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Amway/Quixtar: A Negative Sum Game
by Scott Larsen

Here is an economic analysis of an Amway/Quixtar Direct Distributorship (also called Platinum) to see if it is a positive, zero, or negative sum game, when the typical Amway/Quixtar Motivational Organization (AQMO) overhead expenses are included. The purpose is to see the distribution efficiency of Amway/Quixtar as a whole. Click here for a definition of positive, zero, and negative sum games.

Direct Distributor Group

In order to be able to look at the total business costs of the Amway/Quixtar distribution system more effectively, let's look at a "Direct Distributorship" as a stand-alone business. Assume all downline distributors are part of this business. We will call this business a "Direct Distributor Group". Because there are thousands of downline possibilities, all with their own individual income streams, it is easier to combine all distributors together at the Direct Distributor level. This is the lowest common "business unit" in Amway/Quixtar. The 25% rebate is paid to the Direct Distributor and then from there is portioned out to the downline. Grouping the distributorship together will help show the economic ramifications of the typical AQMO-touted system in a way that's easier to comprehend. The intent is to show how much revenue a group of Amway/Quixtar distributors generates versus the expenses they have in order to earn that revenue. It will also show how important it is to have customers just buying products.

Assume now that "Direct Distributor Group" markets only Amway core products. This is an unrealistic assumption as catalog and Quixtar partner store items carry lower $/BV/PV ratios. However, it makes the analysis less complicated, and errs in favor of the Amway/Quixtar. A Direct Distributor needs 7,500 PV (points)/month ($2/PV) or $15,000 per month in sales to maintain the "Direct" status. Total minimum yearly sales would be $180,000= (12*15,000). If each person consumed 100 points/month of personal volume, or $200/month there would need to be 75 people in the business (game) to make 7,500 points. This would almost represent a 6-4-2 downline so often quoted by people showing the "plan". 6+24+48=78 distributors to make a direct distributorship.

The rebates to the direct distributor are at the 25% level so there would be $45,000=(180,000*.25) available as gross profit to the "Direct Distributor Group" business. There is also a bonus called the Q-12 requalification bonus of $10,000. So, on average there is $733 available per person in the business to be split up among the 75 game participants ($733=($55,000/75)). There is a Q-12 all expenses paid trip as well. The trip benefits will not be included, because the value would vary and it cannot be traded for cash. If it includes a trip to Ada, MI in the winter, it might be a liability!

Let's assume that the cost of the Amway products is equivalent to the cost in local stores. This is of course false, according to what I discovered in my price studies, but let's ignore that for now, as it is also in favor of the Distributorship.

Table of Contents

Amway/Quixtar:
A Negative Sum Game

Direct Distributor Group

Distributor Group Expenses

What Happens When We Add Bonuses?

Now Let's Get Real

Forget The "Tools"

What About Fast Growth?

Definitions

More information by Scott Larsen is available at Quixtar/Amway Business Analysis

This page last updated on 3/29/2004