What is the 70 percent rule in Amway?

The 70% Rule: Amway’s Guard Against Inventory Hoarding

Amway, a multi-level marketing (MLM) giant, operates through a network of independent distributors who sell products directly to consumers. A key component of their business model, designed to promote genuine sales and discourage the problematic accumulation of inventory, is the “70% Rule.” This regulation aims to ensure distributors are actively engaged in moving product, rather than simply purchasing it to qualify for bonuses and climb the ranks within the company.

So, what exactly is the 70% Rule? Simply put, it mandates that Amway distributors must sell or use at least 70% of the products they purchased in the previous month before they can qualify for performance bonuses and be eligible for further purchases. This rule applies to all products purchased at wholesale prices for resale, regardless of whether they are sold retail to customers or used by the distributor themselves.

The intent behind the 70% Rule is multifaceted and primarily focused on preventing a scenario where distributors become overwhelmed with unsold inventory. Without such a regulation, there’s a risk that individuals might over-purchase products in an attempt to meet minimum qualification thresholds for bonuses or to advance to higher levels within the Amway structure. This could lead to significant financial strain for distributors who are unable to sell their purchased goods.

The rule acts as a safeguard against such pitfalls in several crucial ways:

• Incentivizes Active Sales: The primary benefit of the 70% Rule is that it directly encourages distributors to actively sell products to consumers. To qualify for bonuses and continue purchasing, they must demonstrably move a significant portion of their inventory. This shifts the focus from mere purchasing to genuine sales activity.
• Discourages Inventory Hoarding: By requiring proof of product movement, the rule discourages distributors from simply stockpiling goods in their homes or garages. This prevents the accumulation of unsold inventory, a common criticism leveled against MLM models.
• Promotes Sustainable Business Practices: A healthy and sustainable Amway business depends on a constant flow of products from distributors to end consumers. The 70% Rule helps ensure this flow is maintained, fostering a more robust and less speculative business environment.
• Potential for Reduced Financial Risk: While not a guarantee, the 70% rule indirectly encourages distributors to manage their product purchases more carefully. Knowing they need to sell a substantial portion of their inventory, distributors are more likely to be mindful of demand and avoid over-purchasing.

While the 70% Rule aims to prevent excessive inventory buildup and encourage active sales, it’s important to note that its effectiveness is often debated. Critics argue that the rule doesn’t completely eliminate the potential for distributors to feel pressured into purchasing products, especially when pursuing higher bonus levels. They also point out that the rule can be circumvented through various means, such as distributors consuming a large quantity of the product themselves, which might still create financial strain.

In conclusion, Amway’s 70% Rule is a key regulatory mechanism designed to promote genuine sales activity and prevent inventory hoarding within its network of independent distributors. While its effectiveness may be subject to debate, it remains a crucial element in the company’s efforts to maintain a sustainable and consumer-focused business model. It serves as a reminder that success in direct sales requires a commitment to active selling, not just purchasing products.