Neways International Review: Autoship incentives?

Neways International (hereafter referred to as just “Neways”) is a personal care, nutrition and household cleaning MLM company.

Launched in 1992 and based out of the Utah in the US, Neways was founded by Thomas and Leslie Mower but is now owned by Golden Gate Capital (they owned Herbalife before it went public).

Golden Gate Capital acquired Neways after the Mowers were convicted of tax fraud:

According to the indictment and the evidence introduced at trial, the Mowers founded, co-owned and controlled Neways, Inc., an international multi-level marketing company based in Salem, Utah.

Mr. Mower was the Chief Executive Officer, Mrs. Mower was the Chief Financial Officer and both also served as company directors.

Mr. Thompson was employed as corporate counsel for Neways, Inc. from the fall of 1995 through the summer of 1997.

The defendants devised and executed a scheme to conceal from the IRS more than $1 million of Neways, Inc.’s gross receipts received from Neways Australia, as well as more than $3 million of commission income the Mowers received from distributorships in the multi-level marketing structure of their United States, Australian and Malaysian companies.

In furtherance of the scheme, Mr. Thompson created and presented a false and fraudulent loan document and made false and fraudulent statements to an IRS Special Agent to hide the Mowers’ commission income.

In 2006, Thomas was sentenced to 33 months in prison to be followed by 3 years supervised release and ordered to pay a $75,000 fine in addition to paying prosecution costs.

Leslie was sentenced to 27 months in prison to be followed by 3 years supervised release and ordered to pay a $60,000 fine.

Management wise Neways is currently headed up by CEO Robert Conlee. Prior to his appointment to CEO in July of 2012, Conlee held executive roles in Xango (CEO) and Nu Skin (President, North Asia and Japan).

Read on for a full review of the Neways MLM business opportunity.

The Neways Product Line

As mentioned earlier, Neways market a series of products in the nutrition, personal care and household cleaning MLM niches.

Research reveals that the Neways product line has an equal if not more colorful past than that of its founders:

• In 1993 the FDA forced Neways to recall their “Quickly” weight-loss product because it contained ‘potentially dangerous amounts of‘ furosemide. Furosemide is ‘primarily used for the treatment of hypertension and edema‘ and requires a prescription in the US.
• In 2004 the FDA again hit Neways, who were convicted on criminal charges for ‘the distribution of a pharmaceutical product containing human growth hormone‘. Neways ‘had to ‘pay a $500,000 criminal fine and forfeit $1.25 million in profits from the BioGevity supplement‘.
• Despite not being directly related to Neways own product line, I thought it was also worth noting that in 2008 the Japanese government “suspended” the signing up of new Neways distributors, after an investigation revealed Neways distributors were falsely claiming that ‘kitchen detergents sold by other firms contain toxins that can be absorbed through the skin and accumulated inside the body, eventually causing cancer‘.

Although I have no reason to believe it’s not true today, ironically on their website Neways seem to go out of their way to distance themselves from using any “controversial ingredients”:

Today, Neways creates healthy homes all over the world by avoiding more than 3,000 controversial ingredients and providing exclusive, life-changing products.

Neways current product range is quite diverse and broad covering a whole host of niches and demographics:

• anti-aging, anti-oxidant, bone and joint health, cardiovascular and detoxification, “men’s and women’s health”, “preventative health” and weight control supplements
• digestive health, “essential nutrients”, “athletic water”, acai berry based energy and immune health drinks
• a complete range of household cleaning products
• anti-aging, bath and body, dental, hair and skin personal care products
• complexion, eye and lip cosmetics

The Neways Compensation Plan

The Neways compensation plan pays out distributors primarily using two unilevel compensation structures, with the first paying out commissions on the first 100 volume points generated by recruited distributors, and the second on any remaining points.

Retail commissions, a Fast Start Bonus and Car and Office Bonus are also offered.

