Established in the year 1959, Amway is a USA based multi-level marketing company which was founded by Jay Van Andel and Richard DeVos.
The business model of Amway is involved in selling home care, health care and beauty care products such as Amway Home, Glister, G&H, Nutrilite, Artistry, AmwayQueen, eSpring, Atmosphere, XS Energy across the world.
In this post, we will be covering the intrinsic details of the business model of Amway to understand how they channelize its multi-level marketing and generate money. So, without any further ado, let us start diving deep into the Amway business model.
Table of Contents
Introduction to the Business Model of Amway
There are so many businesses out there in the industry which have gained an immense amount of success in the world of businesses these days.
All of that is possible with the help of the business models that they have, which proves to be a great help to them when they want to achieve certain success in their businesses.
Derived from the Name ‘American Way,’ this company is known for providing a lot of services to the people out there. The company is known all over the world for the amazing products which are provided to the people with the help of the MLM (Multi-Level Marketing) services of the company.
Based in Ada Michigan, Amway was formerly counted as one of the top-performing companies, and it was featured in the Forbes Magazine as well.
So, there is no doubt about the fact that the businesses models of the Amway Company would be a real eye-opener for the new startups out there. Well, the business models of Dell are known as Multi-level marketing and direct selling.
So, these business models have managed to have some triggered flames in the industry.
Discussing the amazing business models of Amway will help a lot when it comes to having an understanding of the entire concept.
What makes the Business Model of Amway unique from the others?
When it comes to the business model of Amway, it is a bit different from the other ones.
In each company where there are some employees; there is also a particular chain of commands that take place between the employees and the employers. This chain is created with power, income, and responsibility.
With the Amway model for business, the situation is a bit different for sure.
Some tradesmen work down the line in a hierarchical pattern. These are the people who will be recruited later on in a chain, and hence, predecessor will be able to earn a bit more from in the form of commission.
There are certain distributors which according to the proposed model that is there are not paid that much to make sure that they are expanding the proper network with the introduction of some of the new workers who come down the entire chain.
This is the Multi-Level Marketing that makes the entire business model of Amway a bit different from the others.
Understanding Multi-Level Marketing In the business model of Amway
Before moving forward to anything else, people need to know about multi-level marketing and it is something which is also known as Referral or Network marketing as well.
The Multi-level marketing scheme is something that can be used to sell all the goods along with the services of the company and that too, with the help of promoters and partners of the company.
The total earnings which are collected from the entire sale are basically just distributed amongst the key players.
So, in the process, the seller is not the only owner of the profit accumulated from the sale.
There is also an involvement of the step where the associates will have to get paid with the help of a proper multi-level system, and there are commissions provided to these associates and promoters as well.
This is one of the most important factors of the Multi-level Marketing business model, which is a part of the Amway Company.
Here ABO, i.e. Amway Business Owner plays the key role in channelizing the business at a different level. ABOs let the Amway products reach to the customers.
Amway Business Owner’s role in the Business Model of Amway
In Amway business functioning, ABOs have the right to selling the products at a different level.
So, the hierarchy is like-
Amway – ABO1 – ABO2 – ABO3.. – Customer
ABO gives a fix commission to ABOs, plus income of 1st ABO gets added when he or she adds the second ABO. This hierarchy continues, and in some way, the commission gets added in the account of every ABO.
The salespeople who are a part of the company happen to be there working down the entire hierarchy. These are the people who will be selling all the products right from the list and to the distributors that are working in the retail markets.
This can be done with the help of some great promotional marketing options and schemes that they have. The better the promotional schemes are, the more sales there would be.
These people who are entrusted with all the sales methods will also get to recruit some other new dispensers that they want around the entire hierarchy which can be further help when it comes to the expansion of the network in the best way.
Either they would want to have sold the products on their own, or they will be able to choose the people who would want to use it in the first place.
So, these are some of the facts that one needs to know about the Multi-level business model of Amway Company. With the help of this knowledge, the new start-ups will be able to create better business models which can be a great help when it comes to getting their own business models.
How Does Amway Company Work? – Performance evaluation of ABO
With the Amway business models, the associates will be able to sell the products of the company directly and also they can make sure that they help in the promotion of the products as well.
This will create different levels of people working towards one common goal, and that is to make sure that the company of Amway is able to make a lot of money and that too in the best way.
The functioning of the Amway Business Model is based upon the performance of ABOs (Amway Business Owners). So, for evaluating their performance, Amway has a term known as Product Value, i.e. PV and Group Product Value, i.e. GPV.
PV is actually the MRP of the product, and commissions of ABOs are decided as per the PV of that product. So, in the hierarchy, the top-level ABO will get the product from the company at a discounted price based upon their commission, so he or she can sell that to other by that retail margin.
In addition, ABOs get the bonuses as per their performances, plus growth incentives are offered to them, so they stay motivated in making the chain to channelize the multi-level marketing program of the company.
All in all, the business model of Amway is not really that difficult to understand in the first place. There are certain roles that ABOs will be playing. They can either act as the distributor of the company, or they will be playing the role of the recruits who are recruited by the distributor as well.
You will also be able to easily recruit the people in order to do the job for you in the best way.
So, it seems quite obvious that the Amway Business model is one of the best models from the other models of businesses that we tend to see for a very long time.
How does Amway Make Money?
With the help of the products and services that are provided by the company, it is able to make money. In order to have a proper understanding of how Amway makes money in the first place, one needs to know how it works that we had discussed earlier.
So, as you would have understood that business channelization occurs when an ABO joins the company, for joining, everyone needs to pay a registration fee which is for sure, a direct income of the company.
In addition, the company manufactures more than 450 products, and via its MLM model, it sells those products all across the globe, generating a good amount of money.
As per the recent data, in the year 2018-
- Nutrition and Wellness Products were responsible for 52% of total sales
- Beauty and Personal Care Products were responsible for 26% of total sales
Amway Products that help Amway Makes Money
Amway manufactures and sales a wide variety of products that are of a top-notch quality which helps the company in making good money. Let us have a look upon some of the products of Amway here and now-
#1. Household Cleaners
- Original multi-purpose cleaning product LOC
- SA8 laundry detergent
- Dish Drops dishwashing liquid
#2. Health and Beauty
- Body Series
- Miskin (South America)
- Nutriway (Scandinavia and Australia/New Zealand)
- Attitude (India)
- Atmosphere and iCook as well as XL and XS Energy drinks
Amongst these, some of the top-performing Amway products that are highly crucial in generating revenue for the company are-
Top Performing Products of Amway Business Model
It is the largest selling brand of Amway that offer best in class health supplements that surpassed the sales of $3 billion in the year 2008.
These products comprise anti-ageing creams, cosmetics, skincare products, and serums. It has also surpassed the sales of $2.8 billion in the year 2011.
XS Energy, a California based company of Energy Drinks and Snacks, was acquired by Amway in the year 2015, as XS Energy was being sold as Amway product since 2003. It is responsible for generating $150 million in sales for the company.
It is a water filter that Amway claims as to the first water filter with a carbon block filter and ultraviolet light that further combines electronic-monitoring technology in the filter cartridge.
So, these are some of the details that you need to know about the Amway business model.
With the help of the Multi-Level Marketing Business Model, Amway is effectively widening its user base and adeptly channelizing its sales to generate good revenues.
So, this business model can be a very good inspiration for the businesses that are starting to provide their services and products to the companies who are in need for it.
With the help of the right model, the companies will be able to receive the success that they need to have in the first place.
So, how important and inspiration do you find the business model of Amway? Share your perspective with us in the comments.
Liked this post? Check out the complete series on Business Models