Is Amway A Pyramid Scheme? [2022 MLM Review]

Amway is a network marketing or multi level marketing company that has been around for decades. You may have heard of it thanks to its home based products or for its legal battles with disgruntled distributors.

As a network marketing company, one of its selling points to new distributors is the promise of making money from selling its products as well as memberships.

Therefore, if you have encountered Amway, it has probably been at the hands of people who not only want you to buy products from them but also join the company.

In this Amway review, we will be taking a close look at some of most common questions people ask about Amway’s products and its multi level marketing business.

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What is Amway?

Amway Global is one of the oldest businesses within the the network marketing industry.

Amway manufactures and distributes nutrition, beauty, personal care and home products.

It is a brand name that is synonymous with the industry. In fact, when most people explain what network marketing is, they give it as an example.

Is Amway A Pyramid Scheme? [2022 MLM Review] 23In terms of sales and revenue, no multi level marketing company brings in anywhere near the amount of money it does every year.

On average, Amway Global earns $8 billion per year (give or take). It is, therefore often regarded as the number one direct selling business in the world.

Other direct selling companies we can consider like Avon and Herbalife lag behind Amway when it comes to revenue.

Amway distributors, or as they are often called Amway Independent Business Owners, are the lifeblood of the company because they distribute the products to customers.

It sells its products in 100 countries through Amway Independent Business Owners (IBOs). The company has over 17,000 employees. The number of distributors is rumored to be anywhere between three and four million.

Since anyone who is willing to join Amway can do so in order to start earning money, they are offered free training in order to distribute those products more effectively.

Since Amway is considered the largest direct selling business, it shouldn’t come as a surprise that at one point, everywhere you went, you’d find Amway distributors who were eager to sell you something.

When Forbes recently released its rankings, it ranked as the 44th biggest private company in terms of revenue.

Is Amway A Pyramid Scheme? [2022 MLM Review] 24Amway headquarters in Michigan comprise a mile-long property with numerous buildings and 3.5 million square feet of office space.

The company owns a hotel in Grand Rapids called the Amway Grand Plaza.

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Who Created Amway?

Amway was founded by Richard Devos and Jay Van Andel in Ada, Michigan.

Is Amway A Pyramid Scheme? [2022 MLM Review] 25They founded the company in 1959 having been lifelong friends who believed that owning a business could help them reach their potential.

Long before they started Amway, Richard and Jay Van Andel had been salespeople. They worked for a company called Nutrilite selling nutritional products and it exposed them to the concept of network marketing or multi-level marketing.

It was a direct selling company and both of them were so good at it they were often the company’s top distributors.

They enjoyed selling and liked the fact that they would earn commissions when the people they had introduced to the company made sales.

When they had created a distributor network comprising 5,000 people, they decided to leave their employer, Nutrilite, to start their own company. They left together with their team of distributors.

They called their new company American Way (shortened to AmWay) and decided to start selling household items in addition to the nutritional products.

Their first product—Liquid Organic Cleaner or L.O.C.™—was one of the first biodegradable and environmentally conscious cleaning products in the market.

Is Amway A Pyramid Scheme? [2022 MLM Review] 26They expanded their product range over the decades, even going international. They are known for selling products in health, wellness, beauty, and nutrition.

Richard Devos died on September 6, 2018 in Ada, Michigan and he left behind four children, namely Dick, Dough, Dan, and Cheri.

Besides running a business, Devos had an interest in sports and he bought the Orlando Magic for $85 million.

His son, Dan, followed his example and is also into sports. He has interests in the American Hockey League.

Richard Devos and Jay Van Andel left a lasting legacy and are widely regarded for pioneering a business model that many people love or hate (depending on who you ask). By the time he died, Richard Devos had a net worth of $5.1 billion.

Dick Devos (one of the sons) married Betsy Devos, the former secretary of education serving in the Trump administration.

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How Amway Was Started

As we established, Amway was created by Jan van Andel and Richard Devos, two men who were friends working for a direct selling company.

Is Amway A Pyramid Scheme? [2022 MLM Review] 27

The two gentlemen had known each other for longer than that because ten years before they started Amway, they sold nutritional products for a company called Nutrilite.