Retail Commissions

Neways define retail sales as Neways distributors

buy(ing) products at the distributor price, sell(ing) them for more and making a retail profit.

Using the above definition, no commissions are paid out by Neways on retail sales.

Distributors can however have retail customers order through their replicated storefronts, with each order paying out a 30% retail commission.

Fast Start Bonus

Neways pays out a $50 Fast Start Bonus on the recruitment of new distributors, once recruited distributors are generating 150 personal volume (PV) a month.

Newly recruited distributors can either generate this PV via buying into Neways monthly autoship program ($150 a month), or selling Neways products to retail customers.

Multiplex Profit Center Commissions

The first 100 PV a recruited distributor generates is paid out commission wise using what Neways calls a “Multiplex Profit Center”.

The Multiplex Profit Center pays out commissions using a unilevel compensation structure. A unilevel compensation structure places a distributor at the top of the structure, with every personally recruited distributor placed directly under them (level 1).

If any of these level 1 distributors recruit new distributors of their own they are placed on level 2. If any level 2 distributors recruit new distributors of their own they are placed on level 3 and so on and so forth.

There is no width limitation in a unilevel compensation structure, with how wide the structure is based on how many distributors are personally recruited.

How much of a commission is made and on how many levels of the unilevel compensation structure depends on an Neways distributor’s own PV, along with how many recruited distributors they have generating 150 PV a month.

• 50 PV = 5% on levels 1 to 5
• 100 PV = 8% on levels 1 to 5
• 100 PV via mandatory autoship = 10% on levels 1 to 5
• 150 PV via mandatory autoship = 10% on levels 1 to 4 and 5% on levels 5 and 6
• 150 PV via mandatory autoship and 2 recruited distributors on a minimum 100 PV autoship = 10% on levels 1 to 4 and 5% on levels 5 and 6
•  150 PV via mandatory autoship and at least 4 recruited distributors on a minimum 100 PV autoship = 10% on levels 1 to 4 and 5% on levels 5 and 6, plus an additional 2% Infinity Bonus on all unilevel levels (including the first 6 levels)
• 150 PV via mandatory autoship and at least 7 recruited distributors on a minimum 100 PV autoship = 5% on level 1, 10% on levels 2 to 5 and 5% on level 6, plus an additional 4% Infinity Bonus on all unilevel levels (including the first 6 levels)
• 150 PV via mandatory autoship and at least 12 recruited distributors on a minimum 100 PV autoship = 5% on levels 1 and 2, 10% on levels 3 to 5 and 5% on levels 6 and 7, plus an additional 5% Infinity Bonus on all unilevel structure levels (including the first 7 levels)

Note that Neways distributors with 12 or more recruited 150 PV a month autoship distributors also qualify for a “generation bonus”.

This generation bonus pays out 0.25% on the Multiplex Profit Center commissions of up to 4 downline distributors who all have at least 12 personally recruited 150 PV a month autoship distributors.

Note each unilevel recruitment leg (each level 1 position) is treated independently in calculating the generation bonus.

Affinity Profit Centre Commissions

In order to qualify for Affinity Profit Centre commissions an Neways distributor must be generating at least 150 PV a month (either via sales of products to customers or self-purchase qualification via a 150 PV monthly autoship order).

Note that Affinity Profit Centre commissions are only paid out on volume beyond a recruited distributors initial 100 PV for the month. Commissions on the first 100 PV are paid out as per the Multiplex Profit Centre above.

As with the Multiplex Profit Centre, the Affinity Profit Centre pays out commissions using a unilevel compensation structure. Rather than pay out on levels though, the Affinity Profit Centre groups each downline leg depending on the membership level of the recruited distributor at the top of the leg (level 1).

Recruited distributors (and the distributors qualifying for Affinity Profit Centre commissions) are ranked according to the Group Volume (GV) their downline produces in any given month.

