« Amway "Lukewarm" About China's New Rules | Main | Orrin Woodward's TEAM Gets Wiki-fied »
November 27, 2005
Quixtar Sets Wrong Kind of Record
By QBlog in Quixtar
Earlier this month Quixtar reported sales of $1.058 billion for the 2005 fiscal year. A truly impressive figure.
However, last year Quixtar reported sales of $1.1 billion for the 2004 fiscal year. If my math is correct (and it may not be) that means Quixtar's sales dropped about $42 million this year.
The Grand Rapids Press reports that this year's sales drop is the first such decline in Quixtar's six-year history. A new record!
Quixtar reported a drop in sales for the first time in its six-year history.
Sales at Alticor Inc.'s Web-based division fell about 3 percent to $1.06 billion, according to the company.
Bonuses and incentives paid to the company's army of dealers, known as independent business owners or IBOs, also dropped.
And while Internet Retailer gives a somewhat confusing report on Quixtar's sales, the article still concludes that sales are less than stellar.
Quixtar Inc. is reporting essentially flat web sales for its 2005 fiscal year. In 2005, the web generated sales of $753 million, up less than 1% from sales of $748 million in fiscal 2004, the company says.
No matter how you look at it Quixtar's sales are down at the same time that Alticor (Quixtar's parent company) is reporting its sixth straight year of sales growth. I think I know why Ken McDonald is on Beaver Island instead of in Ada, Michigan.
Comments
Qblog,
The better question to ask is,
How many other MLM companies did $1 billion dollars last year?
X, just because they were off in their predictions, don't mean they were wrong. I am confident it will still be a huge business.
Interestingly, Quixtar's web sales were actually up slightly. It was the offline sales that tanked. All the poor folk doing Amway the old way who basically got left behind when Amway was completely subsumed by Quixtar. A shame. I think they should have run parallel for at least 10 years.
X - It is a multi-billion dollar enterprise. All of Amway's global worldwide turnover is downline of Quixtar IBOs. IBOs in Quixtar are thus responsible for $6.4billion in sales. That seems "multi-billion" to me. Quixtar itself will eventually have multi-billion dollar turnover, but, like all the BS hype of the internet bubble, it was never going to happen as fast as some IBOs claimed.
Insider,
You should know to segregate the Amway sales from the Quixtar sales. It is Alticor that is the umbrella for these, not Quixtar. I don't care what the 'root' is, the point is, across the board, people kept hearing how this business was going to sky-rocket like a NASA shuttle! And the first few years it was growing fast as the old business was shifting gears to the new.
But now it has leveled off; from this point on, basic economics influenced by the group fluxuation says that Quixtar sales may go up and down slightly from here on out. If you want another explosion growth, you have to reinvent yourself again. Don't you listen to RP891?
Insider -
Not exactly certain what you are claiming to be 'inside' of, but Alticor and the reality of it, you are not. Q* will not ever be multi-billion. At the very highest levels of distributors (which is what they are proudly called all over the world), there is NO association with one another, and legs DO NOT all go back to the U.S. The struggles between them are the same as any global enterprise.
Ken was attempting to hold IBO leaders accountable to new profit goals, mutually beneficial for IBOs & the Corp, and when it came down to the first leadership event under the new rules and it was going to be less than 1/2 full because IBOs could no longer meet goals, the Corp folded and went back to the 'old' rules. Appearances are so much more important than reality in this business. Shortly after that, Ken said good-bye.
The Titanic continues to take on water. Revenues can be padded by taking on contract manufacturing and not reporting actual profits....but as long as water continues to be taken on, the ship will eventually sink.
xanadustc - no, Amway US was subsumed into Quixtar some time ago. Have you even read the press releases? Quixtar reports "online" and "offline" sales. Online sales increased, though marginally.
SeeSpray - not quite sure what your reply is to? I'm well aware that even at the highest levels IBOs have little to do with each other, and I entirely agree re "same as any global enterprise". The biggest misconceptions people have start with a huge underestimation of exactly how big this corporation is. As for legs - I'm >90% certain all legs go back to the US eventually, though I could be wrong. Any distributorship, including I assume JaRi, internationally sponsors themselves when new markets open. I'd be surprised if there's a frontline distributor in any country in the world that is not either internationally sponsored or actually owned by a US-based IBO or in most cases, both. If you have reason to believe otherwise please enlighten us. I'm always willing to learn.
