From: reb@punch.EBay.Sun.COM (Bob Brown)
Newsgroups: alt.business.multi-level
Subject: Re: Questions about Amway
Date: 12 Nov 92 22:38:22 GMT
Organization: Systar Technologies, Inc.
NNTP-Posting-Host: punch.ebay.sun.com
In-reply-to: rjn@FC.HP.COM's message of Thu, 12 Nov 1992 20:40:14 GMT

>>>>> rjn@FC.HP.COM (Bob Niland) writes:

bob> X-Newsreader: TIN [version 1.1.8 PL6]

bob> Since there are some Amway Distributors and advocates in this
bob> group, I was wondering if any of you would answer some questions.
bob> Obviously I have never had an Amway presentation, or I would
bob> already have answers.  A family member did Amway some 15 years
bob> ago, but I was not living in the same state at the time and
bob> didn't pay much attention.

It's changed a lot in just the past few years so take the time to
really find out more by going to several presentations and asking
lots of questions.

bob> The questions...

bob> * How many "Amways" are there?  The traditional Amway-branded
bob> product line seems to be what most people are familiar with, but
bob> I have seen some indications that there is a second organization
bob> that has a catalog of non-Amway products.

Just one Amway. Of course, then again, we are in over 50 different
countries, and each of those countries operate differently and have a
different line of products, so we could count them as separate.

Amway has the personal shoppers catalog (primarily in the US) which
has thousands of brand name products. These are avaialable through
Amway and pay a reduced amount of profit compared to the products
Amway itself manufactures. However, there are a lot of products and
our customers can choose from all of the 7 or 8 different catalogs we
have.

bob> Assume that the remainder of my questions apply to the
bob> traditional program.  If the alternative (if any) program varies,
bob> and you wish to comment on it, please identify it as such.

bob> * When was Amway founded?  How many Distributors are presently
bob> enrolled?

Amway was founded by Rich DeVos and Jay Van Andel in 1959. A great book
to read is _Promises to Keep_ by Paul Conn. It will answer a bunch of
other questions you might have.

bob> * I understand that Amway fought some legal battles in the US to
bob> establish the legitimacy of MLM.  Was that effort completely
bob> successful, or do Amway and other MLMs still have obstacles or
bob> problems in some states?  If so, what are the problems?

That is correct. The FTC (Federal Trade Commission) went after them to
declare them as an illegal pyramid and force them to market products
via the usual distribution system. After a several year court battle,
Amway won with flying colors. We now have the "seal of approval" by
the government and oftentimes when other companies are taken to court,
the Amway business is the legitimate model that the comparisons are
made with. Amway is legal in all 50 states, territories and 50+
countries overseas. Amway participates in helping create appropriate
legislation to define a proper multi-level system and a pyramid.

bob> * How many products are in the traditional branded product line?

400 to 500.

bob> How much would a new Distributor need to spend to buy one of
bob> each?

A bunch. I don't know of anyone who does that up front though. For
example, the water treatment system, air filter system, Cleartrac CMS
(vacuum cleaner), and encyclopedia would be over $1,000. If the
average price of the other products was just $10 times 500 products,
you're in for $5,000 more. In our organization, we have a small
inventory to service a few customers. All the other orders are on a as
you need it basis.

bob> * What percentage of the branded products are significantly
bob> differentiated (in content and effectiveness) compared to similar
bob> store-bought products?

That's a tough question. Personally I believe nearly all the products
that Amway makes are better than the competition... however, I haven't
tested more than a fraction of the total. Those I have tested are
better and in most cases cheaper per use than the competition.

bob> * Does Amway REQUIRE its distributors to sell products to
bob> non-enrolled customers, or can you succeed in the business just
bob> by buying product for your own use, as well as enrolling others
bob> and supplying inventory to them?

Amway asks that its distributors follow the law. The FTC for various
reasons requires that product be sold at retail (you choose the price)
to customers. Amway's application of that rule is to require a minimum
of 10 customers per month. It's no big deal and it's profitable so why
not. The best thing about Amway is that once you have 10 customers,
they can be the same 10 because our products are used up and bought
again and because we have so many. What if you only sold Water
Treatment systems? To meet the requirement, since each customer really
only needs one, I have to find 10 NEW customers every month. What a
pain that could be.

bob> * If selling is required, what are the quotas, and what are the
bob> penalties for failing to make quota?