• Consultant – no requirements
• Supervisor – have a downline generating at least 1000 GV monthly
• Manager – have a downline generating at least 3000 GV monthly
• Executive – have a downline generating 6000 GV monthly or 4000 GV over two consecutive months

Note that a maximum of 80% of the qualifying volume required above can come from any one unilevel leg.

Using the above criteria, Neways distributors are paid out Affinity Profit Centre Commissions as follows:

• Consultant – no commissions
• Supervisor – 10% on the GV of personally recruited distributors and 10% on Consultant groups
• Manager – 15% on the GV of personally recruited distributors, 5% on Supervisor groups and 15% on Consultant groups
• Executive – 25% on the Gv of personally recruited distributors, 10% on Manager groups, 15% on Supervisor group and 25% on Consultant groups

Executive Leadership Bonuses

If you’ve gone over the Affinity Profit Centre commissions above, you’ve probably noticed that there’s no commission offered once a level 1 recruited distributor reaches “Executive” membership status (and creates an “Executive group”).

These Executive groups do pay out a commission but it’s handled in a separate Executive Leadership commission, paid out down five levels using a unilevel compensation structure (each level is defined by an Executive group within an individual unilevel downline leg).

Along with the respective qualifications required, here are the Executive Leadership Bonus commission payouts:

• Executive (1000 GV, 500 Affinity GV) – 5% on levels 1 to 3
• Senior Executive (1000 GV, 500 Affinity GV and 3 qualified Executive unilevel legs) – 5% on levels 1 to 3 plus a 3% bonus paid out down unlimited levels (including levels 1 to 3)
• Master Executive (1000 GV, 500 Affinity GV and 4 qualified Executive unilevel legs) – 5% on levels 1 to 4 plus a 4% bonus paid out down unlimited levels (including levels 1 to 4)
• Presidential Executive (1000 GV, 500 Affinity GV and 4 qualified Executive unilevel legs) – 5% on levels 1 to 4 plus a 5% bonus paid out down unlimited levels (including levels 1 to 4)
• Ambassador (500 GV, 250 Affinity GV and 7 qualified Executive unilevel legs) – 5% on levels 1 to 5 plus a 5% bonus paid out down unlimited levels (including levels 1 to 5)
• Diamond Ambassador (250 GV and 9 or more qualified Executive unilevel legs) – 5% on levels 1 to 5 plus a 7% bonus paid out down unlimited levels (including levels 1 to 5)
• Senior Diamond Ambassador (250 GV, 9 or more qualified Executive unilevel legs and 3 or more qualified Diamond unilevel legs) – 5% on levels 1 to 5 plus a 7% bonus paid out down unlimited levels (including levels 1 to 5)

Senior Diamond Ambassador’s also qualify for a 0.5% Generation Bonus, which pays out an additional 0.5% commission bonus on the volume of Senior Diamond Ambassadors in an individual unilevel leg (up to a total of four per leg).

Note that in order to qualify for Executive Leadership Bonuses, an Neways Distributor must maintain at least 150 PV a month at all times.

Car and Home Office Bonus

Despite the name, the Car and Home Office Bonus ‘can be used towards a current payment or lease of a new car or home office furnishings and equipment’.

The bonus is paid out at a rate of 15% of a distributor’s earnt commissions or $1000, whichever is less.

To qualify for the Car and Home oFfice Bonus an Neways distributor must be a Senior Executive or higher and have earnt $2000 in commissions for three consecutive months. This qualification must be maintained in order for a distributor to continue receiving the monthly Carn and Home Office Bonus.

Joining Neways

Distributorship to Neways is $19.95 (which I believe is an annual reccurring fee).

Note that if a newly recruited Neways distributor signs up for a $150 monthly autoship order, the distributorship fee is waived.

Conclusion

Under the guise of “transfer-buying”, the concept of recruiting new Neways distributors and getting them onto a monthly $150 autoship is revealed.

Here’s how Neways themselves publicly describe their business model on their website:

How much more do you want to earn per month? You can make it happen with Neways.

