All the Amway/Quixtar Business Myths

See the Rebuttals page for more responses to distributors standard lines Another site's list of lies

Change your buying habits and save 30% buying with Amway/Quixtar!

Truth: You need to do your own price study to determine this for yourself. Whether it is termed "buying at retail" or "buying at wholesale" it doesn't really matter. What matters is the price you get for the quality and level of service you expect. My price study showed I would spend up to 43% more using the Amway network than by shopping at local Charleston, SC discount stores. Most distributors will not let you see the distributor price lists until you spend money on a kit, or worse yet, they will get you to one of their motivational weekends after which you will lose all rational business thought. Typical Amway sponsored price comparisons, compare per-use costs of national name brand price leaders, in small packages at grocery stores, against Amway generics in large package sizes. Proper comparisons should compare generic to generic in equivalent sizes, at discount stores. Amway studies compare catalog products against premium competitor mail order catalogs and not local discount stores, where the majority of price-conscientious people shop. If you want to start saving money, check out your local discount store first. There are no minimum purchases or retail sales to customers required just to get a rebate, or up-front joining fees at your local discount store like with Amway/Quixtar.

 

The SA-8 laundry detergent is cheaper to use. It's concentrated!

Truth: I did a price study, and found that the SA-8 is only cheaper to use against the small boxes of Tide, purchased in a supermarket. One 9.9 lb. box of SA-8 is equal to 150 loads, and at distributor price is $25.56 (includes 4% shipping). If you use only one scoop per load (two scoop are recommended for hard water), the price per load is $.171. The table below, shows the "Power of Buying Large Sizes" at Wal-Mart. Sure, if you are stupid enough to buy the 10 load box at Publix grocery store for almost $.32 per load, then you can save money with SA-8 at $.171 per load. Buying Tide at Publix is almost 87% more expensive than the SA-8. If you really want to save money, buy the 23-lb pack at Wal-Mart for $.119 per load and save 43.4% over the SA-8. Even with the smaller 5.75 lb box at Wal-Mart, you can still save 10.7% over the SA-8, and you don't have to buy as many loads as the SA8 gives. If you buy the USA Detergents brand liquid, you can get down to $.093/load, or a savings of 45% over the SA8. Anyone who thinks they can retail SA-8 will be hopelessly uncompetitive at $.206 per load (no shipping included). In addition, the retail mark up is only 20.7% (16.7% if the distributor absorbs the 4% shipping). The markup is just 2/3 of their widely touted 30% "immediate profit", and this is one of the famous Amway core products! (these prices may not be up to date and are for illustration only)

Brand-

Loads

Box Price

Store

Lbs

Cost per Load

Price Savings over 9.9 lb SA-8

Tide-10

$3.19

Publix

1.37

$0.319

87.1% (Amway cheaper)

Tide-18

$3.49

Wal-Mart

2.43

$0.194

13.7% (Amway cheaper)

SA8-100

$17.64

Amway

6.6

$0.171

3.1% (9.9 lb cheaper)

Tide-85

$13.68

Wal-Mart

11.62

$0.160

5.9%

SA8-760

$118.68

Amway

50.00

$0.158

7.6%

Tide-42

$6.47

Wal-Mart

5.75

$0.154

10.7%

Tide-168

$19.97

Wal-Mart

23.00

$0.119

43.6%

USA D-32

$2.97

Wal-Mart

Liquid

$0.093

45%

(these prices may not be up to date and are for illustration only)

"We have been purchasing core products (Amway). We were lead to believe (again lied to) that these products were competitive with retailers, plus receive a discount up to 30% - plus you got paid (3% back based on obtaining100 pv)". Site visitor

The Misty window cleaner dilutes down to a cost of $0.098 for 32oz!

Truth: That is the truth. The catch is that you have to buy four gallons of concentrate at $49.99 to get this great price. Diluted out, the Misty would provide 512 - 32 oz bottles, or 16,384 oz of window cleaner which would appear to me to be more than a life time supply for the typical person. The cost is $0.00305/oz. If the typical person used 8.5-32 oz bottles per year over 60 years they just might use it all up before they die. Sounds like the profitable deal is to repackage the stuff and sell it to others already diluted, maybe $1/bottle and make $462 per four gallons. This would be a profit of almost 10x the cost. Anyway, you can sell this one thing of misty to one person and never sell him another one. If you are a direct distributor you get a $12.49 profit from the wholesale price just once per non-commercial customer/lifetime. You need to find a new customer if you want to sell more . If you took the $49.99 and invested it at 8%, you still would generate $4/year forever. This $4 will be more than enough to cover yearly purchases of store brand window cleaner, and you won't have to drag around 4 gallons of concentrate for the rest of your life.

The A.C Nielson Company did a price survey. They say I will save money. 

Truth: If one looks into the Amway/Nielson cost comparisons (available from Internet Services corp.) you will find comparisons of major name brand price leaders in small packages sold in grocery stores to the Amway generic in larger packages. A more valid comparison would be to compare the Amway generic brand to the equivalent sized discount store generic brand. Nielson used, for example: FORMUCARE Aspirin Free Tablets 150ct - $7.60 + .26 (S&H) = $7.86, $.0524 per tablet. If you buy just the 24 ct. Tylenol, in a grocery store, sure you will spend more money per use. It is a name brand in a small package! If you bought the 175 count Tylenol, you have almost the same cost per use as the Amway product. If you are looking to really save money, go to Wal-Mart, and buy their generic, and save almost 50% per tablet over the Amway price, and buy fewer tablets. The Wal-Mart product is made by the same company as the Amway generic brand. If you really consume the stuff, buy the 500-ct package and save almost 2/3rds over the Amway price.. My price study My price study summary

Store

Brand

Size / Cost

Cost / unit

% difference

Amway

Formucare

150 ct / $7.86

$0.0524

Na

Wal-Mart

Tylenol

24 ct. / $2.97

$0.12375

Wal-Mart136% more

Wal-Mart

Tylenol

100 ct / $7.43

$0.0743

Wal-Mart 41% more

Wal-Mart

Tylenol

175 ct /$8.97

$0.051

Amway 2.2% more

Wal-Mart

Equate

100 ct $2.87

$0.0287

Amway 82% more

Wal-Mart

Equate

500 ct $7.57

$0.0161

Amway 224% more

 

Wal-Mart never gives me a rebate. I get one from AmQuix!