The company allegedly started selling the country’s first multi-vitamin and when Jay and Richard saw how pivotal direct selling was for their success, they quickly became the top distributors.

They loved the idea of earning commissions when the people they recruited as distributors sold something.

Back then, the idea of network marketing or multi-level marketing as we know it was still new and radical. Companies like Vector Marketing had not been formed.

Accomplished marketers as they were, they both built teams of 5,000 distributors by the time they decided to leave Nutrilite to start their own company.

When they first started Amway, they sold household items.

They also decided to buy the rights to a household cleaner called Frisk. They later changed its name to Legacy of Clean.

They also sold Nutrilite Multi Vitamins.

Over the years, the company has expanded its product catalog. At the same time, it was becoming popular among people who were joining it as a way to make money.

People were joining Amway to earn residual income for selling its products.

The idea of working as a distributor, selling to friends and family was getting more popular, and this is what many people associate the company with these days.

Amway products are also popular as the company makes high quality products. They are scattered across multiple divisions of the company and they bring in billions of dollars every year.

Over the past few years, the company has been selling billions of multi vitamin tablets.

It has also been ranked as the number one seller of nutritional supplements.

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Quixtar: Amway Ventures Into the Internet

In the nineties, right in the middle of the Dot Com Boom, Amway wanted to go into the internet business.

For a while, it appeared as though Amway was serious about having an online presence. It launched Quixtar North America.

Quixtar North AmericaThis venture was not as successful as the company had hoped and it had to scrap those plans.

Amway was launching an online version of its business to allow Amway distributors to become independent business owners (they are regarded IBOs now but that was the first time this was intentionally explored).

With a website, IBOs would have an easier time dealing with the company because they would only have to order their items online.

The idea looked solid because it would make the whole ordering process convenient. Independent Business owners would save time because they’d no longer have to fill order slips and submit them to their sponsors.

This idea did not catch on as well as the company had hoped and after a couple of years, Quixtar was sued. This appeared to seal the fate of the online venture and the company scraped the project.

The name “Quixtar” was phased out and Amway Business owners started dealing with Alticor Inc. the parent company

Alticor was created in 1999 to act as the parent company of Amway, Amway Global, and Access Business Group, a manufacturing and distribution company.

Alticor acquired a cosmetics company called Gurwitch Products in 2006 but the subsidiary was later sold to Shiseido in 2016.

Amway’s business model is often polarizing in the public’s eyes. There are people who like the company and/or its products and others who hate it.

Whatever the opinion people have of the company, it has consistently made great products.

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Which Products does Amway Sell?

People who don’t like Amway usually have a problem with their MLM business. Otherwise, its products have largely held up in terms of quality.

Is Amway A Pyramid Scheme? [2022 MLM Review] 28

As we established, the first product Amway sold was LOC, a laundry detergent that is said to be fully biodegradable and compromised of natural ingredients.

Other products that have been popular with consumers include SA8 laundry detergent, Satinique hair care product, and the Dish Drops dishwashing liquid.

Currently, Amway manufactures more than 450 products with manufacturing plants in the US, India, and China.

It has farms in the states of California and Washington as well as in Brazil and Mexico. The company grows, harvests, and processes the plants it uses for its supplements on organic farms.

It owns a variety of brands, including Artistry, Bodykey, Body Works, eSpring, Glister, iCook, Legacy of Clean, and Nutrilite just to mention a few.

Is Amway A Pyramid Scheme? [2022 MLM Review] 29The Artistry brand of cosmetic and personal care products is relatively popular and has been bringing in Billions of dollars per year

Another notable product line is eSpring. It is a tap water purifier that has generally received good reviews from the public, even earning five star ratings in consumer reports.

Is Amway A Pyramid Scheme? [2022 MLM Review] 30How does it purify tap water?

It does that by combining the actions of a UV light along with a carbon block filter to get rid of impurities and kill germs. Some users have said that it makes water taste good.

Another one of the Amway products that has been popular is their XS energy drink that independent business owners have been selling over 100 million dollars worth every year.

By 2018, 52% of its sales were nutrition and wellness products with 26% attributed to beauty and personal care products.

Most people who have tried their dietary supplements have given them good reviews (that you can read online).