As for Q* being multibillion (which is after all just sales >=$2billion), I think it will be, but i'd be surprised if it happened in say the next 5 years.
And by the way, Access Business Group third party sales is reported separately to Quixtar sales. You apparently don't bother to read the press releases either.
And finally .... I have Amway businesses both personally and through downline in multiple countries on 3 continents, and in not one of them do we still use the term "distributors". But then, what would I know?
I was commenting on your apparent lumping of Quixtar and Amway...if you are not aware, there are Quixtar groups that still follow the old order through the upline and have product pickup, these are the WWDB groups.
Amway international is a toally different business, and the two are under the umbrella of Alticor. It was Amway, USA that became Quixtar. It was on this basis that I said that currently Amway and Quixtar had to be considered seperately.
Ok, when I said "doing Amway the old way" I'm talking about the way they operate, not the name they operate under. No need for a history lesson, believe me, I know the deal :-) In any case, Deb commented in the forums that she knows of lots of "old timers" that basically gave up after Amway US disappeared. Now, I would assume the WWDB platinums and above are using Quixtar to place their orders, even if the downline is still doing pickup, so I'd assume they're included in the "online" sales. Offline sales I assume are phone/fax/mail/warehouse pickup.
Hmm ... on the other hand ... I wonder if WWDB are still doing warehouse pickups? If so then the sales drop might be primarily in WWDB. Which IMHO is not such a bad thing ....... ;-)
As an aside, any WWDB platinums and above still doing product pickup from upline would not be counted in the Quixtar "achievement" percentages. Do you have any further knowledge and how they are operating? I might post on the forums and ask about this ....
I do not, but contact Mevious at http://quixtardemons.blogspot.com/
He was in WWDB, I was BWW so I have a lot of info there.
X
SeeSpray:
Only thing he's "inside" of is a "non-domestic" leg of the PYRAMID. He wants to project his experiences in markets that have not been tainted by decades of saturation and corruption onto quixtar so we can all see what a swell opportunity it is. I think he's had a glimpse at (and been appropriately appalled by) how things are here, but what he fails to realize is that his market is destined to converge on the way ours is, rather than vice-versa.
I have to question the credentials of someone who claims to, say, be a "business major" or to have founded multiple businesses, yet has fallen for the fallacy of MLM to the extent of becoming an apologist; either his other businesses didn't work out so well or he's being disingenuous (such as identifying as "insider" on a Q* board when he's not in any way in Q*.)
MLM is intrinsically fatally flawed.
xan and insider,
I am also in WWDB currently and yes my upline still offers product pick up nights. Only this year have we given the other options of direct fulfillment(product pickup) or get products directly through Quixtar. I think next year there is talk of my upline getting rid of direct fulfillment. Ditto Delivery is taking place of that. I haven't been to product pick up for 6 months now, freeing up my Tuesday nights. I get my products delivered right to my door without even thinking about it.
Bystander, if MLM is fatally flawed then how come MLMers continue to exist and do very well?
Also alot of critics think MLM is "fatally flawed" nothing new there. But yet we still exist.
I agree with you, it was fatally flawed.... for the people in Passport.... ;-)
Really? So how long does it take for this convergence? I've been using the products for nearly 25 years now, they've been available in my home market for more than 30. But then, none of the markets I work in has the number of right-wing religious fundamentalist nutcases your country has. Maybe we should move in to the Iran market so we can duplicate the conditions better.
If you think MLM is intrinsically flawed then you don't understand it.
When? You want me to put a date to it? Can't do that, really. It's a function of saturation; that's where the fatal flaw comes into play. Saturation of the market for the product, and saturation of the "opportunity". If it's still working as advertised where you are, then get it while you can, I guess. Of course saturation is much misunderstood on both sides here.
Are you suggesting that your market(s) can grow to the point where ours is no longer saturated? Or would it be more likely that they would grow until THEY ARE? My whole point about you is that you're working in a different dynamic and that the corruption of the "tools" system is merely the most prominent symptom of the breakdown due to the fatal flaw of the MLM. If you're in an MLM with a vested interest in the success of the model itself, your objectivity is compromised.
