recently went to Wal-Mart and bought a couple of things there. So I’m not against those places. They just don’t serve my needs for things I can get from Amway. All can co-exist. One is not better than the other. They serve different purposes.

        3. The fact that SOME groups encouraged the “buy from yourself” model 10 or 20 years ago is irrelevant. All of us have an access to Amway’s official materials and everyone can choose whether he/she sell to customers or not. It’s OUR choice, not BWW’s or WWDB’s choice. When you chose to ignore all of the RDV’s & JVA’s recommendations, it was YOUR problem, not ours.

    5. Are you implying that the upline Platinums and above did no work to get where they are? They signed up, never bought a product, never sold a product, recruited others to do all the work and made it to “the top”? You’re absolutely talking just to hear yourself talk and misleading others in the process.

  8. This kind of logic makes as much sense as going in to a store, and telling the customer, “Ya know, I don’t know why the shop keeper here doesn’t pass on his volume discount to you. I mean, you know he gets the products cheaper than you’re buying them for. His business is exploding, he’s moving more product, and so he’s getting an even bigger discount from his supplier than when he first started out, and he hasn’t lowered his prices! Don’t you think he should pass on that discount to you?”

    What Joecool sees as a discount (because that’s from the consumer’s POV), business owners call a profit.

    Yes, I receive more money from Amway than some of those in my organization receive on their own individual volume. And that’s because of all the work I’ve done in addition to helping that one IBO, and in addition to this one moment in time.

    Joecool is choosing to ignore all hard work over many years’ time, an upline IBO in a higher bracket has done in order to be in that higher bracket.

    It’s a ridiculous argument he makes, relying on people’s lack of knowledge of the Amway business model specifically, and their lack of knowledge of business in general.

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