Truth: Distributors are right, Wal-Mart never gives you a rebate, but who really cares? I get this argument all the time. I always respond the same way. "What difference does a 3% rebate make when you are paying 40+% more on average for the products from Amway?" Unless you are a complete idiot, you would want to save 40% now rather than get 3% back later. At Wal-Mart, you get your rebate immediately at the cash register. You don't have to wait to get if from your upline, and you needn't spend a minimum of $200 in one month to get a measly 3% rebate either. If you only spend $50 at Wal-Mart you still get your 40% savings on average over Amway prices.

"We determined that without the Vitamins you needed to spend between $200 and $300 to obtain 100pv Close to the end of the month our sponsor called us and said that "we were nearly at the next level. All we needed to do was purchase a little more." As it turned out we were about 30 - 40 PV short. To obtain that next level we need to spend about $60 to obtain $12 back?? I could not justify this!" IBO site visitor

Other problems included greatly inflated prices even at pseudo-wholesale that made many customers just about swallow their tongues when we quoted prices ("$40/month for daily multivitamins! What the ...!")." Site visitor

 

Spend $200 with AmQuix, save $60 and get a $6 rebate.

Truth See above "save 30%", for the $60. The $6 rebate assumes a reaching a volume of 100 points (100PV). It is possible to obtain 100PV on $200 of sales only on the core Amway Brand product lines. A product mix with increasing share of non-core products, such as catalog items, will require much higher spending to maintain 100 PV. 100% non-core products would require over $400 in expenditures to attain 100PV, and yet the resulting bonus would be only about $3, or .7% of sales! Open meetings routinely imply that $200 will yield a $6 rebate, when in fact this is the absolute best case, only with Amway Branded products and some of the new Quixtar partner stores. The rebate could be zero when $200 were spent, and only 99 PV points or less were earned. Amway rules also stated that if you do not service a minimum volume to retails customers, you are not entitled to any rebates or performance bonuses.

AmQuix returns 55% to 68% of sales to distributors

Truth: If this were true then, Amway would be woefully uncompetitive (see above "save 30%"). Wal-Mart overhead and profit is only 21.2% of sales. Proctor and Gamble sales and marketing expenses are 9% of sales.

Assume an Amway product cost the same to manufacture at P&G. A $10 product from P&G, less the 9% sales and marketing expense, now is $9.10. With 55% of the selling price returned to distributors, the product would have to cost $20.22! ($20.22*(1-.55)=$9.10. At 68% returned to distributors, the price would need to be $28.40! The same product would cost $12.68 retail at Wal-Mart ($12.68*(1-.212)=$10.00). The combined Wal-Mart and P&G distribution costs are ($.90+$2.68)=$3.58 of the $12.68 retail price. This is 28.2% of sales compared with the Amway claim of 55%! Which system is more efficient to you?

As additional support, Quixtar reported sales of $443Million excluding partner stores in the first year of operation payments of $143 million in performance bonuses to IBO's resulting in a pay out ratio of 32%.

From the 1979 FTC case against Amway, Amway reported US sales of $169.1 Million and paid out $60 resulting in a pay out ratio of 35.5%. This was before the advent of less profitable catalog sales.

How do they end up making this claim or returning 60% of sales to distributors? Assume that a core product has a 30% suggested retail markup from "wholesale". The maximum performance bonus level is 25% of IBO "wholesale" price, which is paid to platinum distributors. Adding these to up: 30%+25% is equal to 55%. The misleading point here is that few people sell at "suggested retail price" and obtain the 30% markup. IBOs try to trick you into thinking that the "phantom income" from the suggested retail markup is an actual cash flow into your business. Since anyone can become a distributor and buy from themselves at "wholesale prices", the suggested retail markup is not realistic to include as a source of income.

 

AmQuix products are higher quality. The extra cost is worth it.

On one hand they want you to switch buying habits to save money on commodities, then once you find out you aren't saving any money they try to justify the costs with the "higher quality", "premium products" argument.

I used the products and I wasn't impressed. They did the same work as the competitors. The concentrated items such as Zoom and LOC were more complicated to handle because of diluting, and took up more space to store the diluted version as well as the concentrate. Items such as Zoom and LOC I use so infrequently, that it is not worth the 25-30 cents a year I would save using the product due to its lower cost per use. If you lose the bottle of concentrate, then you are out some serious money compared to a smaller bottle of a competitor.

It is my opinion that most distributors are just parroting the quality issue. If they didn't have a vested interest in trying to build a group of dedicated buyers for their products, they would probably have a different opinion. This opinion might be reflected in the millions of US distributors who have quit Amway. If the products were so great and such a good value, how come the millions who've quit don't just "buy for themselves and save a little money"?

I knew a guy who had a restaurant. He said you could not beat the Amway oven cleaner. It was more expensive, but worth it in reduced effort. That's the only good thing I've heard from a true consumer not being biased by being a distributor. (The oven cleaner has been discontinued per IBO feedback)

AmQuix has created more millionaires than any other business!

Truth: This is not officially documented anywhere. No one that I have challenged can give me the source of this infamous "Amway urban legend". If you read the book "The Millionaire Next Door", you do not even see Amway or MLM listed.

For an in depth discussion with calculations click here.

Distributors claim to have businesses in several states and other countries

Truth: Amway/Quixtar is made up of Independent Business Owners. Each IBO owns his or her own business. Distributors may have a downline in another state or other in another country, but at no time does he "have" or "own" these businesses. These downline distributors possess their own business and no one else has control over them. Distributors say this to create hype and to cover the fact it is just a MLM operation.

The Quixtar WEB site is receiving millions of hits a day.

 Truth: From www.pcdataonline.com

Amway is the new distribution method taking the retail industry by storm.

