Amway Review: Is It Really a Pyramid Scheme?

If you’re reading this article, you’ve likely been approached about joining Amway or purchasing their products.

You might be intrigued by the opportunity, but a nagging question remains: Is Amway a pyramid scheme? With the internet buzzing with terms like “Amway pyramid scheme” and “Is Amway a pyramid scheme,” it’s crucial to separate fact from fiction.

You’ve probably heard whispers from friends or seen online discussions claiming that Amway is nothing more than a sophisticated pyramid scheme.

With over 60 years in business, millions of distributors worldwide, and annual sales exceeding $8 billion, Amway certainly warrants a closer look.

In this comprehensive Amway review, we’ll dive deep into the company’s business model, address the pyramid scheme allegations head-on, and provide you with the information you need to make an informed decision about whether Amway is a legitimate opportunity or something to avoid.

Our Verdict

Amway Review

3.5/5

Multi-Level Marketing Company

Amway uses a multi-level marketing (MLM) business model that has faced pyramid scheme accusations. While it offers legitimate products, the emphasis on recruitment raises concerns. Read this Amway review to understand if it’s a pyramid scheme or a viable business opportunity.

Pros

• Established company with a long history (over 60 years)
• Wide range of products in various categories (300+ products)
• Potential for earning income through sales and recruitment
• Some products receive positive reviews from customers
• Offers business training and support for distributors
• Strong global presence in over 100 countries

Cons

• Multi-level marketing structure can be difficult to succeed in
• High pressure to recruit new members
• Products often priced higher than comparable alternatives
• Potential strain on personal relationships due to sales tactics
• Complex compensation plan that may be hard to understand
• Low success rate for distributors (less than 1% make significant income)

What is Amway?

Amway, short for “American Way,” is a multi-level marketing (MLM) company founded in 1959 by Rich DeVos and Jay Van Andel. The company sells a wide range of products, including home care, personal care, nutrition, and wellness items. Amway operates in over 100 countries and territories, with millions of distributors worldwide.

Key Facts:

• Founded: 1959
• Headquarters: Ada, Michigan, USA
• Annual Revenue: $8.4 billion (2022)
• Number of Distributors: Over 3 million worldwide
• Product Categories: Nutrition, Beauty, Home Care, Energy, and more

Amway’s business model relies on independent distributors, also known as Independent Business Owners (IBOs), who sell products directly to consumers and recruit others to join the company. This structure has led to both praise for its entrepreneurial opportunities and criticism for its similarity to pyramid schemes.

The History of Amway: From Garage Startup to Global MLM Giant

Amway’s journey from a small garage-based business to a global MLM powerhouse is a testament to its founders’ vision and the power of direct selling. Here’s a brief timeline of Amway’s history:

1949: Rich DeVos and Jay Van Andel, childhood friends, start their first business venture selling wood products.

1959: Amway is officially founded, selling a single product: Liquid Organic Cleaner (L.O.C.). The company’s name is derived from the “American Way” of entrepreneurship.

1960s: Amway expands its product line to include home care and personal care items. The company also begins its international expansion, starting with Canada.

1970s: Rapid growth continues with Amway entering markets in Europe, Asia, and Australia. The Amway Center opens in Ada, Michigan.

1979: The Federal Trade Commission (FTC) conducts a four-year investigation into Amway’s business practices. The FTC ultimately rules that Amway is not a pyramid scheme but requires the company to make changes to its business practices.

1980s-1990s: Amway continues its global expansion, entering markets in Latin America and further expanding in Asia. The company diversifies its product offerings and acquires several other businesses.

2000: Amway restructures as Alticor Inc., with Amway, Quixtar, and Access Business Group as subsidiaries.

2009: Quixtar is rebranded as Amway North America.

2010s-Present: Amway focuses on digital transformation, adapting to e-commerce trends, and continues to grow globally. The company invests in sustainability initiatives and expands its nutrition and wellness product lines.

Throughout its history, Amway has faced both praise and criticism. Supporters laud its entrepreneurial spirit and global success, while critics question its business model and recruitment practices. Understanding Amway’s history provides essential context for evaluating its current operations and the persistent questions about whether Amway is a pyramid scheme.

How Does Amway’s Business Model Work?

