Tag Archives: Amway

eSpring wins “Product of the Year” award in Poland

Amway Poland received eSpring Product of the Year awardAmway Poland receives “Product of the Year” for eSpring

In February 26, Amway Poland received Product of the Year Award for the eSpring Water Purification System from the World Foundation of Health, Heart and Mind.

The awards ceremony in the prestigious Royal Castle in Warsaw was sponsored by the Ministers of Health, Education Culture and featured the baroque music of Professor Elzbieta Stefanska. Continue reading eSpring wins “Product of the Year” award in Poland

What is an Amway or Quixtar business worth?

It’s interesting occasionally to take a step back and compare an Amway or Quixtar business with a comparable result in the “real world”. Though Amway doesn’t like us to say it, a properly structured business can pay you a “passive” income, i.e. one you get without working. With the internet and marketing technologies such as “ditto delivery” this can happen to a certain extent at Platinum and below, but generally in those situations you will need to continue working, at least part-time, to maintain a particular income as customers/IBOs can and will drop out for various reasons. At Emerald and above however, you have found and developed other leaders to the Platinum level and above who will have their own reasons and financial incentives for doing this “maintenance” work. The more of these Platinums and above you have in each leg of your business, the more stable any “passive” income will be. Indeed it may even increase!

Not long after I joined, my upline told me that once you build a business to Emerald and higher, you should expect that when you stop working your business will shrink by at least a third. Now, according to ThisBizNow the average Diamond in North America had a yearly income from Quixtar of approximately US$150,000. So, assuming the business was built properly, if they stopped working they could expect an a yearly income of US$100,000/yr+.

What type of investment would be necessary to develop that kind of income? 

In studying investment vehicles, the Department of Family, Consumer, and Human Development at the University of Utah found the following historical rates of return, after adjusting for inflation –

Small Company US Stocks 9.5%
Large Company US Stocks 7.3%
Government Bonds 2.0%
Treasury Bills 0.7%

source

The higher the rate of return, the greater the risk. FinancialEngine.com reports that Small Company stocks typically have a rate of return between -14% and 30%, Large Company stocks between -12% and 26%, and Bonds between -4% and 9%. In other words, you may end up with less than you started with!

So, how much would we need invested to get a return of US$100,000/yr? Ignoring risk, you would need –

Small Company US Stocks 9.5% $1,052,632
Large Company US Stocks 7.3% $1,369,863
Government Bonds 2.0% $5,000,000
Treasury Bills 0.7% $14,285,714

So, to develop a “passive” income similar to that of a retired Diamond, you would need to save and invest at least a million dollars, after tax, and risk losing it all, or if you wanted it to be relatively safe, you need at least US$5,000,000.

Let’s say it took you 20 years to build a Diamond business, and then you retired. That would be the equivalent of saving $250,000/yr, after tax. Even with compounding at 5%, you’d need to be saving (inflation adjusted) $133,000/yr or $11,000/mth to match building a Diamond business over 20 years.

Do you have an extra $11,000/mth, after tax?

Analysis of a spreadsheet of several hundred Diamonds maintained by Amway critic Scott Larsen shows the median time to Diamond was a little over 6 years.

Building a Diamondship in 6 years is the equivalent of saving and investing just over US$49,000/mth for 6 years

What about an Emeraldship? According to ThisBizNow , the average Emerald income is a little over US$72,000/yr. Assuming it drops a third at “retirement”, that would leave an income of just under US$50,000/yr. Let’s take 10 years to build a solid, stable Emeraldship. Plenty of depth so it’s not going anywhere.

Building a Emeraldship in 10 years is the equivalent of saving and investing just over US$14,000/mth for 10 years

So, IBOs, if you’re out there working hard, showing the plan, doing what’s necessary – next time someone asks you how much you are making, tell them “the equivalent of $14,000/mth earned tax-free and invested so I can retire in 10 years!”

As an added bonus, while you’re building the Emerald asset, you get to spend all the money you make along the way!

NOTE: It’s a little appreciated fact that, unlike most stocks and bonds, Amway and Quixtar income is automatically adjusted for inflation. You’re paid a percentage of products purchased. If inflation increases and the prices of those products increase, so does your income!