Truth: Simply looking at the Amway sales growth number for the country you live in could show the market acceptance of this "new wonderful and amazing system". Amway is so proud of their sales performance in the United States that they refuse to release actual corporate year-by-year US data! Existing distributors should be complaining that Amway is not doing enough to show the success of their concept via publishing hard facts and statistics of sales growth, and distributor counts. Amway's former public companies Amway Japan, and Asia Pacific had all this information in their annual reports. A stockholder or new distributor needs the same information to see if this business is worthy of investment, whether time or money!  

AmQuix is on the verge of "critical mass" and explosive growth.

Truth: The chart below, which depicts the rate of Amway's sales grow, shows a cyclical sales-growth pattern with decreasing peaks. It looks like Amway's sales are on the verge of collapse instead of explosive growth as some say! It would appear that the years of good growth as measured by percent-change-in-sales is already behind them from the late '70's. (Sorry, I don't have access to the '60's data). Another good growth spurt kicked in the early '90's, mostly from expansion in Asia. Trend analysis suggests that Amway's growth rate is trending down in the long and the short term. This type of growth rate action is characteristic of market saturation. The prospects for explosive growth don't look promising, from the trends shown in their rate of growth. An Amway distributorship will be very difficult to grow in this market environment. The 25% drop in sales in 1983 was the same year when 60 Minutes did a negative story on Amway. Forbes magazine reported in Feb 1991 that there were 600,000 US distributors. USA Today reported in March 1999 a US distributor count of 750,000. Over eight years that comes to a 2.85%/year compounded growth rate.

  

Procter & Gamble spent $1.5 billion on Advertising. Amway spent just $10 Million. Those advertising dollars go in the Amway distributor's pockets.

Truth: The money Amway doesn't pay in advertising can be made available to distributors so that they can do the product promotion. P&G had 1997 sales of $35.764 billion, and advertising and marketing expenses of $3.468 billion. I guess Amway forgot about marketing costs in their comparison. The May 11, 1999 USA Today article only listed "advertising" expenses. Anyway, P&G's1998 advertising and marketing costs were 9.7% of sales. From "Fun with Math", actual corporate Amway US sales were $1.28 billion. My estimate of cumulative Amway distributor expenses is $718 million. US Amway distributors received at most 31.5% of sales from Amway or $511 Million, compared to the estimated $718.million they spent promoting Amway distributed goods. This makes the real Amway sales and marketing expenses amount to 56% of sales! (.718/1.28) Amway distributors spent over six times more per sales dollar than P&G to advertise and market products! This is true inefficiency!

 

AmQuix is more efficient since there is no advertising or marketing. 

Truth: Amway does have Wal-Mart and P&G beat when it comes to dollars spent on advertising, but it doesn't have them beat on a total cost basis. Amway would have to be able to produce core products (soaps) for at least 14% cheaper than a discount store could purchase them for from P&G, in order to pay the bonuses and stay competitive. This doesn't even figure in estimated Amway overhead or Amway profit margin. When these are factored in, Amway must produce the products for 38% less than what a discount store can buy from P&G or some other soap company. The following bar chart shows the distribution of costs on a typical "core" type product which, Wal-Mart would purchase from Proctor & Gamble for $10. This assumes that P&G and Amway are equally efficient at manufacturing, R&D, and administration. The P&G advertising and marketing costs are broken out in white. Additionally, this analysis does not include time or money spent by distributors in marketing the products. For an analysis from the distributor's side, click here.

AmQuix is more efficient. They eliminated the layers of middlemen!

Truth: Amway might buy direct from manufacturers, but so do Wal-Mart and a host of others. Amway hasn't eliminated the middleman; they have just replace it with new middlemen. The new middleman is the long line of Amway distributors who are now in between the end consumer and the "servicing company". There is a Diamond distributor taking a small cut. There is an Emerald distributor taking a little larger cut. There is a Ruby distributor taking a cut. There is the sponsor of the direct distributor taking a 4% cut. There is the direct distributor taking a 25% cut. The direct distributor cuts his 25% into several different rebate levels. All in all the Amway method of distribution has more layers of middlemen as the systems they compare themselves to. These middlemen take about 31.5% of BV, which many distributors falsely assume to be sales dollars. Wal-Mart by contrast buys from the manufacturer and has 21.2% of sales as overhead cost. An interesting development now is that Quixtar will market Amway products. Amway has just added another middleman, Quixtar corp. to the scheme.

 

The overhead costs of an AmQuix business are low when compared to a traditional business

Truth: The total dollar amount of Amway overhead is very low compared to other business, but as a fraction of a distributor's personal sales, the overhead costs are terribly high! Distributor expenses can exceed personal sales by a 2 to 1 margin. The "optional" expenses of the typical AQMO could be between $1,000 and $3,200 per year, even more if you drive a lot out of town to recruit people. I agree, the sheer dollar amount is low, but correspondingly the sheer sales dollars of an Amway distributorship is also very low and can't support the typical expenses of the AQMO system! The SA4400 states that the average distributor consumes/sells about $1700/year. Take for instance, from "The Plan", a self-consuming distributor doing little or no retail sales, trying to build his downline by saying "buy from yourself and show others how to buy from themselves". At $200/month the sales of this distributor, amount to about $2,400/year. One cannot count the personal consumption/sales of the downline. These sales belong to each downline distributor. To be mathematically correct, you cannot double count sales, as is done with Amway "pin levels". In effect, the absolute low dollar terms, the overhead costs of an Amway distributorship is not even exceeded by the sales volume of that distributorship. Typical distributors are spending more dollars on their business overhead than their distributorship has in its own sales! A typical self-consuming distributor is generating about $600/year in gross margin, which can be divided up within a direct distributorship. So yes, the overhead of a distributorship is low, but the sales are so pathetic, and the resulting margin so low that on average all distributorships will be losing money. The only way to make a profit it to recruit more money losing distributors on the bottom of the pyramid. If Amway/Quixtar products were popular enough and competitive enough, continuous sales growth could move these money-losing distributors into a profit state. Most distributors will quit before they can build a downline big enough to be profitable. Sales do not grow quickly since few of these "quitting" distributors see no true economic value in the products, prices, or system. Only a few very good salesmen and motivators will manage to build large groups using the "dream" as their vehicle.