We say 10 retail customers doing $10/$15 per month. I don't think the
dollar amount is a real requirement since the forms we fill out can't
ask us what price we charged.  The penalties CAN BE you won't get your
bonus check at the end of the month. There are organizations who
enforce that heavily and there are organizations who don't really
check at all, they trust you and assume you have 10. At the direct
level, though, it'd be a good idea to have the 10 for sure.

bob> * I understand that below the "Direct" level, a Distributor gets
bob> product from the up-line sponsor.  Do all Distributors, at all
bob> levels, pay the same wholesale price, or do the Directs and above
bob> get a better deal?

We all pay the same wholesale price. There is however, a bonus schedule
based on volume. At the end of the month, depending on where your volume
is, you'll get 0 to 25% more.

bob> * Do up-line Distributors attempt to carry enough inventory to
bob> immediately fill down-line orders, or do they pass the order
bob> through their up-line Direct who then forwards it to the company
bob> for drop-shipping?  If so, what is the premium for drop-shipping?

It various from person to person and organization to organization. I
have just recently reached the Silver Producer Level. ($15,000 volume
in one month). I have less that $750 of inventory. My upline direct, a
Ruby ($30,000 volume in one month) has about $2,500 of inventory. My
upline diamond (minimum of 6 people at $15,000 volume consistiently)
has about $4,000 of inventory.

We don't buy it initially, we just increase slowly as our business
grows. $4,000 of inventory for a Multi Million dollar business is
unbelievably small.

bob> * What is the typical start-up inventory for a new Distributor?
bob> What is the typical on-going inventory for Distributors below
bob> "Direct"?  Does the need for inventory change at the Direct
bob> level?

bob> * At the entry level, what is the percentage or fractional
bob> relationship between: 
bob> - suggested retail price, 
bob> - wholesale price and 
bov> - valuation for bonus purposes?

Varies with the specific product line and from product to product.  It
really doesn't matter, if you build the business you get paid for
creating volume. Grocery stores and banks operate on razor thin
margins, ours are much more substantial.

bob> * At the Direct level, can products be ordered in less than case
bob> lots?  What is the premium for doing so?

Yes. Varies from product to product. Look at an SA13 when you see the
plan and look under the eaches column.

bob> * When attainment goals are met for advancement, for example to
bob> the "Direct" level, are the new position benefits granted:
bob>   - retroactive to the beginning of the month in which attained
bob>   - on the date of attainment
bob>   - at the end of the month in which attained
bob>   - at the end of the following month
bob>   - at the beginning of the next fiscal or calendar quarter
bob>   - at the beginning of the next fiscal or calendar year

Each month you reach 7500 PV you get paid at the 25% bonus level.
That check, as a direct, comes from Amway someplace around the
20th of the month.

If you are a direct and you break off a silver (or direct), you will
receive a 4% check base on that distributors group volume.

To become a direct, you must qualify at 7500PV for 6 months out of the
fiscal year. The first time you can count months in a previous fiscal
year provided you reach it every month for 6 months in a row at least
5 months before the new fiscal year.

bob> * Some of the attainments appear to be quota based, requiring X
bob> volume for Y months, and maintenance thereafter.  What happens if
bob> subsequent to making a goal, you fail to maintain it for one
bob> month, two months, etc.  Must you go through a requalification
bob> all over again, or are there more severe penalties?

There are no "penalties" per se. You reach the bonus level on the
schedule, you get paid. If you don't maintain the volume, you get paid
for the volume that you are at. 

There are two ways for us to approach this. We could say once you
reach a certain level, you ALWAYS are there and always get paid for
it. I believe this encourages frontloading and buying more than you
should because it's worthwhile to "get to that level". But a real
leader needs consistient volume and so Amway says be a real leader,
have a strong business. For one month ANYONE can buy at a high level,
but to maintain it is to have a real business.

bob> * What happens if anyone in your downline qualifies for a greater
bob> level than you are at, before you do?

GREAT! Hope I find 6 of them.  They get paid the bonuses that they
deserve, when you get your business to where it needs to be-- you get
paid too.

