How Amway Works

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Revision as of 10:28, 26 February 2009 by IBOFightback (Talk | contribs) (Australia/New Zealand Rebate Scale)

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Amway business owners can earn income and other incentives in a variety of ways. They fall under the categories of Retail Markup, Volume Rebates, Leadership Bonuses and Higher Awards and Incentives.

Retail Markup

The simplest method of generating an income is to buy products from Amway at their base wholesale price, add a markup, and sell them directly to a consumer. In general, Amway Business Owners (ABO) have the right to sell Amway-sourced products at whichever price they choose. The recommended markup on Amway manufactured products varies from 20-35%. In many markets Amway also makes available products from third-party manufacturers. The potential retail markup on these "catalogue" products is usually limited however, and they are generally made available for the personal convenience of Amway business owners rather than for resale. There are a number of exceptions to this, including XS Energy drinks and Emma Page Jewellery.

Volume rebates

In most product based businesses, the more volume you buy from your supplier, the cheaper per-unit price you receive. This means when you resell the product your potential markup (and thus profit) is higher. The same applies for Amway, however it occurs in a slightly different manner. In traditional distribution you would be required to purchase large inventories up-front and you would receive an upfront discount on the purchase price. With Amway, all authorised representatives make their initial purchase at the same price, no matter the volume. At the end of the month the total volume of products purchased through that ABO is added up, and the volume discount paid as a rebate, typically on or about the 13th of the following month. In addition, the volume is based on all products purchased, so you don't need to buy large inventory of one product to receive a discount, as is often the case in traditional distribution.

Because of the international nature of the business, the wide variety of products available, and the differing amounts of markup available to be shared on Amway manufactured products compared to third-party manufactured products, volume is calculated using a points system rather than per unit or purchasing cost. The scales varies slightly between different markets (see below). Every product is allocated a Point Value (PV) and a Business Volume (BV). The PV is used to calculate the rebate percentage earned. For most core line products (ie those manufactured by Amway), the BV is usually close to the wholesale price of the product less any sales tax. The rebate paid is calculated by multiplying the PV rebate percentage by the total BV.

North American Rebate Scale

PV Rebate (% of BV)
7,500+ 25%
6,000 23%
4,000 21%
2,500 18%
1,500 15%
1,000 12%
600 9%
300 6%
100 3%

Australia/New Zealand Rebate Scale

PV Rebate (% of BV)
7,500+ 21%
5,000 18%
3,250 15%
2,500 12%
1,000 9%
400 6%
100 3%

United Kingdom, ROI, and India

PV Rebate (% of BV)
10,000+ 21%
7,000 18%
4,000 15%
2,400 12%
1,200 9%
600 6%

India

PV Rebate (% of BV)
10,000+ 21%
7,000 18%
4,000 15%
2,000 12%
1,000 9%
300 6%

Other Markets

PV Rebate (% of BV)
10,000+ 21%
7,000 18%
4,000 15%
2,400 12%
1,200 9%
600 6%
200 3%

Leadership bonuses

Higher Awards and Incentives