 

You are only investing in the kit. The financial risk is very low.

Truth: Most distributors spend many times the cost of the kit employing the "success system" of their upline Diamond distributors. The cost of the kit is negligible when compared to the money spent on motivational events, tapes, books, and business tools. [Overhead Cost Summary] Distributors can invest hundreds of man-hours a year trying to build "the business". High level distributors and Amway would rather have you "experiment" with a distributorship, and spend your money on their products while finding out for yourself whether it works or not. If they can turn over 500,000 US distributors a year, each spending $2,400 ($200*12 months) before they quit, they can cover $1.2 billion in US sales. Experimenting distributors could provide almost 100% of their annual North American sales. It is far better for them to get the incremental sales of the experimenters and beginners, rather than turn them away by providing solid data that might not be attractive enough to hold their interest. See case studies of former distributors who lost many times the cost of the kit.

 

You only risk your time when you start an AmQuix Business.

Truth: There are opportunity costs associated with any decision you make. An opportunity cost is the value of the next best alternative you have. There are three opportunity costs with starting an Amway distributorship. People can and do lose money in Amway. It is not risk free. Click here for site visitor responses.

The first cost is the price premiums you might pay on personal consumption of Amway distributed products. Assuming one spent $200 per month, and the price premium was equal to what my price studies show, one could spend an extra $960/year. (12*200*40% premium)=$960.

The second is the cost of the time you invest in the business. Assuming you could pick up additional work at $7.50/hour @ 500 hours/year, the after tax value of the lost time is $2,250.

The next cost is that of running the business. Based upon the typical "success" systems one could spend $3,600/year for a single person. The example below assumes growing rebates and bonuses progressively offsets the $3,600 after 5 years and compounding at 10% (tax deferred), one would have and opportunity cost after 5 years of $33,461!

The future compounded value of the $33,461 "opportunity" cost from above; invested at 10% tax deferred is depicted below. Instead of experimenting with an Amway distributorship, but rather investing the time, money, and product premiums, you would have spent with Amway over a 5-year period; you could have an investment nest egg of almost $1 million after 35 years. This investment would spin off almost $62,000 per year risk free after 35 years, or $100,000 per year invested more aggressively. The stock market has historically yielded 10% over the long term. Making a million dollars with this method has a higher probability of success than making a million with an Amway distributorship.

From a site visitor: "I was doing some research on my investments and I thought the numbers were interesting when compared to the 2-5 year plan. I used some of your numbers for business support material expenses but didn't use food, travel, mileage etc. expenses because I wanted to do a simple, some true believers would say simplistic, analysis and didn't want to bring in tax ramifications. I used a start up expense of $780 (kit, suggested BSM's) and an annual BSM expense of $1620. These figures are extremely conservative.

I like to shop at two retail establishments, Wal-Mart and Best Buy. In fact probably 60% of my non-grocery household purchases are at one of these two stores. Since I use them I've also invested in them.

I looked at a 3 1/2 year investment plan, half of the 2-5 year plan. I took start up costs and first year BSM cost and divided them equally between the two companies. I then put half of each year's BSM costs into each stock. I used the stock closing costs on Dec 31, 1996 as the staring point for the 3 1/2 year plan and used after crash prices on April 14, 2000 as the end price. Best Buy does not have a dividend reinvestment plan, Wal-Mart does. Dividends are reinvested if possible. Based on these numbers you will have invested $6445 in the two companies.

Your investments will have grown to a value of $44,222 and you will have been aid $1200 in dividends (if you had invested only in Wal-Mart you would have $20,657). You could take this money, put it into a 6% CD and make over $200 a month and never touch your principle.

The reason I point this out is to ask the true believers who have been actively building the business during this time how many are making a residual profit of $200 a month?" 

AmQuix is the only option some people have to financial freedom

From the example above, there are opportunity costs of opening an Amway distributorship. Distributors are told if they don't follow the "success system" of the upline, then they will not make it. If distributors have the money to finance the "success system" then that money ($3,600 for our example) is also available for investment. If the money were available to buy $200/month of Amway products, then there would be money ($960/yr) available to invest from the price premiums. If one had 500 hours to invest in Amway then there is $2,250/yr after tax in outside work @$7.5/hr, especially given today's job market. All told with the same effort and expense as an Amway business, one could possibly save $7,110 per year for investments. A better paying part-time job or more hours could speed the process up. Amway sales decreased last year. The average new distributor will not make direct even in 45 years assuming an unrealistic10% Amway sales growth rate! Some of course will make it; you just have to decide which odds are better for you. Risk it and try being a super distributor, or spend wisely, work, save and be a successful investor. People following the typical AQMO success plan, of "buying for your self, and show others how to buy for themselves" on average will always lose money. See Amway is a "negative sum game". The "Amway Business paradox", and the Tax Court cases.

Nobody makes money off of motivational and training tapes.

Truth: The wholesale cost for duplicated tapes is $.88 each in 100 pc lots, and $.60 each in lots of 5,000, packaged in a case, printing on the tape, shrunk wrapped, and without a paper insert. Most tapes sell for a minimum of $6.00, and up to $9.00. There is a minimum of $5.40 missing from the equation. Who gets the money can be debated until the cows come home. The fact is that there is at least $5.40 missing from the math. CD-ROMs in lots of 1,000 cost $1.56 each, and are being sold for $10. There is $8.46/CD missing here. See how the "tools" money gets split up in some groups. Additionally, the second largest MLM, Nikken, which sells the therapeutic magnets, only charges $0.95/tape! Based upon the cost to reproduce and package tapes, and the fact that another, smaller, MLM can sell tapes at a fraction of the cost of Amway AQMO's, somebody is making a tremendous profit off of tapes.