How? It’s called transfer buying.

It’s simple. Just get three who get three and start making money. When each person transfer-buys $150 U.S. per month, you earn 10% up to four levels deep and 5% on an additional two levels.

Additionally the Neways compensation plan describes the $150 autoship as ‘key to getting the most out of the Neways compensation plan’.

Neways recommends that independent distributors maintain Direct Ship volumes of at least 150 Personal Volume (PV) to receive the maximum payouts provided in the Neways compensation program.

And as an added incentive, Neways will even waiver the annual distributor fee and offer a discount on all autoship product shipping.

Oh and it’s also no co-incidence that commission qualification is the equivalent of the monthly autoship amount either, nor that the Fast Start Bonus is tied into new distributors generating 150 points of volume.

Further incentive to recruit new autoship order distributors are the diminishing personal volume requirements in the Affinity Profit Centre upper levels. From the Ambassador distributor rank, personal volume requirements start to decrease and Affinity group volume requirements disappear altogether.

Typically personal sales volume requirements would increase but the qualification criteria in Neways in the upper levels of the compensation plan clearly focuses on building a distributor team and having them do the same, with you relying on their efforts rather than your own personal sales volume.

Note that I have no problem with building a downline in MLM, however when you start to disconnect this from an individual distributor’s own sales volume wise as a basis for increased commission qualification, things start to get murky.

Now of course none of this is required and it’s entirely feasible to earn the above volume via retail sales, but given the dominant emphasis on recruiting new distributors (customers don’t generate additional levels so it’s clear they’re not talking about customers), one would imagine this is the mindset and mentality most if not all new Neways distributors are joining the company with.

Additionally there does seem to be some ambiguity regarding retail sales within the company. Whereas sales made to customers via replicated websites and telephone orders are most definitely retail sales (including those made by preferred customers on monthly autoship), a distributor buying product (most likely for the purpose of commission self-qualification) is not.

Revenue wise a distributor buying product is still a distributor buying products, regardless of what they do with the product after it’s purchased (regardless of whether they resell it to someone else, self-consume or simply toss it in their garage and forget about it).

With such a heavy push to recruit new distributors and sign them up on autoship, my primary concern as a potential Neways distributor would be analysis of the ratio of retail volume vs. distributor internal volume.

I looked for an income disclosure statement (or similar document) on the Neways website and failed to find one. Given this my only reference would be the person trying to recruit me.

The first question would be was I approached from a product perspective or that of the income opportunity. The second would be requesting information as to whether my potential upline had more retail customers (including preferred customers) or recruited distributors.

In other words, how are they earning their commissions?

If the data felt inconclusive, it of course wouldn’t help to go higher up the food chain and approach your potential upline’s upline (although you’ll probably need your potential upline to request this information as it’s doubtful a second level upline would provide it to a potential recruit).

If, despite the heavy marketing towards autoship distributor recruitment at a company level, the revenue makeup of Neways is primarily from retail sales then with retailable products and commissions offered there’s no question of legitimacy.

If on the other hand we’ve got a company full of distributors who have recruited distributors with everyone paying their $150 autoship and little to no retail sales happening outside of the distributor network, then there’s a big question of long-term sustainability here.

Neways distibutors might attempt to brush this question off by pointing to the age of the company, but (and again no data is provided on this) perusal of the Neways website demonstrates an ongoing expansion into primarily Asian markets.

This in itself isn’t a bad thing but it might be worth looking into the long-term sales figures (and of course whether they are retail or not) for markets Neways has been operating in for some time. Any decline in established markets might indicate a dependency for continued expansion into new markets (which would themselves decline over time).

I might sound like I’m trying to find problems with the business model here but after going over the Neways compensation plan and marketing material, given the way it’s slanted towards autoship distributor recruitment, I’m simply having a hard time believing distributors would ignore this and focus on the retail side of the business.

Good luck!