To understand the allegations of Amway being a pyramid scheme, it’s crucial to first grasp how the company’s business model operates. Amway uses a multi-level marketing (MLM) model, where independent distributors (IBOs) earn money through two primary methods:

1. Direct sales of Amway products to customers
2. Recruiting new distributors and earning commissions from their sales

Here’s a more detailed breakdown of how the Amway business model operates:

1. Becoming an IBO: Individuals sign up as Independent Business Owners for a small fee (usually around $62 in the US). This fee provides them with a starter kit and access to Amway’s business resources.
2. Product Purchase: IBOs buy Amway products at a discount (typically around 30%) for personal use or resale. They are encouraged to be product users themselves to better sell to others.
3. Direct Selling: IBOs sell products to customers and earn retail profit. The difference between the discounted price they pay and the retail price they charge is their immediate profit.
4. Recruitment: IBOs are encouraged to recruit new members to join their “downline.” A downline consists of all the IBOs recruited by an individual, as well as the IBOs those recruits bring in, and so on.
5. Commissions: IBOs earn commissions based on the sales volume of their downline. As their downline grows and sells more products, the IBO’s commission percentage increases.
6. Bonuses: Additional bonuses are awarded for meeting certain sales targets or recruitment goals. These can include cash bonuses, travel incentives, and recognition at Amway events.
7. Training and Support: Amway provides training materials, seminars, and support to help IBOs develop their businesses. However, IBOs often have to pay for these resources.
8. Point Value (PV) and Business Volume (BV): Each product has a Point Value (PV) and Business Volume (BV) assigned to it. PV is used to determine an IBO’s performance level, while BV is used to calculate commissions.

This multi-level structure, with its focus on both product sales and recruitment, is what leads many to question: Is Amway a pyramid scheme? While the model allows for earning through product sales, the emphasis on recruitment and the multi-tiered commission structure bear similarities to pyramid schemes, which we’ll explore in the next section.

Is Amway a Pyramid Scheme? A Detailed Analysis

The question “Is Amway a pyramid scheme?” is complex and requires a nuanced answer. Let’s break down the arguments for and against classifying Amway as a pyramid scheme:

Why Amway is Not Legally a Pyramid Scheme:

1. Legitimate Products: Unlike pure pyramid schemes that only move money, Amway sells real, tangible products. This is a crucial distinction in the eyes of the law. The company offers over 300 products across various categories, including nutrition, beauty, home care, and energy drinks.
2. Income from Sales: Distributors can earn money by selling products, not just from recruitment. This differentiates Amway from illegal pyramid schemes where the only way to make money is through recruitment.
3. Legal Operation: Amway has successfully defended its business model in court and continues to operate legally in many countries. The company has faced legal scrutiny and made adjustments to comply with regulations.
4. Refund Policy: Amway offers a satisfaction guarantee and buyback policy for unsold inventory, which is not typical of pyramid schemes. This policy helps protect distributors from being stuck with unsold products.
5. Training and Support: The company provides business training and support for its distributors, investing in their success beyond mere recruitment. This includes online resources, in-person events, and mentorship programs.

Why Amway is Often Associated with Pyramid Schemes:

1. Emphasis on Recruitment: While not the only way to earn, there’s a strong focus on recruiting new members, which is a characteristic of pyramid schemes. Many critics argue that the real money in Amway comes from building a large downline, not from product sales.
2. Multi-Level Structure: The business model rewards distributors for building a downline, creating a pyramid-like structure. As distributors recruit more people, their potential earnings increase exponentially.
3. High Failure Rate: Like many MLMs, the vast majority of Amway distributors do not make significant income, with many losing money. According to Amway’s own income disclosure statements, only a tiny percentage of IBOs make substantial income.
4. Product Pricing: Amway products are often more expensive than comparable items, leading to criticism that the real customers are the distributors themselves. This can make it difficult for IBOs to sell products to non-Amway affiliated customers.
5. Cult-like Atmosphere: Some critics argue that Amway creates a cult-like environment that pressures people to stay involved despite lack of success. This includes motivational meetings, success stories, and a culture that can alienate distributors from friends and family who are skeptical of the business.

Expert Opinions:

Dr. William Keep, a professor of marketing and former dean of the School of Business at The College of New Jersey, states: “While Amway’s business model technically differentiates it from a pyramid scheme, the emphasis on recruitment and the low success rate for distributors raise ethical concerns about the sustainability and fairness of the opportunity presented to potential recruits.”