MLMs continue to exist because between true believers (in the model) and naive newbies, the kingpin types can always find enough suckers to make a company profitable for a while and rake in some big bucks themselves. Equinox? Trek? Quorum? (etc etc) Some (very few) made some big money there. Where are they now? I would suggest that not only does nobody start an MLM anymore with the idea that it's a viable way to market/deliver ANY product, but that the product is irrelevant. The lessons of Amway (NA) have been learned well, but by bad people.
How do some do well? There will always be some few who do well, just as it's POSSIBLE (though not necessarily worthwhile) to profit in a saturated market, but what is the proportion? Can those who do well do so without those who don't? If they can't, can it not be said that they're doing well at the EXPENSE of those who aren't? (Remember, I'm talking about the saturated NA market here) In other words, if all the people that DON'T BELONG in the MLM (not operating as a BUSINESS, not SELLING STUFF) were to just quit RIGHT NOW, how would the ones who stay be doing, operating by the principles they are?
Well, all businesses are subject to potential market saturation, that isn't anything special to MLM. As you say, wWe have two areas pf concern though, one is saturation of the product, which is the most important as that where the income comes from. If there's a market for the product, then there is much more likely to be a market for the business opportunity. Sales can increase either through developing a new market or by taking market share from a competitor. Let's see ... in 2004 sales of Tide was over $2billion in the US. So just in washing detergent one competitor has nearly twice as much sales as from ALL of Quixtar. There's obviously room to grow market share there. How about developing new markets? The Health&Beauty industry is predicted to *grow* by $1trillion over the next decade or so. Quixtar is already #1 online in that arena, and Nutrilite is #1 globally in nutritional products, doubling sales volume in the last few years. So plenty of room for growth in that new market area and we are ideally placed.
So, I can't see how you can honestly claim there is any saturation in terms of the market for the products. Clearly there is not, and this is what is fundamentally important. People often present mathematically calculations claiming saturation will happen because if it worked everyone will be sponsored. This is spurious. We do not make money by sponsoring people. We make money by generating volume. Sponsoring people is essentially just a marketing strategy to generate volume. At different times in the history of A/Q different emphasises have been employed. Sometimes there more on direct sales. Sometimes on recruiting. Strategies have to change with market hanges. Is there are market for business opportunities? Of course. And 50+ new diamonds and above and hundreds of new platinums in Quixtar last year show's there's still a market for the business opportunity too. Will things have to change? Of course. The corp has terminated over a dozen diamonds and above (even a crown) in the last couple of years. It's embarking on brand building marketing. It's (shock horror) even looking at price changes. People were saying it's too late, it's saturated, back in the 70s using much the same arguments you are. They were wrong too.
And incidentally, new companies using MLM popup all the time. Not all of them are just scams masquerading as MLMs either. heck, even venerable old Avon went MLM not so long ago.
As for your last question, if all the IBOs not operating as a business quit as IBOs, what would happen? This happens every year now. The majority of folk not doing anything don't renew. The majority of those buying still remain in. PV stays much the same between august and september.
But you've again raised another myth. This belief that we make money at the expense of downline. How exactly do come to that conclusion? I recommend perhaps taking this to the forums.....
I've often wanted to pose this question to active IBO's: Hypothetically, if it were impossible for any IBOs to gain anymore downline (but still have the opportunity to keep the present downline they have should they choose to stay) how would this impact the present spending habits IBO's?
Many of these issues have been addressed in the forum, but perhaps it's time to revisit; it's only been fairly recently my grand unified MLM theory, so to speak, has really been coming together for me.
A couple of things though. As I said, saturation is much misunderstood, and please don't think I'm misunderstanding it the same way others do. Saturation is nothing to do with everyone being involved. Of course that's spurious. Now, you know I know that not everyone over here is or has been involved, right? Neither is it to do with a market not growing, or being unable to wedge yourself into what market there is. Saturation is simply the point where the cost of moving the next unit exceeds the profit to be derived from it.
Of course you aren't paid directly for recruiting (that would be illegal here, anyway). You do have the potential of bonuses from downline volume. It's money in your pocket either way, whichever you want to call it, and it provides motivation to recruit, just as retail markup provides motivation to sell.
