"I stumbled across your site. It is interesting. I signed up as a Quixtar IBO last weekend. I put together a spreadsheet and did some figuring. It is going to take a tremendous amount of volume to make a decent amount of personal income from the site. The partner store PV/BV is really low." Site visitor

"A couple weeks after getting in, I met Don Storms at a meeting . I asked, wasn't this just another way to sell Amway and he told me no. My Emerald Distributor, Sowers, called me last night. I mentioned that incident and he said, at that time they didn't know that it was going to turn out the way it has. He admitted that it was another way to sell Amway only because there was very little money in the partner stores". IBO Site visitor

"I also know that I have yet to meet an IBO that says we make our money from the Partner Stores. We make most of our money from the core line (Amway products)". IBO Site visitor

Looking back into history, Amway added catalog products in the early 1980's to take advantage of the loyal sales force and bump up sales. Catalog items were a natural addition to the Amway product offering since catalog companies in the 1980's were enjoying robust sales growth by the increasing popularity of shopping at home with catalogs. The introduction of catalog sales also correlates to a positive rate of change in Amway sales from 1983-1997.

In the mid to late 1990's Amway must have learned that their catalog business was not competitive in many categories against discount stores such as Wal-Mart, Office Depot and the like.. With the popularity of WEB based, shopping Amway introduced Quixtar and partner stores to fill out the product offering, and to get more competitive sources for some of its lines.

The catalog items did not have as high of PV/BV ratios for the bonus structure as did the Amway core lines. Never the less, these items filled out the product offering that was not already represented in by the Amway core lines. The typical catalog item has an Amway suggested retail markup of 17% and contains about 1/2 the bonus potential per sales dollar as did the Amway core line. In general, sales expanded along with distributor gross margin. The catalog items were a good idea to add, although they might not have been price competitive with other sources. Dedicated Amway distributors bought the items despite the higher prices in order to generate volume and help make their next sales goal.

Amway had covered most types of consumer items with their catalog line, although it had a limited selection of brands and models. At the time before Quixtar, it was said you could get most everything you needed from the Network. Distributors touted the thousands of products (13,000 I was told), and the hundreds of Fortune 500 companies lining up to get Amway to take their products for Amway distributors to market. Therefore, it was generally accepted inside of Amway that you could buy most every type of consumer item you would ever need.

No doubt, one of the more interesting features of Quixtar is the introduction of the partner store concept. Let us take a deeper look.

Assume for instance, we have a typical Amway catalog item selling for $100. This product might have a PV/BV/$ ratio of 25/50/$100. This would mean for someone qualifying for the 25% rebate level could expect this item to generate 25% x.50 x $100 = $12.50 in gross profit in the IBO organization. If the distributor was lucky enough to sell this item at Amway suggested retail price then there would be an approximately $17 of gross profit for the distributor himself. In our example there is about $29.50 to be split up on this retail sale, and $12.50 for a "self consumption" purchase.

Now assume this item can be purchased from a Quixtar Partner store. If it is one of the more popular stores, it will have a typical PV/BV/$ ratio of 10/20/$100. This means the $100 item from the partner store at the maximum performance bonus level of 25% now generates 25% x 20% x $100 = $5 in gross profit. If it is any consequence, the item is most likely less expensive at the partner store than what it would have sold for in the Amway Catalog.

Assume now that there were inactive distributors just buying the products so they could get them at distributor cost. These inactive types can join Quixtar as a member and get the products at distributor cost, but cannot get performance bonuses. Their sponsor gets the PV/BV credit but at partner stores these are 1/2 the normal IBO ratios. For our hypothetical $100 product purchase by a member the total gross margin to the organization is now $100 x 25% x 10% = $2.50.

What has happened with the addition of partner stores is that some cannibalization of sales from Amway catalog items will occur resulting in sales with lower gross margins. No doubt, the addition of partner stores has drastically increased the selection of products and the possible allure of Amway/Quixtar as a viable business.

What we see over time is a continuous expansion of the Amway product offering, but at the same time competitive pressures shrink gross margins to distributors. From the graph above, we can see the range of gross profit margins available to IBOs. Amway core lines sold at retail prices generate 22 times the gross margin of a member at the most popular, but less profitable partner stores.

The use of partner stores can be profitable if one can adjust their overhead costs to fit the profit margins from the more popular but less profitable partner stores. Profit can also be generated by even more sales to compensate for the lower margins. In our example above the $100 item generated $12.50 in gross profit, versus now $5 for an IBO or $2.50 for a member. In this case, just for distributors to breakeven (on average) with the old method, total sales must increase 150% for IBOs to generate the same level of gross profit. Sales must increase 400% to generate the same dollars in margin for member purchases. Previously if Amway distributors were steering the majority of their personal purchases to Amway distributed goods; the introduction of the partner stores has not helped much, unless there were things Amway just did not offer.

The chart above shows a histogram of the Quixtar partner stores and their payouts as a percentage of "BV" or business volume. Over 65% of the partner stores have a BV/sales dollar ratio of less than 50%. 88% of all partner stores payout under 70% compared to the Amway core product line being about 100%.

Certainly, the product offering of Quixtar is much more appealing than previously with the Amway Core line and their catalogs. Given that the most profitable items are still in the Amway core line, the reliance upon partner stores sales may not be the best bet for people in Quixtar. Just to get to 100PV on Quixtar alone could take up to $1000 in sales!

Quixtar uses the Amway lines of sponsorship. The AQMO system is intact with all of those "tools" costs. Nothing has changed in many lines of sponsorship and since gross margins are decreasing, either more members need to be recruited, or more sales per person are needed to breakeven on the overhead costs.

For instance a distributor spending $2,000/year on business costs in Amway/Quixtar with a product mix that 33%PV/66%BV would need to have about $12,000 in personal sales to have generated enough gross profit at the 25% bonus level to breakeven on average. In reality, he will not breakeven, as he does not qualify for the 25% performance bonus level. It only means he generated enough margin in the group to cover his expenses. The portion of the 25% bonus he did receive showed up as a profit with his upline, and a loss in his business. In order for Quixtar to avoid being a "negative sum game" (where people spend more on average than they earn) IBOs need at least four times their overhead costs in personal sales at BV of Amway core lies, at IBO cost to breakeven. If the use of partner stores and members is the strategy then at least forty times the overhead cost must be had in sales at BV to avoid the "negative sum game" situation.

The chart above shows the contribution to gross profit of a $1000/year Quixtar member for various partner store PV/BV ratios and IBO performance bonus levels. A $1000/year member at a 10%PV/20%BV partner store generates $25/year in gross profit for the group. The person who sponsored this member would get somewhere between $3 and $25 /year in gross profit. Personally sponsor 40,000 such members and you can make $1 million per year in performance bonuses.

There is of course money to be made with the partner stores, but it will take many more people and lots more sales to keep the level of profitability up. One must decide if the effort to recruit even more people is worth the incremental profitability they bring to the group.

Table of Partner Store Pay-outs

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