"I was taught and therefore taught that the system was put in place to assist people in building their "Amway" business. This is as far from the truth today as you can get as when you are making 80% of your income off of the system, it is totally reversed, Amway is in place so people can sell their system!"

Don Lorencz: Diamond Direct Distributor  Other Lorencz Quotes

 

Cassette tapes in stores cost $6 or $7, what's the problem with making money off of tapes, tools or seminars?

Truth: There is certainly nothing wrong with making money on tapes or seminars. Free enterprise is free enterprise. If people will buy them, then sell them. I just see a very large conflict of interest, and an integrity issue, which can easily be abused. Many new distributors are never told that the uplines all benefit by each tape they buy; those tapes that were recommended to them for purchase by their upline. The weekly purchase of a $6 "standing order tape" (SOT) puts at least $5/distributor/week in extra gross margin into directs' and above businesses. Now, everyone knows why high level distributors recommend that new distributors order the weekly SOT. If the distributor were a 100PV/$200/month distributor, then he is only generating at most $13/month ((31.5%-25%)*$200) in bonuses and rebates for the complete upline over direct distributor status, but just SOT distributor will generate $20/month/distributor in gross margin! If a new distributor kit comes with, say, 10 cassettes or so (this depends upon your organization) you bet your upline DD and above was very happy you joined as they cleared more on the sale of the cassettes than they did on the product in the kit. There was probably $50 worth of margin in the tapes, and only around $7 in product related rebates and bonuses to the high pins. Over the course of a year at $200/month a distributor would produce about $156 ($2,400*.065) in gross margin for those above Direct Distributor status. If this distributor bought SOT, 20 recruiting tapes/year, and attended four functions he just generated about $460 in gross margin for the upline or almost three times the gross margin from Amway product bonuses! Again, it is not bad to make money on the tapes. It only presents an integrity issue when the margins are so attractive.

The real business of the high level distributors turns out not to be promoting Amway product, but actually selling tools and motivational supplies to lower level Amway/Quixtar distributors who are promoting the Amway products. The new distributors think the money is in the Amway bonus structure, while their "high integrity" upline is more concerned about selling business support products and services than Amway product. It would seem to me that if the real business, of the high pins, was to make money from Amway bonuses, they would reduce the cost of tools so that more distributors could be profitable sooner, and expand their businesses faster. I had a 20-year Amway, supposed high pin, write me. I asked him if he could maintain his life style today on the money he makes from just Amway and not tools. He never answered the question. Not answering a question is a simple way for Amway/Quixtar distributors to say NO. He had also stated that some organizations are setting up bonus schedules for tools in their organizations, to get around the problem of only high pins making money on tools. This is an interesting concept as the organizations can now just sell themselves tapes and tools; they won't need Amway anymore so they can sell each other product. What are they going to do; raise the price of tapes so that there is more money to give away to the low distributors? Pretty soon they will be selling each other tapes and holding seminars to teach themselves how to improve their tape and tools business!

 AmQuix is AmQuix. It doesn't matter who your upline is.

Truth: I have been asked several times by site visitors who my upline was. They implied that I had a bad upline to have the experiences I had. My upline diamond is head of the Amway ethics committee. Meet my former upline ruby direct! Do they both look like "bad uplines"? They look like any other nice, respectable successful distributors. Many distributors claim they are reputable and that a few bad apples are ruining it for them. This then leads the question: "how do I search and select a reputable upline before I invest a lot of effort". I can't answer this question. But, I can tell you that there are many uplines (AQMO's). This will complicate your decision greatly if you are thinking of joining up. How do you know before hand which organizations are really reputable until you spend tens if not hundreds of hours with them? It gets even more complicated since much will depend on your upline Direct Distributor, and there are thousands of those form which to choose. Be aware that there are also differences in motivational tape prices between organizations. Some organizations also keep statistics of their performance versus others or Amway as a whole. Access to this data may help you decide which ones have a better probability of success. Anyway, here is a small listing of the major AQMO's just so you know what is out there. I.N.A, Network 21,Internet Services, WWDB, Britt International, Storms & Assoc., Ambassadors Int'l, Executives Int'l, F&J Enterprises, Mazzeo Inc., Distributed Marketing Technologies, Miller Enterprises, Midwest Industries, Foley & Company, Mc Ewen & Assoc., Distribution Training, Independent Distribs., Stranney Organization, Bovill Organization, Cherry Organization, I.B.S., Lowell Organization, Int'l Leadership, Bergfeld International Inc., Jerry Boggus Company, Bulmer Holdings Inc., Dmico International, Mark Day Enterprises Inc, LTD Partnership, Eckman Enterprises, Gilewicz Enterprises Inc.,The Golden Inc., Hopper Enterprises, Howard & Associates, King Associates, Kinsler Enterprises, PRO NET, McConnell Family Enterprises Inc., Crown Enterprises, Paullin International, Diamond J Enterprises, Inc, Shoffler Ent., Ken Stewart, Wilson Enterprises, Downeast, Jevi, Convington International, Globalnet, and Youngblood International. It will be a big research job figuring out who is reputable!

"I have met my upline Diamond. I have seen that success is possible."

Truth: No doubt some people do take home some money from an Amway business. People take away good money from lotteries as well despite the poor economic fundamentals of the "negative sum game". As long as people play both games there will be a few winners and lots of losers. More people could be successful in Amway if it actually sold to the general public and not just those in the "game".

Distributors are commonly introduced to groups by the highest level they have ever achieved in Amway. According to Amway/Quixtar rules, IBO's must always maintain their sales volumes and downline structures to re qualify for their Diamond, Emerald, or Platinum status on a certain frequency. There are Diamond distributors, too numerous to count, who fail to meet the requirements of re qualification and still refer to themselves or have themselves referred to as Diamond distributors. These distributors are lying about their actual status. Ask your Emerald or Diamond if they have re qualified this year. If you're banking on living off the residuals of this business you might ask why so many don't requalify to understand how stable your residual income will really be.