All told, Amway’s brands bring in billions of dollars in sales every year.

Amway has a large variety of products making money for them reliably but there are some things that people don’t like about the company.

For example, the Amway business model is designed in a way that the prices are higher than usual.

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Why Are Amway Products So Expensive?

Amway justifies its high prices based on the quality of their products just like we saw with Cutco Cutlery.

But if you take a closer look, you realize that this trend is rampant whenever an MLM or pyramid schemes are involved.

With such businesses, the products are typically priced way above that of the competition, which has the unwanted effect of diminishing product sales.

However, by pricing their products like that, the company ensures that it makes a profit off the distributor, and off the end consumer…

This explains why it is usually hard for you to sell to anyone besides your family members and friends who just want to support you and be nice. They really don’t care too much about the products themselves.

The only justification for this is that Amway has high quality products in each category, which is understandable.

And if you think about it, we cannot expect the Amway business owners to slash their profit margins to zero because that’s not practical.

To an extent, it is a bit sad because the company produces many quality products but there is a lot of negativity that accompanies this business opportunity.

Is Amway Banned In The UK?

Amway was banned in the UK after the authorities decided that the company makes more money by selling to distributors than by direct selling to retail customers.

The company is also being scrutinized in India where some distributors have been investigated for potential involvement in a pyramid scheme.

Amway has been to court several times in the US and it has been fighting to keep operating. Some people think that its days may be numbered although it is highly unlikely that it will be banned.

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How Amway Works

If you are considering joining Amway, you are doing so hoping to start making money.

Although they mention that you can potentially make $500,000 a year, it is highly unlikely that you will even get close to that when you are starting.

Is Amway A Pyramid Scheme? [2022 MLM Review] 31Before you even start to make money, you have to learn how the Amway business model works.

To join as an independent business owner, you will be required to pay a fee of $100.

Paying a subscription fee to join an MLM is pretty standard. In some businesses, the fee goes towards buying supplies.

A good example of this is Scentsy, the fragrance business, where the first amount you pay to join the company as a distributor goes towards buying you a “starter kit.”

Like you’d expect of an MLM, Amway offers training to new recruits.

They encourage you to sell to your family members and friends and if possible, recruit them so that they can start earning commissions.

They also encourage you to sell your home care items and replace them with Amway products.

Remember, although you are an independent business owner, you are first and foremost, a customer, and the more you buy, the better.

You have to sell a lot of products to make a decent commission because the point system that Amway uses is not the dollar per point system used by most MLM companies.

Therefore, you will find it tough to make a profit.

They give you a little chart for reference to help you calculate how much you make when you sell Amway products.

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Calculating Your Income

The Gross income you make is a combination of immediate income (the profit you earn from retail sales to customers) and the bonuses you earn on your overall sales volume.

Immediate Income is defined as the difference between the cost at which you buy products from Amway or your sponsor and the price at which you sell the products to your customers. This income is derived from each sale to a customer.

Performance Bonus is the extra income that you can earn through the monthly Performance Bonus. The Performance Bonus is driven by sales volume, which is tracked from two sets of numbers – Point Value (PV) and Business Volume (BV). These two figures are published in connection with each available product or service.

Point Value is the number of points assigned to each product. The total PV you earn based on your monthly sales volume is tracked to calculate your Performance Bonus bracket.

The higher your PV, the higher the percentage (up to 25%) will be used to calculate your bonus.

Business Volume is a dollar figure assigned to each product. Your total BV at the end of the month (calculated from your monthly sales volume) will be multiplied by the percentage from your PV to calculate your gross Performance Bonus.

You make more money when you register other people as IBOs.

However, you will be required to sell $300 in Verified Customer Sales before you can start sponsoring others.

The Independent Business Owners Compensation Plan pays you for selling products and services and for helping other IBOs under you to do the same.

Amway provides you with a chart to help you to understand how much you make when you sell Amway products based on your calculations:

Is Amway A Pyramid Scheme? [2022 MLM Review] 32

From the diagram Amway has of their compensation plan, it looks like a unilevel compensation plan.

Is Amway A Pyramid Scheme? [2022 MLM Review] 33

The point-scoring system has many detractors because you have to make a lot of sales to earn a modest income.