Now, what happens to a centrally-controlled marketing effort when it reaches saturation? It will increase its marketing effort only to equilibrium at the point of diminishing returns. Coca Cola's market share stays fairly constant despite a gargantuan marketing budget, but they won't spend any more even thought they have the money, because they know it won't help. In fact it would eat into profits and result in a net loss overall.
A distributed marketing effort will unconsciously try to increase its marketing effort as well, but it becomes unstable at saturation and won't stop. There's nobody at home directing the efforts, and the individuals out there will try to increase the marketing effort to overcome the diminishing returns, either by going out personally flogging the products, or by expanding the team.
This is where the two motivations come together, and the fatal flaw of which I speak. You guys, with all your marketing restrictions, and having to push the products personally, have a pretty high cost of moving that next unit. When the motivation to recruit exceeds the motivation to sell, where do you think people are going to direct their efforts? It's each individual doing what he thinks is best for himself, but the aggregate effect is a vicious cycle, self-reinforcing. Instability.
People will realize they can sidestep the selling, and not having to sell will make it easier to convince a greater number of prospects. "Buy from yourself and teach others to do the same." Sound familiar? How do you get people to join and stick with it when all they are is customers? Hook them with the big money dream. Get them fired up, get them to go core. Indoctrinate and manipulate them to keep pouring their own money into the organization until you've gotten all you can from them, then call "next". All this sound familiar?
These things have been going on for a long time, and only subject to scrutiny with the advent of the internet. Unfortunately, they're commonly perceived to BE the problems, but I've come to realize they're just the symptoms of the problem. They're crimes that are ongoing, and the corporation has been complicit, because all that core self-consumption is volume. They may terminate someone when they realize there's no more covering for him, but have demonstrated a pattern of defending the guilty.
I don't think there is any way for a true multi-level model with unregulated recruiting and no central control of the marketing effort to maintain stability at saturation. Mary Kay has the same phenomenon as Quixtar, you can see it on the boards: the Koolaid swilling culties battling it out with the growing legion of shell-shocked survivors. I was peripherally involved with Avon before the transition, and have heard grumblings about the change. I don't think they've done their distributors any kind of favor, but I bet it will look good on the annual reports. The only reason left to start an MLM is greed.
On my site, I was discussing this issue in the comment section with someone. My summary is this:
1. Cost of MLM products are generally much more expensive than that of competing products [this appears to be to pay all the people in between].
2. The money is in growth, so more emphasis is generally placed on recruitment over customer sales.
3. The markup on products for sale is generally too small to make a significant [i.e. living wage] profit.
4. The time required to build and maintain a network far exceeds the reward for doing so [especially since the MLM I know of with the highest retention rate is Reliv @ a little over 50%].
5. If you ever do succeed in turning a significant profit, it is always for having a large network of people who are making little if any money at all
6. Statistically, 99.9% of people lose money in MLM
The page is:
http://bwwsot.blogspot.com/2005/09/effects-of-britt-world-wide.html
if you care to read further.
Bystander: I think *we* are having a convergence if nothing else. I mostly agree with you, and that is why my organisation does not promote the "buy for yourself etc" model. I've never heard that phrase at all from our tapes/seminars etc. I'm not against that model from a legal perspective. It's not illegal. But for pretty much the reasons you state it's not a smart business model. Now, there is a few things you state that I disagree with. Primarily that the cost of the marketing exceeds the returns. This is a misconception, much fueled by Scott Larsen's faulty "Negative Sum Game Analysis". In the way A/Q is structured one can only sensibly do an analysis within a platinum group. Outside of that group there is essentially no expenses regarding that groups return. A Platinum group does not go on forever, it's limited to 10-20 levels at most, and within any given line in that, only 3 or 4 of the people have any expenses. The rest are essentially just customers. Very very very few registered IBOs have any expenses at all, and the majority of those expenses are against future income. I'm yet to see a critic to a proper analysis that factors this in.
Finally, your question about "sound familiar?". No it doesn't, not even close. What you are describing there sounds a stupid way to build a long term business. It's not how I work or how anyone I've worked with the past 7 years works. That's simply not the A/Q business I am familiar with.
inquiringmind: The business group (no bigger than platinum) would then essentially be the same as a traditional business structure. The more recent IBOs would only have the opportunity to profit from retailing (or members if you allow!). The platinum and others could either focus on helping the retailers or doing their own retailing or some balance. In terms of spending habits, for personal shopping it shouldn't change at all. For other expenses there'd be a shift. Those wanting to be more like managers would obviously still need leadership-type training, the retailers would need more focus on sales-type skills.