Distributors/IBO's proclaim to have extremely high ethical and moral standard, but at the same time have neither the credibility nor the integrity to be truthful about their actual pin status in Amway/Quixtar. This is just another example of "white lying" which distributors commonly use to paint the Amway picture nice and rosy.

 

You don't need any sales growth information about AmQuix. The business is based upon individual effort.

Truth: Any business not accepted by the market place will have poor or slow sales growth. All distributors, added together, cannot out pace the growth rate of the Amway Corporation. That is a mathematical truth. If the business doesn't expand, then the market has not embraced the business as having a value to the economy. It is easy to sell and grow a product line that consumers readily accept, and the evidence of the acceptance is double-digit sales growth. It is difficult to sell a product or service which, people do not accept or is not competitively priced. An Amway distributor needs to recruit people to grow his business. If the current growth in sales or distributors in your country is not growing quickly, it says the market has not embraced the concept. Data can show you just how fast or slow the business is growing. Knowing if the business is growing slowly, can tell you whether your investment of time and money in the business is warranted. If Amway's sales, in the country where you live, are growing rapidly (20-30% per year), you will be much more successful than if the sales are only growing 3% per year. Would you rather invest your money at yields of 3% or 10% per year? The theory of compounding is the same for Amway or for investing! Ask Amway for their US growth rate of sales and distributors. They won't tell you. I guess they don't feel that has anything to do with evaluating the success of Amway.

The chart above shows how much sales you would have after so x-years based upon different sales growth rates. If the US Amway business is growing on average 10% per year, $200 first month sales would grow on average to $800/month after 15 years! Even if your business grew an astounding 35% per year, much greater than the North American Sales of the Amway Corporation, you might qualify for direct distributor after 15 years (7,500PV*$200/100PV= $15,000/month)! This even uses the highly inflated $1=1BV! This is why the sales growth rate in your country is so important. If it is not growing quickly, then it will take a very long time on average for the new recruit's to get a profitable amount of sales. Remember, all distributors, added together, cannot out pace the growth rate of the Amway Corporation. If some distributors in the US are growing at 35% per year, then others must be shrinking at huge rates to balance out the overall growth rate in the US, as Amway Worldwide hasn't grown over 15% per year for the last two years.

 The 2-5 year plan

Truth: The two to five year plan is a commonly used "plan" to sell the idea of becoming financially independent in 2-5 years of concentrated effort building your Amway Distributorship. The 2-5 year plan is that, just a plan. It has no basis upon proven track record or is even verifiable to have been attained by any significant percentage of distributors. In an equally absurd manner, I could show you a plan to make a $1 million in the stock market in less than two years, with starting capital of $2,000. Of course you need the right stock and the proper leveraging with margin. It will be that, just a plan and will be equally low in probability that anyone will actually do it. Someone most likely has do it, just like Amway with the 2-5 year plan. It is possible but not probable.

Sales growth rates needed to attain even Direct Distributor status in such a short time are phenomenal. The chart below shows the monthly compounded rate of sales growth needed to achieve Direct status in 1, 2, 3, 4, and 5 year. The calculation uses the best case of 1PV=$2, which implies 100% core products, which is unrealistically conservative. The sales growth rate to achieve Direct in five years needs to be 7.5% compounded monthly, which translates into 238% yearly sales growth =((1+.075)^12), when starting with personal sales of $200, or 100PV. These numbers dwarf the Amway Corporate sales growth rate, which last year was negative. This means that a very small minority of distributors can grow this fast and keep it in their own downline without it splitting off. It would be interesting if Amway would release the statistics to see if the Distributors claims can be substantiated. I asked for this information, but they would not release it. Ask your upline whom in their group retired from their job after 2-5 years in Amway/Quixtar. You will not find many or any at all, and if you do, they probably had money saved to live on.  If you are prospected ask all the people you meet if they have been in more than 2 years and live solely off their Amway business.  You will find that most, if not all of the people still have jobs to finance their losses in Amway.

Amway tripled in size between 1990 and 1997

Truth: Amway's overseas sales increased significantly in this time period. Sales growth from Japan, China, and the Far East were the main contributors during this period. Growth in North America did not keep pace with these rates. The growth of the North American market is the most important if you live in North America. Amway does not release this information so you are left blind to how well they are growing in N.America. Worldwide sales decreased 18% from 1997 to 1998, and also decreased 12% from 1998 to 1999.

Sales are down 28% from 1997 to 1999. Maybe the number of new markets Amway can enter is shrinking. Now they must rely on selling more in existing countries rather than the easy sales gains they get by moving in to untapped territory.

Just buy from yourself and show others how to buy themselves

 Truth: Direct/Platimun Distributors must ensure that every distributor within their "downline network" sells Amway products at retail to non-distributors. There is a retail sales rule in Amway and Quixtar which must be met before being paid a performance bonus ( or also called a rebate). Amway rules prohibit the Direct Distributor from paying performance bonus to any individual within his network in the absence of proof of such retail sales to non-IBO's each month. This rule is largely ignored. If everyone "bought from them selves" and recruited in this manner, see how it is a "negative sum game". When everyone follows this "AQMO success plan" on average, people will always lose money. See the Amway business paradox. See "Fun with math" See what the Amway WEB site has to say about this Strategy

 Amway is producing ten's of Directs and several Diamonds every month.

Truth: For those in the North America, let's review some numbers. Amway North American sales reported to me for 1997 was 1.8 Billion. To qualify for Direct Distributor status one needs 7,500 PV, and one must be able to maintain this level. If the sales level cannot be maintained then the distributor loses his Direct Distributor qualification. Assuming a 2BV=1PV=$2, this requires a minimum monthly sales of $15,000. This assumes core products only, which are more favorable point wise than catalog products. A direct distributor would need $180,000 in annual sales to continually requalify. Based upon this it means that there can only be a maximum of 10,000 qualifying Direct distributors. The North American Sales can not support more. Diamond status requires six direct distributors, plus himself. 10,000 Direct Distributors allow for a maximum of 1420 requalifing Diamond Distributors. If Amway NA sales grow at 5% this year, to $2 Billion then 500 new Direct Distributors and 70 new Diamond Distributors could be supported from the North American sales growth. When the Amagram reports 60 new Directs for the month and sales are only growing 5%, that implies that 18 Directs fell out of qualification, since sales growth only supported 42 new directs. If catalog sales amounted to 50% of Amway's sales then the number of new directs supported by business growth will drop about 25% to 30. Base upon sales growth projection of 5%, and the 70 new Diamonds this sales could support, this year is ending poorly, as only 18 new Diamonds were reported for 1998, as of October. The implication of this is that US sales growth for 1998 is about 1%, which is less than inflation. From the graph below you can see the correlation of sales to number of new Diamond and Emerald pins being awarded.