For example, in order to score 600 PV to earn 9% of the BV, you will have to accumulate thousands in sales (both direct sales and group sales).

After all that, you will only earn $225 a month.

Now, that’s not enough to sustain you and it explains why many people criticize Amway and other MLM companies

The main takeaway from all this is: You won’t make much money at Amway if you work by yourself. The real money comes when you recruit people and build a downline.

This way, you earn more points and, therefore, earn more money.

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Can You Make Money From Amway?

As you’d expect with a multi-level marketing business, the people who make the real money are at the top.

For a company that brings in billions of dollars every year, you’d expect the top distributors who earn a large percentage of the money annually to be making a lot of money.

But it takes a lot of time and effort to rise through the ranks and, realistically, very few people ever get to these higher levels.

So, how much does the average seller make from Amway?

Here is what Amway has to say about this, taken from their Business Reference Guide:

For the calendar year 2020, the average income from Amway for all U.S. registered IBOs at the Founders Platinum level and below was $628 before expenses. See www.amway.com/income-disclosure for details. Earnings depend on many factors, including: customer base, business experience, effort, dedication, and quality and performance of an IBO’s sales team.

According to the official numbers, approximately 48% of their independent distributors are actually active. Of those that are active, a majority make just below $628 before expenses.

Note how careful they are to clarify that how much you earn depends on various factors, which is true.

For example, the amount of money you can expect to make as an Amway business owner depends on your marketing prowess and ability to recruit and run a team.

In another survey, it was found that the average Amway business owner makes $200 a month.

If you are involved in direct selling, you will find that it is a constant uphill battle in the beginning to establish yourself and even to make any money.

One of the reasons you will find it hard to succeed is that you won’t have enough time to devote to the gig.

You may have to treat the Amway Business like a part time job and merely use it to boost your income because you cannot rely on this opportunity on its own to make money.

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Pros of Amway

Amway offers Stability

In the world of direct-selling companies, Amway is a beacon of stability.

The company has been a member of the direct selling association for many years and is widely seen as the most successful MLM company in the world.

It is reassuring that the company has been around for decades and it earns billions of dollars per year.

So, it’s not like you are working for an upstart that you are not sure will be around a few years from now.

Product Quality

Say what you will about the company but they provide you with high quality products to sell.

When you work as an Amway Independent Business Owner, you are certain that the products will not disappoint.

When you are selling a product, it’s always nice to know that you are selling something good that will probably earn you returning customers.

High BBB Rating

Some may find it hard to believe but Amway is accredited by the Better Business Bureau.

The company has been accredited for 30 years. It even has an A+ rating.

Now, that’s not to say that things have been smooth-sailing all the way because some independent business owners have had some nasty things to say about the company.

But such is the nature of the MLM industry; things are always highly polarized.

Quality Training Materials

Since Amway has been in the network marketing business for many years, they have learned a thing or two about how you can improve your sales numbers as an IBO.

The company provides sellers with training materials, including podcasts, online courses, and webinars for free so that they can take their business to greater heights.

The material has been constantly updated to match the landscape of the current market. Therefore, you don’t have to give prospective distributors outdated brochures.

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Cons Of Amway

Amway has a Bad Reputation

While it shouldn’t stop you from considering a business opportunity, you will find that a lot of people have not-so-nice things to say about Amway.

And, usually, there are shreds of truth to what these people are saying.

If you look up Amway reviews on the internet, there are hundreds of reviews of them and a significant portion cast Amway in a negative light.

Amway has been accused of being a pyramid scheme or even a ponzi scheme.

Technically, this is INCORRECT because pyramid schemes and ponzi schemes are illegal yet Amway has been operating legally for decades.

Allegations of Unethical Business Practices

Over the years, Amway has found itself the subject of investigations for unethical business practices by various countries and institutions.

It has been accused of making exaggerated income claims, price fixing, and running a misleading campaign.

If you are familiar with MLMs, you know that they often lay it thick with the promotional content. Some have described their message as being less about selling a product and more about selling a dream.

This often sets people up with high expectations about the amount of money they will make when they sign up as distributors.