NOTE 2: An Amway/Quixtar critic has claimed that the above discussion is invalid because of one assumption used – that you should expect the business income shrinks by a third after you “retire”. This assumption was based on discussions with a very experienced IBO with a very large business (multiple downline Crown Ambassadors). If you chose to, you can redo the calculations with different levels of “shrinkage”, the same principle applies. In reality, how stable the income is entirely depends upon how well you’ve built the business and “transferred leadership” to others. I’ve had reports of people income increasing, not decreasing, after “retirement”.

The Nutrilite Difference

One issue that often arises regarding Amway and Quixtar products is pricing. Critics will occasionally publicize price comparisons that ostensibly show that Amway and Quixtar products are over-priced. The problem with these comparisons is that they rarely incorporate any judgment on value or quality. For example, Artistry was ranked a top 5 “prestige brand” by Euromonitor International. What does “prestige brand” mean? Well, by virtue of it’s quality and packaging, Artistry was deemed to be in the same category as brands such as Lancôme, Estée Lauder, Clinique and Chanel. This means that if you are going to do price comparisons, it should be done with those brands – not with the cheapest cosmetics you can find at the local supermarket.

Artistry is Amway and Quixtar’s #2 best selling product range, with sales of around a billion dollars a year. The top selling products though are the Nutrilite range, with sales in the order of two billion dollars a year, making Nutrilite the best selling nutritional brand in the world. However, if you do a “price comparison” you may be in for a shock. You’ll find Nutrilite Bio-C Plus (Acerola-C in some markets), for example, much more expensive than the average Vitamin C tablet at the local store. There’s a reason for this. The majority of nutritional supplements are produced synthetically in factories. When you buy Vitamin C, what you are usually getting is Ascorbic Acid made in a laboratory. Vitamin C was first isolated from food in 1928 and in 1932 it was discovered that a diet deficient in Ascorbic Acid could lead to scurvy. Vitamin C is also a very strong antioxidant – helping prevent oxidative damage to cells in the body. Continue reading The Nutrilite Difference

Amway/Quixtar Myths, Psycho-facts and the Internet Echo Chamber

The Internet is unprecedented in it’s ability to provide access to massive amounts of information to anyone who wants it. However, as a true “medium of the people” there is no editorial oversight. There is nobody fact-checking statements and claims. Anybody can write pretty much anything they want. In theory of course, if one person puts up a website making one claim, then someone disputing it can put up another website, and an independent observer can make their own judgements.

In reality though, few of us are truly independent observers. We each have our own background, our own experiences, our own biases through which we filter everything we encounter. One effect of this is what psychologists call confirmation bias – we tend to actively seek out and give more weight to evidence which supports the beliefs we already have, and we give less weight to evidence which contradicts our beliefs. For example, someone who already believes that UFOs are alien visitors is far more likely to accept a report of a UFO sighting than someone who does not hold this belief. A “believer” would tend to accept the report at face value – a skeptic would look for other explanations.

Another phenomenon of belief is the Echo Chamber effect. Like minded people tend to congregate in similiar places, and share similar ideas. Simply by virtue of the fact we each have limited hours in the day, this also means we inherently limit our exposure to other ideas. We talk to people who agree with us, they talk to us, we all tell each other we are right, and our beliefs are reinforced and strengthened. It has been said that if something is repeated often enough, most people will believe it, no matter whether it is true or not. Robert Samuelson, writing in Newsweek, called these beliefs Psycho-facts. In the world of logic, it’s a logical fallacy known as argumentum ad numerum – if it’s repeated often enough, it must be true!

The Internet provides an almost perfect arena for these phenomena to act in concert. Individuals can log on to Google and search for a subject they are interested in. Confirmation bias plays it’s role, and the individual will be more likely to read and believe articles that support their existing tendencies. Then forums, newsgroups, chatrooms, and sites like MySpace allow these like-minded people to congregate in virtual communities, reinforcing their beliefs in the Internet Echo Chamber. Using blogs and other web technologies, these beliefs can then be published in a variety of forms, with little or no editorial oversight or fact checking. As these sites and posts accumulate, “psycho-facts” are reinforced via argumentum ad numerum – it’s all over the internet – it must be true!

