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Quixtar: A Multi-Level Marketing Scam

After learning that one of my acquaintance was running his own business, I asked about the kind of business he was running -- just out of curiosity. I was in for a surprise. I was expecting a short-and-sweet to-the-point answer, but what I got was an hour long "information session" on Quixtar (supposedly an online shopping company). He claimed it was the solution for gaining my financial independence by becoming an IBO - Independent Business Owner - affiliated with the company.

As much as it motivates me to be my own boss and run my own business, I'm always sceptical whenever someone talks about the big bucks I can [potentially] make in a [relatively] short period of time in some sort of business with minimal investment. And of course, they have the fancy charts, literature and math to back up the numbers.

Despite what they say, Quixtar is a pyramid scheme, albeit a cleverly disguised one. Citibank's Primerica also operates in a similar fashion. Both are "multi-level marketing" schemes. The basic idea is for an IBO to sell Quixtar products and to "sponsor" (i.e. recruit) other IBO's (who will work under you). The sponsoring person gets a bonus for recruiting, and a fee from everyone that the new IBO recruits. The recruiter also get a percentage of the new IBO's sales and of the sales of everyone under the new IBO (if any). The new IBO is strongly encouraged to sponsor/recruit more people.

Advocates of Quixtar are quick to point out that almost all corporations operate in a pyramid fashion, where the employees are at the bottom of the so-called pyramid and company executives reap all the benefits of a regular employee's hard work. This is certainly true. But what's the point of becoming a Quixtar IBO and "owning your own business" if the employee-employer relationship still holds true, where the IBO can be thought of as an employee of Quixtar and all the hard work is benefiting the company? I think it makes much more sense to get into a business where you are the sole beneficiary of your hard work. Otherwise, you may as well be a salaried employee of some company (with paid vacation days, benefits and then some)!

I don't think it is possible for IBO's to make any significant amount of money by re-selling Quixtar products, which are over-priced. It's "re-selling" because an IBO purchases products from Quixtar and re-sells to the public. The concept is similar to a franchise, where Quixtar is the franchiser and the IBO is the franchisee. It's not a money-losing strategy for the IBO, but obviously not a money-making one either.

No wonder the average gross income for an IBO was only $115/month in 2006 (the most recent year for which data is available). Gross income is total income before taxes or expenses. The actual amount one will pocket will be much less. I wonder how much time one has to put in to gross $115/month... I suspect it is a lot. I would much rather spend time with family, friends and doing things that I love, instead of wasting it on this business.

I've learned the hard way that if it seems too good to be true, then it usually is. One cannot break the golden rule of life, which is, you reap what you sow. Somehow I'm suppose to receive exponential benefit from other people, by paying a one time fee of only US$250 to "setup" my business. In business and in finance, just as in life, risk and reward go hand-in-hand. Although not always true, the bigger the risk (i.e. investment), the bigger the potential gain (or loss).

Clearly, the only way to make money in these types of businesses is by mass recruiting, and not by re-selling Quixtar products. This is why it is a pyramid scheme. Money simply flows up the chain in the form of referral bonus/commission. Those at the top make lots of money; those at the bottom make next to nothing. If I become a Quixtar IBO now, it will be like going to a party when the party is over. I'll be at the bottom of the pyramid with little to no chance of even recovering my initial investment. The people at the bottom of the pyramid who are not able to recruit any IBOs themselves are the losers in the game.

About five years ago when I was looking for a summer job I got caught in a trap laid by Primerica. I was told at the first "interview" that I was exactly what they were looking for. The interview was more like a brain-washing session where they tell you what everyone wants to hear (i.e. how much money you can make and how they will make you a "Team Leader" and how it will help you accomplish your financial goals). Primerica's concept of a "Team Leader" is the same as Quixtar's "IBO". I was subsequently invited for an orientation, which was another brain-washing session. I don't want to go into more details, but this turned out to be a pyramid scheme just like Quixtar. Luckily I was able to get out in only two weeks without any major financial loses. However, I wasted a lot of time with them attending "business meetings" (at my own expense!) and other such nonsense. It is indeed quite an elaborate scam and it's very easy to fall prey to it.

Perhaps the biggest problem with this business is the way IBO's are trained to recruit new people. The whole process is so misleading that one gets an entirely wrong idea about the business. This business also forces an IBO to look at every single person as a potential recruit. Promoting your business is one thing and trying to recruit every new person you meet is quite another. I think my friends and family will hate me if I try to get them involved in this.

I'm not the only one who feels this way about Quixtar. There are quite literally thousands of people who feel duped by this business and say that it is a "scam". Just google "Quixtar scam" or "Quixtar pyramid" for thousands of relevant stories on the many people who feel duped by this business! Google'ing anything is usually a self-fulfilling prophecy, but is it wise to ignore their experience? Ignore at your own peril, but then again, ignorance is bliss.

Having said all this, I don't think the folks who talked to me about Quixtar had any intention of misleading or misguiding me. I felt that their passion for this business was genuine and that was admirable. I wish them all the best!

7 comments:

IBOFightback - Fighting the Amway Myths said...

Hi,
Unfortunately there's a deal of things both wrong and misleading in your analysis of Quixtar.

First of all, Quixtar is absolutely not a Pyramid Scheme. You claim regarding Quixtar that

"The sponsoring person gets a bonus for recruiting, and a fee from everyone that the new IBO recruits."

This is actually the defining feature of a pyramid scheme - however, it's also 100% false for Quixtar. You don't get any money at all for recruiting people, nor for anyone that your downline recruits.