Then as soon as they sign up and find out how tough it is to make money, they feel disappointed and accuse it of being a pyramid scheme. In fact, some former IBOs have called it “Scamway”

One of the largest claims against Amway is that they are actually an illegal pyramid scheme.

Throughout its existence, Amway has been the target of multiple pyramid scheme investigations.

For example, the Federal Trade Commission (FTC) has put Amway under the microscope for practices associated with pyramid schemes.

In one such case in 1979, the Federal Trade Commission was investigating Amway for allegedly paying distributors for bringing in new distributors.

The company was found to be innocent of the allegation although everyone knows that recruiting new distributors is the best way for people to earn money working for an MLM.

This hardly came as a surprise because Amway has never been found guilty of other similar allegations. However, it has been forced to pay tens of millions of dollars to settle suits with Amway business distributors.

Amway Products are Expensive

The amount of money you make is based on how much you sell and your point volume and business volume.

As we have seen, the prices of the products they sell are pretty expensive and this makes it hard for most distributors to make money.

It is especially difficult to sell expensive Amway products when people can just go to the store (physically and online) and buy something of the same quality at a lower price.

Amway Meetings Border on Cult-like Conventions

One of the reasons people hate on Amway is the nature of their meetings.

Some Amway business owners have found them to be repulsive because they are almost treated like a religion.

Some have reported that the meetings are often used to brainwash new recruits.

These meetings are often blamed for making some distributors extra aggressive when they are selling their products.

The Real Money is made by the people who are at the top

Thanks to an extra-restrictive point system, Amway business owners do not make a lot of money, on average.

The people higher up in the pyramid make the most money because they have a network of sellers beneath them.

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Is Amway Legit?

Amway Corporation is a legit business opportunity.

The company was founded in Ada, Michigan by Jay Van Andel and Richard DeVos in 1959. It has been promoting itself as a legit business opportunity and has sold its products to many clients around the world. Amway has been earning billions in revenue.

Despite all the accusations leveled against it, it has been operational for decades and this shows that it is legal, at the very least.

The MLM industry is often accused of selling people the “financial freedom” dream and Amway has been guilty of this.

People who become business partners with the company usually hope to earn money off of it but that’s not usually the case.

It takes a lot of hard work to actually earn the average income and frankly, you cannot use it as a primary source of income.

Therefore, in a technical sense, Amway is legit.

Is Amway A Multi-Level Marketing Business?

Technically, Amway is a direct selling business or a multi-level marketing company.

It has a team of distributors around the world that are structured in a multi-level marketing model.

Multi Level Marketing Companies themselves are not popular and have even been dismissed by some as scams.

Why?

Multilevel Marketing companies often have a bad reputation because although they are legal, you probably won’t make the amount of money they imply you can.

In most cases, they approach you promising to show you how you can also start making money as a network marketer.

The problem with the network marketing business model is how saturated it has become to the extent that it is incredibly hard for the average person to make money selling products for the company.

There are many stories of people who worked for multilevel marketing companies and in the end, they actually ended up losing money.

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Is Amway A Pyramid Scheme?

Amway is not a Pyramid Scheme, at least according to the Federal Trade Commission.

It’s a legit direct selling company that bases itself on the MLM (Network Marketing) business model to sell its products to customers across the globe.

It has a complex structure comprising Amway Distributors and Independent Business Owners.

It is a legit opportunity for those who are aware of the implications of this business model.

Amway does not fit the description of a pyramid scheme, which is an illegal business model. In a pyramid scheme, participants focus on recruiting new members to earn money instead of selling products.

One of the easiest ways to tell whether you are looking at the pyramid scheme is how it compensates members. Pyramid schemes pay people directly when they recruit members.

But in an MLM, you get paid for the sales of your downline. This means that the best way to increase your earning potential is to recruit new distributors.

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Final Word

Having gone through all those details about Amway, it is up to you to decide whether it is worth joining?

If you choose to become an Amway distributor, you should know that you will probably be selling to friends and family because most people are not going to buy expensive products when they can just go to the store and buy cheaper ones.

You should also go into the Amway business with realistic expectations of how much you will earn as a distributor.

Amway, like other Multi Level Marketing companies is not for everyone. Some people will not do well while others will thrive. You can build a successful online business if you have the skills and the patience.

Before you leave

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