A few of the Amway - Quixtar Myths

Quixtar has cut out the middle man in the distribution chain.
Truth: Quixtar might buy direct from manufacturers, but so do Wal-Mart and a host of other retailers. Quixtar / Amway hasn't eliminated the middleman; they have just replace it with numerous new middlemen. The new middlemen are the long list of Quixtar distributors between the end consumer and the "servicing company".  All in all the Quixtar method of distribution has more layers of middlemen as the systems they compare themselves to. These middlemen take 31.9% of the wholesale sales price. Wal-Mart by contrast, also buys from the manufacturer and has just 21.2% of sales as overhead costs.

Do the work once and get paid for life.
Truth: "Residual income" is one of the oldest Amway/Quixtar myths there is.  What new prospects do not understand is due to the high turnover rate, the nature of the bonus payment system and Quixtar rules themselves, IBOs must continually work just to maintain their business. 

1) IBO non-renewal rate of first year IBOs, as reported by Quixtar, is an astonishing 66%.   Amway reported that just a little under 50% of all IBOs each year do not renew.     A lot of work must be done to recruit new people to replace those that quit.  If one does not actively work to keep the business propped up with new people, those "residuals" will be quickly reduced to nothing. 

2)  Due to the nature of the Quixtar bonus system, upline IBOs are always in a race with their downline.    As soon as downline distributors have enough volume to be in the same bonus bracket as their upline, the incremental income from that leg to the upline can fall to virtually nothing.  Therefore an IBO must always strive to build width in his own business to be able to collect the extra profits from "bracketing" of the various bonus levels. 

3) Quixtar has a "servicing agreement" rule.   The Quixtar rules also state that IBOs are responsible for training and motivating their downline IBO.   An IBO wishing to sit back and enjoy his residual income, and not spend time building and training his team, will most likely be forced to sign a servicing agreement with his upline.  The servicing agreement will require the IBO to pay his upline for taking over the "servicing" of his downline.

Those IBOs who have "retired" to the business have done nothing more than change jobs to one of self employment.  Check their schedules and see how many hours they are working the business.  Most of the "retired" people are working the business harder and longer than they had been working their previous jobs.  in order to save face, most do not want to admit that they are worse off with time than before the business.  Thus the lies about time freedom continue.  Check out all the top level IBOs no longer in the business.  If it were "residual" and "effortless" why did they all leave?  IBOs can be fired too.

Change your buying habits and save money shopping with Quixtar
Truth: You need to do your own price study to determine if you will actually save money  Price studies show you will spend a lot more using the Amway network than by shopping at local discount stores. My study found only just 25% of the Amway prices were lower on a per use basis. Fair price studies should compare generic to generic in equivalent sizes, at discount stores. Amway studies compare catalog products against premium competitor mail order catalogs and not discount stores.  The high turnover of IBOs suggests that most participants cannot find enough value with Quixtar to justify renewing their membership.   One group I studied had 456 people with just 4000 PV, or an average sales of just $22/month assuming 1PV point is worth $2.5.

Wal-Mart doesn't pay you to shop with them

Quixtar rebates 68% of sales to IBOS

The business has created
thousands of millionaires.

A.C Nielson says you will save money

Quixtar's computers melted!

The Quixtar business has very little risk.
Truth: Most distributors spend many times the cost of the kit employing the "success system" sold by their upline Diamonds. The cost of the Quixtar kit is negligible when compared to the money spent on motivational events, tapes, books, and business tools. 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.  See case studies of former distributors who lost many times the cost of the kit.

Your upline doesn't make any money of you until you make money.
Truth: As soon as you buy a kit, the upline has already made money off you.  Additionally, the kit can be loaded with tapes, promotional supplies, and the line of sponsorship website registration fee.  This will assure that your upline will be making money before you ever do.  When you buy your first function ticket, or motivational tape, the upline has probably earned several times what you will from your first month's Quixtar purchases.

Your will always make more money on your business than your upline will.
Truth: A typical 100PV plan of recruiting nine people who then each recruit four who in tern each recruit two is very lopsided when it comes to compensation. This 9-4-2 plan has 72 people in the first level of the pyramid compensated at the 3% bonus level. There are 36 people in the second layer of the pyramid at 6% bonus, and nine in the third layer at 12% bonus.