Just keep trying and you can make Diamond.

Truth: Taking a look at the graph below one can see that the number of diamonds peak at an average of 7 years in the business. After 17 years in the business there are fewer and fewer people "Going Diamond" as time goes on. If one hasn't made Diamond after 7 years, history shows then with each passing year it will be less and less likely that one will ever make it. If you aren't Emerald by 10 years in the business, there is a low probability of getting there since only 13% of the Emeralds get there after 10 years.

From the chart below, less than 50% of the distributors who go Diamond, do it after 8 years in the business. Of the people who "go Diamond" less than 25% go diamond after 11 years. In another light, only 15% of the people who do "go Diamond" get there in 5 years. From the data in the 1992-1998 Amagrams, there are no people who have "gone Diamond" in less than 3 years.

You can't be fired or laid off from Amway

Truth: Any business is at the control of the market it serves. True you can't be "fired" from Amway, unless you violate rules, but the Market can fire you never the less. Your distributorship could lose profitability as people quit, or buy fewer products through Amway for themselves. There are many stories where legs in a downline quit, or go with some other MLM idea. So, your Amway business is in no way secure forever either. It can rise and fall with the good and bad times just like any other business.

 A Direct Distributor can keep you out of your own business. In short, they can simply tell you that you cannot contact anyone but the people you personally sponsored. This has happened to specific people and that's how a Diamond took over a business that another built. Dave Kruer of Amway has confirmed that the Direct Distributor can do this.

Also, the other way they can "fire you" is to pay performance bonuses around you and allow all your people to pick up products from them. The compendium says the Direct Distributor can pay bonuses any way they want. That's how Amway supports it when they take it away. In short, you no longer have a business anymore. These methods are used so that you cannot work depth. Your Diamond of course will not work with any of your width so every line disappears except one, which is all the Diamond cares about as long as it is a 7,500 leg. That's how one can be "fired".

A distributor is also not entitled to any support from his upline. A major portion of recruiting is to "parade" the successful Diamonds and Emeralds (who have quit their full time corporate job to take a full time Amway job) in front of the new recruits. Without the support of the "successful" role models, a distributor cannot effectively grow his business. No one will believe it is possible unless they see and meet warm body who has "made it". Being cut off from this support for any reason can stop a distributor's growth.

The tax return for my Amway business is only for the IRS and me.

Truth: I get this reply all the time when people respond to my site. "That's personal information, you have no right to that", "it is for the IRS and me", blah, blah, blah, blah....... Face it, if you are purchasing an existing business, you want to know how much that business is making, wouldn't you? You EXPECT to see the books before you buy it. If you don't see the books you should walk away. They guy is trying to sucker you into buying his problem! Why is Amway any different? Most likely you will be presented with a "success plan" which will be your road map to Amway success. Why not ask the guy who is following the "plan" to PROVE how he is doing? If he is following the plan, and says he is financially successful, why not PROVE it! Just like you would ask an investment advisor what his track record is, why not ask your sponsor how his track record is? You are supposed to reproduce what he did, aren't you? If you were to invest in a mutual fund, you would ask the fund for its performance, wouldn't you? If the guy is really making money, what skin is it off his back if he shows you his Schedule C of his tax return? Would showing people how profitable the business really was, help his business grow? Will it help his business grow if he is showing a loss? Decide for yourself. See proof that most people are taking a loss on their taxes when following an "AQMO success plan". The numbers assure it. See Amway- A negative net sum game? The Amway business Paradox. Fun with math! See how profitable distributors are with Tax Court records.

 

Your employer is paying you a very small fraction of what he makes off you.

Truth: This is another unfounded statement that distributors use. First of all people who have a job walk away from the game with money in their pocket, unlike most Amway distributors. . People with jobs get paid in cash, most people in Amway get paid with a dream. Now, let's play with some number from the one of the most profitable and well-run companies in the world, General Electric. Using GE, we will be using the most favorable numbers, from the pro-Amway position, to show the point that most distributors just can't perform simple math.

GE 's 1997 sales were $90.84 Billion, had after tax profits of $8.2 billion and had 276,000 employees. Sales-per-employee was an eye popping $329,120/employee. This is outstanding, consider that most self-consuming, non-retailing Amway distributors have personal sales of only $2,400/year! (You can't count your downline, since the downline claims their sales for themselves) Most other companies come in below $200,000/employee. Now the after tax profit is an outstanding $29,721/employee. Even if the worst paid employee were to get $11/hr plus 30% benefits, the total compensation package is $28,600/year. It seems here even with the best numbers that employees still gets at least half of what they earn for the company. Not a very small percentage, as distributors claim. GE also has invested equity of $8.23 billion or about $125,000/employee. Given the capital employed and the after tax profits, GE's return on equity is 23%. In less efficient companies, the employees will get much more than 50% of what they earn for the company. If you invested $125,000 in a risky business you would like it to earn 20%+ too. The capital must be employed in order for the people to earn the wages in the first place.