I encounter this phenomonen again and again amongst internet-based critics of Amway and Quixtar. A meme is somehow spawned, and then the critics repeat it amongst themselves and elsewhere. The meme is spread through forums and blog comments so that it appears ubiquitous. And of course, this very ubiquity reinforces the belief there is a factual basis in the meme – when often there is not.

One example is the myth that there has been no growth in IBOs in 30 years. This particular meme began with a post on September 1 2004 by Amway/Quixtar critic “lawdawg” on his website, LawBlawg. The post Zero Population Growth (site now defunct), seemed logical and reasonable and claimed that the numbers of Amway and later Quixtar IBOs had not increased substantially in 30 years. This is in fact false, something I address elsewhere on The Truth About Amway and Quixtar. The falsity of the claim did not, however, prevent it being spread throughout the internet.

Barely one week after lawdawg’s post, a comment by user “Doug_G” repeats the claim on Quixtar Blog. The following month, in October 2004, a poster by the name of “Roger” repeats the falsehood on the What About Quixtar forum as does jason on Sinking in Quixsand. Lawdawg himself repeats the claim often on QuixtarBlog (november 2004, June 2005, July 2005) as well as on his own site (now defunct). “Rocket” repeats it in October 2004. In December 2004 and May, June, and July 2005 “Imran” repeats the claim in posts on the Random Observations site, run by a Quixtar critic. In May and August 2005 it’s repeated by poster “dmm” on QuixtarBlog. In July 2005 it’s also repeated on the WorldWideDreamStealers site. In August, November and December 2005 it’s stated as fact by JoeCool18 on QuixtarBlog and other sites critical of Quixtar. Joecool18 repeats the claim again in February 2006 on the QuixtarBlog forums. WildHalcyon states it as fact on QuixtarBlog forums in October 2005. Ty Tribble continues the myth in April 2006 and in July of 2006 JoeCool18 is still repeating it on yet another site, despite him being aware of it being false through my discussions with him on QuixtarBlog.

So, one falsly constructed post in October 2004 is repeated elsewhere in less than a week and is still being repeated around the internet two years later. In just my brief googling I’ve discovered 10 different people repeating the myth more than 20 times on at least 9 different websites. How many other people have repeated it on how many other sites we’ll never know. And how many hundreds, indeed thousands of people have read this “psycho-fact” we’ll also never know.

The Internet is a marvellous tool for research, but as always, be wary of where the information comes from. We all have our biases, we all have our wish to be right. Something may be repeated by many people in many places – but that doesn’t mean it’s true!

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Amway/Quixtar MYTH: No growth in IBOs in 30 years

This myth seems to have been started in 2004 by the infamous lawdawg on his MLMlaw blog, with a post Zero Population Growth (update: the site has since been removed). Lawdawg takes a quote from a press release stating that Quixtar has a sales force of about 340,000 IBOs –

Though it’s young, Quixtar already has a sizable sales force: about 340,000 distributors — Independent Business Owners, or IBOs, as Quixtar calls them

He then takes some figures from the FTC v Amway case in 1979-

1. The number of active distributors since 1972 has remained relatively constant, fluctuating around 300,000, climbing in 1977 to about 360,000.

And “confirms” his 2003 figure by quoting a 2003 Tax court case Guadagno v. Commissioner, where it states –

Amway has about 360, 000 independent distributors.

On the face of it, this lookings pretty damning doesn’t it? Nearly 30 years and no growth in IBO numbers! A little common sense though makes one think. It certainly made me think when I read lawdawg’s page, and here is what I found ….

Ponder this

From FTC v Amway

183. Amway’s United States sales have grown from $4.3 million in 1963 to $169.1 million in 1976. Worldwide sales of Amway products in 1976 amounted to about $205 million. (RX 431, RX 448) [71]

and the same press release lawdawg quotes –

Quixtar, which sells in the United States and Canada, hit the $1 billion sales level for the first time last year, and has set monthly records since then.

Hmm ….