If it were true, then I'd be as suspcious as you are!

Continuing along these lines you say -

"Money simply flows up the chain in the form of referral bonus/commission. Those at the top make lots of money; those at the bottom make next to nothing ... I'll be at the bottom of the pyramid with little to no chance of even recovering my initial investment. The people at the bottom of the pyramid who are not able to recruit any IBOs themselves are the losers in the game.

Again, what you are describing is an illegal pyramid scheme, not Quixtar (now known as Amway Global by the way). It is quite possible to earn an income without recruiting anyone at all. Recruiting other agents, much like employing sales staff in a traditional business, is simply a strategy to increase sales volume. Indeed, just like in a traditional business, the more people you "hire" to generate the same sales volume - the less you make, not more, since the profits will be split amongst more people.

You also comment, with regard to the "average income" -

" I wonder how much time one has to put in to gross $115/month... I suspect it is a lot."

You suspect wrongly. If you read the definitions on www.thisbiznow.com you'll see that to be called "active", and thus included in the statistics, all you have to do is just attend a meeting, once in a whole year, or ask your brother, once, if he wants to buy an XS Energy drink. He doesn't even have to buy it! Heck, even if you just buy stuff for your own use, and buy enough to get a rebate, you're considered "active"!

Clearly, none of those examples can be expected to lead to any income at all, and just as clearly all those "zeros" bring the average income way, way down, such that they don't reflect the reality - you work hard, you make money. A more sensible measure is to look at what people who generate certain levels of business earn. A "platinum" for example, earns around $50K a year - not bad for a part-time business.

The reality is though, like most things worth doing, it takes hard work over a period of years. For most people it's part-time gig, at least initially, on top of whatever they're already doing. That makes it even harder. And like most businesses, it takes some time to generate a persistent profit. The end result is that very few people persist, and thus few succeed.

Finally, a few words on your comments about "over-priced products". This is a common mantra of anti-Amway/Quixtar critics that simply isn't true. Amway itself makes over 450 products, and markets thousands of others. You'll always be able to find some product, somewhere, to complain about. However, the two main product ranges are Nutrilite and Artistry, generating well over half of all revenues, and the focus of the company. Nutrilite has no real competition, so it's difficult to do a proper price comparison. It is however cheaper than the next best. Nutrilite has been the best selling nutritional brand in the world for some years now, doing over $3billion in sales in the 12 months to July this year. It's used and endorsed by sporting stars like Jamaican 100m sprinter Asafa Powell, football superstar Ronaldinho, and many others.

With Artistry cosmetics it's a little easier to do a price comparison, since an independent company, Euromonitor, has done an assessment of exactly who the competition is. Euromonitor classifed Artistry in the "prestige" category, alongside brands such as L'Oreal and Clinique. Again, a price comparison shows Artistry is cheaper than the competition. Artistry is now one of the top 3 best selling prestige cosmetics lines in the world. #1 in Germany, Japan, and Malaysia.

Nutrilite, along with another Amway brand, eSpring, have won multiple awards, including "Most Trusted Brand" in countries throughout Asia year after year. Nutrilite has also been named by ConsumerLabs in North America as having the "most satisfied customers".

Clearly there is a market for the products, and in assessing whether a business is viable or not, that is the #1 concern.

A Quixtar/Amway business is not for everyone, but it is a low cost, low risk business opportunity that anyone can give a go. Heck, in North America if you don't think it's for you, you can get all your money back any time within 12 months. That's a pretty good deal if you ask me.

/IBOFB
siteadmin -
Amway Watch
Amway Wiki
Amway Talk
The Truth About Amway

Can't C Me said...

Whao, that was fast! I had heard about the cultist behaviour displayed by Quixtar people, but now I've experienced it for myself.

To all readers, I suggest the following reading:

How Amway Recruiting Really Works:
http://www.amquix.info/Amway_Recruiting.html

Analysis of the Amway Business:
http://www.amquix.info/amway.html

See also:
http://www.amquix.info/

Dave said...

Maybe IBOfightback can let us know how good quixtar is by describing the lavish success he enjoys?

*crickets chirping*

quixtarisacult said...

BWAHAHAHAHAHAHAHAHAHAHAHA

Another Dude Takes IBendOverForBuddies to the woodshed! All that bullshit you said Bend Over Boy Had No Effect on Another "Dude". How many times are you going to get your ass handed to you by regular dudes, you drone Amway whore?

NEERAJ Check out my blog for the low down on this Amway stooge that paid your blog a visit. Find out how the dudes from Fan Home trounced him and the other stooges that he hangs with. You'll get a laugh. You have become the latest "dude!"

http://quixtarisacultintervention.blogspot.com

The Dudes Anti Amway Movement!

rocket said...

This is AT LEAST the second time this week that IBOFB aka David Steadson has been caught lurking on a post about Amway!

Either a complete raving lunatic, or a moron with no life.

Can't C Me said...

An interesting post on MLM in India.

http://theecogeek.wordpress.com/2008/03/23/carrying-the-bucket-or-building-the-pipeline

Zhu said...

Interesting! Never heard of them but I'm quite familiar with how MLM schemes work and this is to be a perfect case study of it.

"The interview was more like a brain-washing session where they tell you what everyone wants to hear (i.e. how much money you can make and how they will make you a "Team Leader" and how it will help you accomplish your financial goals)."

This is basically the hint that something is wrong. I went to a couple of "interviews" like that when I first moved to Canada and was naive and innocent. You can feel there is something wrong! :-D

 
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