Robert FitzPatrick, author of “Ponzinomics: The Untold Story of Multi-Level Marketing,” argues: “Amway may not fit the strict legal definition of a pyramid scheme, but its business model creates a de facto pyramid structure where the vast majority at the bottom support the few at the top.”

Legal Precedents:

In 1979, the Federal Trade Commission (FTC) ruled that Amway was not an illegal pyramid scheme. However, the company was ordered to make changes to its business practices, including:

• Requiring distributors to sell to at least 10 retail customers each month
• Implementing the “70% rule,” where distributors must sell at least 70% of their inventory each month
• Offering a buy-back policy for unsold inventory

These rules were designed to ensure that Amway emphasizes retail sales over recruitment. However, critics argue that these rules are not always strictly enforced.

Final Thoughts on the Pyramid Scheme Question:

While Amway does not meet the legal definition of a pyramid scheme due to its product sales and compliance with regulations, its business model shares many characteristics with pyramid schemes. The emphasis on recruitment, the multi-level structure, and the low success rate for most distributors are all red flags that potential recruits should carefully consider.

The question “Is Amway a pyramid scheme?” may ultimately depend on one’s definition and perspective. From a strictly legal standpoint, Amway is not a pyramid scheme. However, from an ethical and practical standpoint, the business model raises many of the same concerns associated with pyramid schemes.

Amway’s Product Line: Legitimate Goods or Overpriced Hype?

Amway’s product line is extensive, covering various categories including nutrition, beauty, home care, and energy drinks. But are these products worth their often premium price tags? Let’s take a closer look:

Product Categories:

1. Nutrition (Nutrilite brand):
   • Vitamins and dietary supplements
   • Protein powders
   • Weight management products
2. Beauty (Artistry brand):
   • Skincare products
   • Makeup
   • Anti-aging treatments
3. Home Care:
   • Cleaning products
   • Laundry detergents
   • Air and water treatment systems
4. Personal Care:
   • Body care products
   • Oral care
5. Energy Drinks (XS brand)

Product Quality:

Many Amway products, particularly those in the Nutrilite and Artistry lines, have received positive reviews from users and some independent testing organizations. Nutrilite is one of the world’s largest vitamin and dietary supplement brands, and Amway invests significantly in research and development.

However, the quality of Amway products is often debated. While some customers swear by them, others find them overpriced compared to similar products available in retail stores.

Pricing:

Amway products are generally priced higher than comparable products found in traditional retail stores. The company justifies this by citing:

• High-quality ingredients
• Proprietary formulations
• The cost of supporting the MLM business model

Critics argue that the inflated prices make it difficult for distributors to sell products to non-Amway affiliated customers, forcing them to focus more on recruitment than retail sales.

Environmental and Ethical Considerations:

Amway has made efforts to improve its environmental and ethical practices:

• Many products are certified organic or use organic ingredients
• The company has sustainability initiatives to reduce its environmental impact
• Amway claims to follow ethical sourcing practices

However, like many large corporations, Amway has faced criticism over some of its practices and the environmental impact of its products.

The “Hype” Factor:

Some critics argue that Amway’s marketing and the enthusiasm of its distributors create unwarranted hype around its products. Distributors are often passionate product users themselves, which can lead to overzealous claims about product efficacy.

The Federal Trade Commission (FTC) has warned Amway in the past about distributors making unfounded health claims about its products, particularly in the nutrition category.

Final Thoughts on Amway’s Products:

While Amway does offer legitimate products, many of which receive positive reviews, the premium pricing and the hype surrounding them are points of contention. Potential customers and distributors should carefully compare Amway products with alternatives in the market, considering both quality and price.

The high prices of Amway products also play into the pyramid scheme debate, as they can make it challenging for distributors to build a sustainable retail business, potentially pushing them towards focusing on recruitment instead.

The Amway Compensation Plan Explained

Understanding Amway’s compensation plan is crucial to evaluating whether the business opportunity is viable and to addressing the question: Is Amway a pyramid scheme? The plan is complex, with multiple ways to earn money, but it’s this very complexity that often leads to confusion and criticism.