You're missing or leaving out something here. It's not simply that the cost of the marketing exceeds the return (at all points), it's that saturation is the point where cost of marketing the "next unit" has increased to the point where it exceeds the return on that "next unit". This is quite real, and affects all marketing models. There very definitely IS an expense associated with the marketing, if only in time consumed in the effort, time which has a present value. Putting the value of that time against future income merely abstracts the problem one level further, making it harder to see when that future income has become less valuable than the time it took to generate it.
For your sake it's good that those things aren't familiar to you, but they are all too familiar to the experience in the North American market. It was obvious to me it was a stupid way to run something claimed to be a business, even without having to learn the hard way. However, as I said, you keep trying to project your experiences in other markets onto this one where they don't apply any more than experiences from here would there. You're trying to convince people that Q in this market is a good idea to join just because A where you are doesn't seem to be doing the same stupid things, and this is a disservice to people who may then run off and join abusive groups.
Actually part of my whole purpose for spending times on forums like this is to hopefully STOP people running off and joining abusive groups, and if that's too late to make them realise their is a choice. The QuixtarFacts website lists 16 different LOAs in the US. There's probably more. Why is it that virtually ALL of the complaints you read on the net come from less than a handful of those listed? If what you say is true about the entire American market, then where are all the horror stories for all the other LOAs? And why do forums like this have so little informaton on where all the new Quxitar Diamonds came from last year? To me the answer is obvious. Please please please do not take any of my comments as endorsement or encouragment of the abusive groups. Far from it.
Insider, there's no bonafide information
on the number of diamonds because the corporation does not supply it. I emailed the corporation and their reponse was that I should ask the person who told me about the business who could check upline for the answer.
Therefore, you will get theories such as Lawdawg's that uses whatever the corporation does release, such as approximately 340,000 IBO's in north america and the rate of diamond being .0076 and the rate of EDC is .00018, etc etc.
JC, I was talking NEW diamonds, and we do know that information. The complete list is provided in the forums. And the 340,000 is IBOs that received a bonus. The true number is obviously higher. One ex-IBO reports on the forums that only around 10% of his downline received a bonus. You do the math.
I know I've been out of it for a while, but this post is exactly what it took to bring me back. Does anyone else think it's hilarious that Quixtar owns a place called PETER island, and Ken McDonald chooses to vacation at a place called BEAVER island? I sure do. Next we're going to here about the Van Andles taking a sight-seeing vacation through "Box Canyon."
ROFL!!! hahahaha.
(for the record though, McDonald doesn't work for Quixtar any more and Peter Island was sold to the Van Andels. Or was it De Vos'? whichever.)
Insider,
Your point is well taken, and I agree with your assessment on new diamonds. I think what's important, but left out of how many diamonds fell out of qualification when the new ones emerged. It the total number of active IBO's remains constant, then logic would support the fact that just about as many diamonds fell out of qualification to make room for the new diamonds emerging, except for growth perhaps in an international leg.
No argument there JC. But without real figures on numbers of IBOs we just don't have a clue. Mind you, if PV per IBO increases then you can have more Diamonds with no increase in IBOs at all. What is difficult to have is a decrease in sales and an increase in qualifiers, (international aside), or indeed an increase in sales and a decrease in qualifiers. Being that it was offline sales that tanked last year it would imply a bunch of guys doing it the old way failed to requalify. WWDB anyone?
Quixtar is dangerous!!!!! As you know quixtar was started by 2 guys and there an IBO. All the money and profits is going straight to the 2 guys. What can money and power do? If you have those 2 you can take over anything. You can even over power the government. They say it's the perfect system but there's no such thing as perfect anything. There is something fishy about the higher ups. All i can say about this system is autocracy.
What happened to that multi-billion dollar enterprise this was supposed to turn into? I should pull up some quotes from early Quixtar BWW tapes, they were funny, particularly the Sestina tapes about what this thing was going to be like...it is a far cry today than what they were promoting that it was going to be.
X
Posted by: xanadustc | November 27, 2005 11:19 PM