The life of an IBO: An Amway MLM Review
64% of those interviewed for an independent survey responded that the reason they quit their MLM business was because of the difficulty in recruiting. With big MLM companies like Amway offering both single marketing and multi-level marketing, how come those 64% did not continue as a simple representative?
A Little Math In An IBO’s Month
From the Amway website, I got the following information:
|Welcome kit||$62(inclusive of the $50 Amway Business Services and Support Fee +
$12 IBOAI Support Fee)
|Optional Product Kit(some products for personal use and for samples + more marketing materials)||$97.74 (after shipping) ($83.99 + shipping)|
|Total Expenses||$159.74(Welcome Kit + Product Kit)|
|Average Retail Margin||29%|
Marketing statistics show that only about 1% to 2% of your friends will respond or buy your products. Facebook statistics report that a person with an FB account has an average of 130 friends.
From those information, let’s say in every day for a month, 1% of your FB friends, and each of that 1% also get 1% of their friends, that’s roughly 6 customers, to buy 1 Amway product from you with an online price of $20:
Gross sales (day): 6 friends x $20 Amway product = $120
Gross sales (month): $120 x 30 days = $3600
Profit: $3600 total sales x 29% Retail Margin = $1044
Net Profit: $1044 profit – $159.74 Total Expenses = $884.26
$884.26 estimate is actually a better scenario from that of Amway’s. They state in their Business Reference Guide:
“The average gross monthly income earned by “active” IBOs was $115 US.”
Actually, your “net” profit of $884.26 isn’t really your income yet. Remember to factor in phone bills for making some calls to sell to your friends, transportation expenses if you need to do some meet-ups, and seminars or any more training materials you purchased.
Motivations, Trainings, and All the Hoopla
In a review given by a previous Amway representative for almost 4 years, a serious “want-to-make-it” IBO’s expenses can be as much as $700 every month. These are for instructional DVDs, training books, meetings, transportation for meetings and seminars, and more. With that kind of expenses, then we’re not too far off from Amway’s statement. Most previous IBOs find that there are just “too many” training materials.
In fact, Dateline NBC did an undercover investigation in 2004 of Amway’s business practices. They reported that the top positions in Amway’s levels of distributorship make more money by holding seminars and selling motivational materials like books and tapes than by selling actual Amway products.
“In fact, about twenty high level distributors are part of an exclusive club; one that those hundreds of thousands of other distributors don’t get to join. For years only a privileged few, including Bill Britt, have run hugely profitable businesses selling all those books tapes and seminars; things the rank and file distributors can’t sell themselves but, are told over and over again, they need to buy in order to succeed.”
That feature news was just one of the many controversies and lawsuits that Amway had to deal with.