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BW Businessworld

‘Payouts Linked To Performance’

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William Pinckney, MD and CEO of Amway India, tackles questions on company practices and
commissions in an email interview. Excerpts:

The government seems to have concerns regarding MLMs, and practices associated with them. The ministry’s draft rule suggests that commissions that accrue from downlines will be banned. How will Amway take on the challenge?

The government, as far as we are aware, has no concern with regard to “legitimate” direct selling firms like Amway doing business in India. But if it were to impact FMCG/consumer and product firms, then even conventional businesses would be impacted; ones where master franchisees, master distributors or super stockists benefit in terms of group/downline performance-linked commissions and bonuses. If it’s the latter, then like all FMCG firms, Amway will make the necessary adjustments to follow the law.

The monthly meets give the impression that royalty income for IBOs is perennial. Is Amway doing anything about such mis-selling?

Amway Business Owners (ABO) do NOT have the impression that “royalty income” is available without ongoing effort. All Amway literature and education reinforces this and common sense confirms it. All commissions and payouts are directly linked to business volumes and sales performance each month. So if performance does not reach benchmarked levels, then no commissions or payouts accrue. In the 15 years that Amway has been in India, there have been very few instances of miscommunication/mis-selling brought to our notice, and if brought to our notice, we will take swift action to curb such activity via show-cause, suspension and even termination of an ABO, when required.

On an average, what percentage of the products’ MRP goes to the ABOs as commission, and what percentage accrues to Amway? Also, what percentage will be the costs associated with the product, including advertising, logistics, etc.?

The average mark-up from wholesale to MRP ranges from 10 per cent to 20 per cent and ABOs can make all of that or some of that based on the price they finally sell the product for. In addition, ABOs can qualify for monthly bonuses and annual bonuses (6-25 per cent of total volume). Amway also provides incentive trips.

Typically the percentage of product manufacturing costs, especially when compared to others in the FMCG industry, varies in the 27-30 per cent range — on a par with industry benchmarks. We don’t earn extraordinary profits — our profitability has been in the 12-15 per cent range year on year, the same as the industry standard.

(This story was published in BW | Businessworld Issue Dated 06-05-2013)