 AmQuix creates wealth. It is a more efficient method of distribution

Truth: Amway AQMO success plans are a tremendous waste of resources and are destroyers of wealth. Imagine a distributor motivated, following what their upline tells them. Buy tapes. Attend all rallies and functions. Give out free product samples. An active distributor in most cases is just trying to get another person to consume product, and then the new person recruits other people to do the same. This distributor consumes $2,400/year at 100 points (PV), enough for the 3% rebate level. To follow the AQMO plan and grow his business, he must spend anywhere from $1,300 to $3,600/year on overhead costs (tapes, travel, functions, rallies, postage, etc). Now if the person he recruits copies his plan, that new person consumes $2,400 in product and also spends $1,300 to $3,600 per year trying to find people to "just buy from themselves". If you had 75 people in a group each doing 100PV this group would qualify for Direct Distributor status and the 25% rebate level. 75 people would generate $180,000 in sales, and at the 25% rebate level, get $45,000 back as a rebate. On average each distributor entering the system brings in $600 of revenue from the rebates, but each distributor is spending $1,300-$3,600 per year on their businesses. All 75 distributors are spending 75*$1300= $97,500/year to try and get a piece of the $45,000 in rebates returned from Amway! It sounds like a very poor business proposition to spend $97,500 as a group and only get $45,000 in income to split up. Even if you assume the Amway products are cheaper (bad assumption of course!) and this "savings" is counted as income which would add at most $720 per year to the average income. The distributors as a group still lose money! And, this doesn't account for the time they spend trying to find new recruits. See Amway - A Negative Sum game? The Amway business Paradox.

 People will always need soap, even in the worst economic times.

Truth: This is true. Although, people may not be willing to pay $7+ for a bottle of Amway shampoo, or $3+ for a tube of Amway toothpaste, $5 for a bottom of liquid hand soap or 110% price premium on Amway bar soap when the economy gets real tight. Amway markets "premium" products at premium prices. In tough economic times people will most likely shop for value. People will be unwilling to pay such terrific price premiums in a hard economy. Just take a look at Amway in Southeast Asia and Japan. The economy is in shambles and Amway's Sales in local currency dropped like crazy. For the quarter ending Nov. 30 1998 Amway Japan reported sales of 39,320 M Yen, versus 51,321 M Yen in 1997, or a 23% drop in sales. Net sales for the fiscal year ended August 31, 1999 totaled 143.8 billion yen ($1.3 billion), down 25.3% from the previous year. So much for the theory that people will always buy Amway soap in hard times. For a little Amway satire: President Clinton proposes plan to help Amway Japan

 95% of all people retiring are broke.

Truth: Data from the IRS suggest that this common claim of Amway distributors is untrue. The graph below shows the total income of retired taxpayers for 1995. The data show that 50% of all retires have incomes greater than $20,000, and 20% have incomes greater than $40,000. If any income under $100,000/year classifies you as "broke", then the distributors' claims are true.

 Amway has a "good" or A-1 rating with Dun and Bradstreet

Truth: This is irrelevant. Dun and Bradstreet is a credit rating agency. D&B rate the credit worthiness of businesses, not whether a business is ethical, moral, or a good company to work with. Since you won't lend money to Amway, or supply them products on credit, this statement is useless. Unknowledgeable distributors use this to establish credibility, all the while showing their lack of business understanding. It just means Amway has the capability to pay their bills on time.

 AmQuix is a debt free, private company.

Truth: This is also irrelevant to a business decision about becoming a distributor. Certainly having no debt is plus for the company and its image of stability. But from the standpoint of a distributor it doesn't do anything to make an Amway/Quixtar distributorship more profitable than a company with debt or is publicly held. It only provides bragging rights for business neophytes.

Just a s side note, a company that is totally debt free is not maximizing its return on investment by having 100% equity financing. A public company can increase shareholder value by borrowing money. This replaces the relatively more expensive equity financing with lower cost, deductible debt financing. The interest on the money is a deductible business expense where the return to equity holders of dividends is not deductible. A company can borrow until its debt rating becomes A, and still increase shareholder value. In this case the borrowed money is used to repurchase shares of stock. As the shares are retired the profit per share increases despite the small amount of additional interest costs, thus increasing the earning per share and thus the price of the stock.

From: Amway Corp. To Reorganize Feb. 2000

By LISA SINGHANIA. The Associated Press

Mark Bain, Amway spokesman

"Our cash position is solid, our debt is manageable, we're financially very strong,'' Bain said. ``Our sales are a bit behind what we hoped they would be, but that's not the driving force here.''

It would seem, Amway distributors can no longer claim Amway to be debt free.

See page on issuance of Debt for the Amway help Amway Japan.

AmQuix has "joint ventures" with hundreds of name brand companies like Coke, etc.

Truth: Amway may have agreements to market products produced by these companies, just as Wal-Mart does. Amway, however has not started a joint business with all these companies where they both share equity stakes in the newly formed business. Again over zealous unknowledgeable distributors are trying to give credibility to their story, and showing their true lack of business understanding. An excellent page on Amway "partnerships"

You can even buy Coke through AmQuix..

Truth: You can't buy a two-liter bottle, or a six-pack of coke through Amway. You can however buy a wall mounted single cup-dispensing unit, which was proven to be a marketing failure. There was so much negative press on these units in 1994; I'm surprised they still try to sell the thing. It amazes me how some distributors will grasp for straws in order to establish credibility for themselves. They all know the Coke dispenser is a total market failure, but still go on bragging about the "Coke" relationship!

Any losses from my AmQuix business are tax deductible.

Truth: According to the IRS, losses on a home business can be deducted for up to three years. After that, they consider it a hobby. Distributors have been audited and have owed thousands of dollars in back taxes and penalties when the IRS caught them taking losses even before three years. See the Tax Court records. The point of having a business is to make money. Every dollar of loss is only partially offset by the reduction of your taxes. If you are in the 28% tax bracket, and spent $1 on your Amway business, which resulted in a loss for your business, it only reduces your taxes by 28 cents not $1. You are still out 72 cents. This is 72 cents you could spend on something else. The value of this is even worse for people in low tax brackets. If you are in the 15% tax bracket, then it will cost you 85 cents. The lower your tax bracket the more it costs you to take a loss. If you want a tax deduction send me $1, and I will give you the tax deduction of 28 cents back. Does that sound like a good investment? You should be in business to make money, not to report losses to avoid taxes. See the IRS Position Letter IRS document of the "3-year loss rule"

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