Letter to Amway

 Geek Wannabe, General  Comments Off on Letter to Amway
Jul 312009

One of the perqs of cleaning out the basement is the historical artifacts you dig up. Let me share one I unearthed recently.

The year: 1996. The Artist would have been a year old; we were just getting started as a new family. Apparently Amway tried to recruit Alpha Geek into their ranks. Sorting through a box of old papers (yes, we have boxes in our basement that haven’t been opened since 1996), I found a copy of a letter he sent them in response:


Bradley Orner has produced what looks to me a very well thought out analysis of the income potential of Amway. My own research confirms his findings on all major points. The full text of his article is available on the Internet at http://www.teleport.com/~schwartz/bostat.txt. The relevant findings are as follows:

Percentile Gross
Net Income
99.996 $10,183.00 $9,683.00 Diamond
99.9 $6,321.75 $5,821.75 Emerald
99.5 $2,034.00 $1,534.00 Direct
95.3 $108.00 ($392.00) >500PV
89.1 $70.50 ($429.50) >125PV
79.8 $45.00 ($455.00) >75PV
66.4 $15.00 ($23.00) >25PV
59.7 $0.30 (38.00) >1PV
46.0 $0.00 ($38.00) 0PV active
under 46 $0.00 $0.00 inactive

I cannot help but notice that you lose money on Amway until you “break off” and become a direct distributor. I do not want to lose money; this is not my goal. I am sure you will wish to contest this analysis, so I will simply ignore it and concentrate on the top three levels.

You wrote $2,100 in as the income for a direct distributor; this is in agreement with Mr. Orner’s figure of $2,034. Mr. Orner simply deducts an average of $500 in expenses such as mileage, motivational materials, telephone long distance charges, and so forth. This comes to an income of $18,000 per year. Not particularly impressive; certainly nothing to retire on.

Only one in 200 Amway distributors are at this level. This suggests that to become a direct distributor, you must have an average of 200 members in your downline, not 79 as shown in the booklet. The reason for this is that the booklet assumes that everyone in your downline is fully productive, which will obviously not be the case. So let’s assume that you personally sign up 10 people, who in turn sign up another 50, who in turn sign up another 140. Assuming very optimistically, that one in five people you contact actually become a dsitributor, this means you must personally contact 50 people in order to recruit your first tier, then help them contact 250 more people to fill the second tier, and then help them contact 700 people to fill the third tier. Assuming, simply to get in the ballpark, that it takes, in repeated contacts, driving time, preparation, et cetera, 4 hours, to sign someone up directly, 2 hours to help a first-tier person sign up a second-tier person, and 1 hour to help a second-tier person sign up a third-tier person. That is a total of 1400 hours work. At the 8-10 hours per week described in the booklet (and remember, you can’t quit your day job yet, because you are paying business expenses out of your pocket, and in addition, even once you become a direct distributor, you don’t make enough money to live on), this is 155 weeks, or three years. So in three years of ongoing, week-after-week effort, none of which you have been compensated for—and which you have in fact paid for out of your own pocket—you have created for yourself a part-time job that pays $1,534 for every 400-hour month, or $38/hr. This is about what I make now. Why not just go get a part-time, 10-hr/wk second contact and make money from the beginning?

Okay, but what about emerald and diamond distributors. An emerald distributor makes about as much money as I do right now, and a diamond makes about twice that. One in a thousand distributors are emeralds. Assuming that you become an emerald by having five direct distributors in your group, that means that the five people who are to become your direct distributors must spend the same three years achieving that level that you did to begin with—assuming (and this is a big assumption) that they can all start immediately, or have started already, when you become an emerald yourself. So in 2002, I finally manage to make as much in Amway as I was making in 1996 at my full-time job. This is assuming that it is actually possible to be an emerald distributor for only 10 hours a week; I rather suspect that emerald distributors have to put a lot more work in than that. But anyway, assuming that Amway’s payoffs have kept pace with both inflation and increases in computer industry pay scales, I have finally got to the point where I can say with confidence: “I am now no worse off, or at least not much worse off, financially in Amway than I was as a computer consultant.” I’m still not very excited.

One in 25,000 distributors is a diamond. This means that to become a diamond, you have to sponsor 25 emeralds. If it takes six years to become an emerald, then it takes at least six years to go from emerald to diamond, becomes your downline people have to become emeralds themselves. So now it’s 2008, I’m 40 years old, I’ve been in Amway for 12 years, and I’m making $120,000 per year in 1996 dollars. This, finally, is a respectable income, equivalent to about $60/hour for a full-time job. It’s half again what I make now.

But here’s the thing: Assuming, by your example, that active distributors buy $200 worth of product per month each. Once you’re a diamond distributor, you have an active downline of 25,000 people, so there is a sales volume of five million dollars involved per month, or 60 million per year. So viewed as a sales job, Amway diamond distributors are making a commission of only 0.2% on volume. In any other industry, 1% on gross is considered adequate but not particularly good. If, instead of working for Amway, I spent the next 12 years building sales volume as a manufacturer’s rep or independent sales associate, and assuming that I could generate the same volume (not an unreasonable assumption), I would reasonably expect an income of at least $600,000 per year—five times what Amway proposes to pay me.

Alternately, I could stay in the computer industry. I have eight years’ professional experience now. After 12 more years, I would have 20 years experience, and would be working as a middle manager or extremely senior systems analyst. These people make well over $100,000 per year. And instead of scrimping and saving to pay for the first three unproductive years, I would have a steady income the whole time. Not only that, but I would be doing work I genuinely enjoy, rather than extroverted sales-schmoozing, which I can do but don’t like very much.

So no thanks, I don’t want to join Amway. Please don’t call on me again.

For the record, we never heard from them again.