Let's say you go Emerald (Help 3 people acheive direct volume for 6
months in the year) and ALL 3 of them go diamond (help 6 people
acheive direct volumen for 6 months) before you do. You will get paid
4% on each of your three people, they will get paid 4% on each of
their 6 people. Ahhh, but now the good part. You get a special bonus
called pearl-- you also get 1% of the volume of the 6 people that each
of your people helped. 6x3 = 18% more!! So you get in effect 30% of
a direct's volume as a bonus and they get 24% of a direct's volume as
a bonus!! 

bob> * At least at the lower levels, bonuses are apparently calculated
bob> and paid by the Distributors to their down-lines.  What
bob> enforcement and controls are in place to ensure that these
bob> payments are correct, made in a timely fashion, and drawn on
bob> sufficient funds?  If a Distributor suspects they are being
bob> cheated, what recourse is available and how reliable is the
bob> resolution process?  Do Distributors have the right to examine
bob> the books of their sponsors?

If you get cheated, it will only be once because you'll stop dealing with the person who cheated you. It would be stupid on their part because they have a good chance of losing their business entirely and certainly no one would want to work with someone who has a reputation like that. The primary recourse is to notify your direct or Amway and they will make every effort to clear up the problem. 

No, you don't have the right to examine the books of your sponsor. But
you should know your own PV because you sold the stuff to your
downline. And for things that come via catalog, etc... Amway has those
records and could provide them if necessary.

bob> * I once got a brief look at the simplified Amway business plan.
bob> There were three identical disclaimers on the document, each
bob> stating that only 45% of enrolled Distributors are "active"
bob> (which I suspect is typical for MLMs), and that the average
bob> active Distributor earns (as I recall) $62.50 per month in
bob> bonuses.  Is the $62.50 figure before or after deducting payments
bob> that Distributors must pass on to their down-lines?

I forget. Keep in mind that 'Average Active' in that survey meant the
distributor attended a meeting, tried to sell something, tried to
sponsor someone in the month in question. Now THEY may define that as
active, but I sure don't. 75% of all distributors NEVER sponsor
anyone. Since there are 250,000,000 people in the US, there is only
1 chance in 250,000,000 that I am writing this. Statistic are great
when applied to masses, but they have no meaning in building the business
because it is up to YOUR effort. The low numbers simply mean most people
do zip in building the business.

bob> * What do the terms "roll-up", "break-away", "buy-in" and
bob> "front-loading" mean in the Amway context.  When do they apply
bob> and what are their consequences?

"roll-up" occurs if a distributor quits, fails to renew, or does not meet
the requirements of being a distributor. It just means we pull that person
out of the structure and everyone under them moves directly into his
position. I.E. I sponsor A who sponsors B, C, D and E. When A quits, the
structure changes so that I would be the sponsor of B, C, D and E.

"break-away" is what happens in Amway when you become a direct. That's
7500 PV for 6 months. When that occurs, you stop working directly with
your sponsor and purchase directly from Amway. Amway pays you now. Your
upline direct now gets checks from Amway for 4% of your group volume.

"front-loading" is selling a bunch of product to new distributors.
This can be illegal but it's hard to draw the line. In Amway, there
is no point in doing it since to move up to say the direct level, there
is a business requirement that 70% of the product MOVE someplace other
than your garage. This means you have to build a business, no just buy
a bunch of inventory. In almost all cases where people tell you that
they made $30,000 their first month, it's because they sold a bunch of
product to people who stuck it in their garage.


bob> * Once you have a successful Amway business, and you decide to
bob> retire, become a monk or emigrate off-planet, can you sell the
bob> business to someone else as a going concern?

Yes.


bob> Regards,                                              Hewlett-Packard
bob> Bob Niland      Internet: rjn@FC.HP.COM               3404 East Harmony Road
bob>                 CompuServe:  71044,2124               Ft Collins CO 80525-9599

bob> This article represents only the opinion[s] of its author, and is not an
bob> official or unofficial position of, or statement by, the Hewlett-Packard
bob> Company.  The text is provided for informational purposes only.  It is
bob> supplied without warranty of any kind.


Bob Brown

--
--Bob
Systar Technologies, Inc.		   Sun: robert.brown@EBay.Sun.COM
1712 Picasso Avenue, #B & #C            Office: reb@systar.com
Davis, California  95616		 Phone: (916) 753 - 2611
From: lou@hpkslx.mayfield.HP.COM (Lou Kvitek)
Date: Tue, 27 Oct 1992 20:19:19 GMT
Subject: Re: Selective Disclosure (was Re:  LOOKING FOR GOOD MLMs (?) )
Organization: HP Response Center Lab