1976 Amway Sales – $169,100,000
2003 Quixtar Sales – $1,035,000,000

What’s more, prior to 2000, Amway reported estimated retail sales, ie sales as if IBOs had sold them at recommended retail price. Since 2000 they have reported actual sales. The FTC reported the markup in 1976 was on average 03%, so comparing actual sales (a little over a billion in 2003) we have –

1976 Amway Sales – $130,076,923
2003 Quixtar Sales – $1,035,000,000

Lawdawg would have us believe, that without any change in the number of IBOs, the sales for the corporation have increased nearly 700%!

Even adjusting for inflation, and converting to year 2003 dollars, sales in 1976 would only be equivalent to approx $425,061,704. From 1976 to 2003 there has been a more than doubling in sales volume, or inflation adjusted, growth of 143%.

1976 Amway Sales – $425,061,704 (inflation adjusted)
2003 Quixtar Sales – $1,035,000,000

Have IBOs really become so much more efficient, and profitable? What’s going on?

What’s going on is that the two numbers lawdawg compares aren’t measuring the same thing. In the FTC v Amway case, the numbers reported were “active distributors”. How was “active” defined in FTC v Amway?

At the end of the calendar year the files are cleared of the names of distributors who elected not to continue. The number of distributors at the beginning of the year therefore is close to the number of active distributors.

In other words, it’s the number of IBOs that actually renewed. How is “active” defined by Quixtar today? From thisbiznow.com

**Based on an independent survey during 21. “Active” means an IBO attempted to make a retail sale, or presented the Independent Business Ownership Plan, or received bonus money, or attended a company or IBO meeting in the year 2001.

Two completely different measurements of “active”. You can’t compare them.

So what’s the truth? Fortunately, with a little straightforward math, we can do a comparison of like with like.

Fun With Numbers!

So, actual sales in 1976 were $169,100,000. FTC v Amway also reports –

In 1973-­74 the average BV for each distributor was about $33 a month.

BV stands for Business Volume and at that time was equivalent to the value of the products less the retail markup – ie the actual price sold to IBOs. I’ve already accounted for the retail markup, so to obtain the total number of IBOs in 1976, it’s a simple matter of dividing the sales figure by the sales per IBO for the year –

Total IBOs in 1976 = $169,100,000/($33*12) = 427,020

Now, it’s possible that the BV per IBO changed between 1974 and 1976, however the FTC reports it increased from $20 to $33 between 69/70 and 73/74. This means any adjustment in the number of IBOs would likely be a decrease. We’ll take the higher number.

What about for Quixtar in 2003/2004? Well, Quixtar Platinums have access to something called “The Platinum Index”, which provides the very statistics we need. A copy of the 2004 index, providing statistics for 2003, is on QuixtarBlog. From this we have the following information –

Quixtar actual sales 23: $1,035,000,000
Average Monthly PV per IBO: 38.46
Average amount of PV for each $1 spent: 0.37

Now, this time the calculation is fractionally more complicated, since we have to account for “PV” and convert to BV.

Average Monthly BV per IBO = PV per IBO/PV for each $1 spent = 38.46/0.37 =14BV

Total IBOs in 2003 = $1,035,000,000/($14*12) = 829,327

In other words, a 94% increase in the number of IBOs – Reasonably consistent with the inflation adjusted 143% increase in sales and the increase in BV per IBO.

These calculations required no guesswork, no estimates. “Critics” will tell you that Amway and Quixtar has “saturated”, that it hasn’t grown in 30 years.

They’re wrong.

Sales have more than doubled, and matching this, the number of IBOs has almost doubled. No guesswork. No estimates. Just pure math.

Myth BUSTED.

UPDATE 060803: I found an error in my original calculations where I mistakenly used the inflation adjusted figures to calculate the number of IBOs in 1976 instead of the actual sales data. Corrected.

MYTH: 70% Retail Sales Rule

Is it dishonesty or just ignorance? If you search around the posts of critics of Amway and Quixtar on the internet, something you’ll see regularly is reference to something like “The 70% Retail Sales Rule”.

Here for example, on Pyramid Scheme Alert, the claim is made

A 70% retail requirement level has been applied in various agreements between state Attorneys General offices and multi-level marketing companies charged with violating pyramid scheme statutes.

and

At least 70% of product must be sold at retail to consumers who are not also Amway distributors.

Continue reading MYTH: 70% Retail Sales Rule