The platinum distributor, the head of this group, is in the 25% bonus bracket. The Platinum nets 13% bonus (25%-12%) on all sales in the 9-4-2 model. The 13% exceeds the bonus percentage of all his 117-person downline. It seems in this case the new business owner earns very little of the profit his sales generated, 3% compared to approximately 31% for all those above him. Those that recruited him earn the majority of the gross profits. This is just the opposite of what is claimed.

64% of the people earn less than 1/4th of what the platinum earns off their work. Another 31% earn less than 1/2 of what the platinum makes off their work. Still for the last nine, they only take home less than half the profit their sales generated at the platinum level.

Your employer is making more from work than you do.
Truth: This is another unfounded myth in the business. First of all people who have a job walk away from the game with more money in their pocket, unlike most Quixtar distributors.  Let's look at 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.

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 amazing $329,120/employee. This is outstanding, considering that the average (38.5PV/month) self-consuming, non-retailing Amway distributors has personal sales of just $1,155/year.  Most other companies come in below $200,000/employee. The after tax profit per General Electric employee is   $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. This is not a very small percentage, as Quixtar 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.

According to the American Bankers association 95% of all people retiring at 65 are either dead are broke.
Truth: Many lines of sponsorship want to scare the prospects with the "retirement statistics".  Many groups have repeated the line above and World Wide Dream Builders puts something similar in their "private franchising" brochure.    They state that according to the Social Security Administration, people reaching age 65:

23% still working
30% dependent on charity
45% financially dependent on relatives
2% are financially independent

The source of the "American Bankers" statement above had alluded me.   This topic came up on the QuixtarNow Blog with a link to a January 30, 1935 article from the Senate Finance Committee where the actual basis for this claim can now be found.  Interesting is that the statement was made even before the Social Security Act was signed into law in August of 1935.  It seems unethical to me that these Amway organizations would continue to quote an 80+ year old survey in light of the fact that many things have changed to improve the incomes of retirees.   Since the article was written in 1935 such things as Social Security, corporate pensions, 401K plans, IRA's, Roth IRA's and annuities have improved retirees' incomes significantly.

Data from the IRS suggest that this common myth of Amway and Quixtar distributors is very untrue 80+ years later.  The data show that 50% of all retires have incomes greater than $20,000, and 20% have incomes greater than $40,000. About 5% had incomes over $100,000/per year.  If any income under $100,000/year classifies you as "broke", then the distributors' claims are true.

Losses in the Quixtar 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, it only reduces your taxes by 28 cents not $1. You are still out 72 cents.  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.  You should be in business to make money, not to report losses to avoid taxes.

The Misty window cleaner dilutes down to a cost of 9.8 cents for 32 oz.
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. 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 name brand window cleaner, and you won't have to drag around 4 gallons of concentrate for the rest of your life.

Wal-Mart never gives me a rebate.
Truth: Distributors are right, Wal-Mart never gives you a rebate.   What difference does a 3%-25% rebate make when you are paying 40% or more for the Quixtar products?  At Wal-Mart, you get your rebate immediately at the cash register, and you needn't spend a minimum of $200 in one month just to get 3% back either. Your rebate from Quixtar will also be taxable as Quixtar sends you a 1099 reporting this as income.

Amway / Quixtar returns 55% - 68% of sales to IBOs
Truth: Quixtar reported sales of $1.1 billion for 2004 and payouts to IBOs of $351 million to IBOs, or 31.9%.

Amway / Quixtar has created more millionaires than any other business.
Truth: I cannot find this 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.

The A.C. Nielson Company says 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. The Wal-Mart generic saves almost 50% per tablet over the Amway generic brand. 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.

Quixtar's computer "melted" due to all the traffic they got when Quixtar went online!
Truth:  This has to be the funniest Quixtar urban legend around.  Computers don't not melt due to high processing volumes.  Some lines of sponsorships even went on document this great myth on the tapes they sold to their IBOs. IBOs were using this lie to justify the unexpected technical problems Quixtar had on its opening day.