Basic Structure of Amway’s Compensation Plan:

1. Retail Margin:
   • IBOs buy products at a discount (typically around 30%) and can sell them at retail price, keeping the difference as profit.
2. Performance Bonus:
   • Based on monthly Point Value (PV) and Business Volume (BV) generated by personal sales and downline sales.
   • Bonus percentages range from 3% to 25% of BV, increasing as total PV increases.
3. Depth Bonus:
   • Earned on the group volume of downline IBOs who have reached certain PV thresholds.
   • Percentages vary based on the IBO’s own level and the level of downline IBOs.
4. Leadership Bonus:
   • Additional bonuses for IBOs who achieve

FAQs About Amway and Pyramid Schemes

Is Amway banned in the US?

No, Amway is not banned in the United States. This is a common misconception. Amway operates legally in the US and many other countries. However, Amway has faced legal challenges and investigations over the years:

• In 1979, the Federal Trade Commission (FTC) ruled that Amway was not a pyramid scheme but required the company to make changes to its business practices.
• Amway has been banned or restricted in some countries, such as China (temporary ban in 1998) and the UK (restrictions in 2007), but these bans were later lifted after the company made changes to comply with local laws.

It’s important to note that while Amway is legal in the US, its business practices continue to be scrutinized by regulators and critics.

Can you actually make money from Amway?

Yes, it is possible to make money from Amway, but it’s important to understand that most people do not make significant income. According to Amway’s own income disclosure statements:

• The majority of IBOs (Independent Business Owners) make very little or lose money.
• A small percentage of IBOs make substantial income.
• Success typically requires significant time, effort, and often financial investment.

Factors affecting potential earnings include:

• Your ability to sell products
• Your skill in recruiting and managing a downline
• The market saturation in your area
• The amount of time and money you’re willing to invest

It’s crucial to approach Amway (or any MLM opportunity) with realistic expectations about potential earnings.

Are people still in Amway?

Yes, Amway continues to operate with millions of distributors worldwide. As of 2022, Amway reported:

• Over 3 million Independent Business Owners globally
• Operations in more than 100 countries and territories
• Annual sales of $8.4 billion

While some people have left Amway due to various reasons (which we’ll discuss in another question), the company continues to attract new distributors and maintain a significant global presence.

How do I quit Amway?

If you’ve decided to leave Amway, here are the steps you can take:

1. Review your contract: Understand any obligations or restrictions regarding leaving.
2. Inform your upline: Let your sponsor or mentor know about your decision.
3. Contact Amway directly: Reach out to Amway’s customer service to officially terminate your IBO status.
4. Cancel any automatic shipments or payments: Ensure you’re not continuing to receive or pay for products.
5. Sell or return inventory: Amway offers a buy-back policy for unsold, resalable inventory.
6. Remove Amway-related content: If you’ve been promoting Amway online, consider removing or updating this content.
7. Seek support if needed: Leaving an MLM can be emotionally challenging. Don’t hesitate to seek support from friends, family, or professional counselors.

Remember, you have the right to leave at any time, and Amway cannot force you to stay or penalize you for leaving.

Why do people leave Amway?

People leave Amway for various reasons, including:

1. Financial disappointment: Many find they’re not making the income they expected or are losing money.
2. Time commitment: Building an Amway business often requires significant time investment, which can be unsustainable for many.
3. Strain on relationships: The focus on recruiting friends and family can damage personal relationships.
4. Ethical concerns: Some people become uncomfortable with certain aspects of the business model or sales tactics.
5. Market saturation: In some areas, it becomes increasingly difficult to find new customers or recruits.
6. Product issues: Dissatisfaction with product quality or pricing can lead to disillusionment.
7. Pressure and stress: The constant push to meet sales quotas and recruit new members can be stressful.
8. Change in personal circumstances: Life changes such as new jobs, moving, or family responsibilities can make continuing with Amway difficult.
9. Burnout: The high-energy, often emotionally charged atmosphere of Amway events and meetings can lead to burnout over time.

Is selling Amway legit?

Selling Amway products is a legitimate business activity in the sense that it’s legal and involves selling real products. However, the legitimacy of Amway as a business opportunity is often debated. Here are some points to consider:

Legitimate aspects:

• Amway sells actual products that many customers find valuable.
• The company operates legally in many countries and complies with regulations.
• Some people do make money through Amway, particularly those who excel at sales and recruitment.

Concerns about legitimacy:

• The multi-level marketing structure has been criticized for its similarity to pyramid schemes.
• The emphasis on recruitment over product sales raises ethical questions.
• The low success rate for most distributors leads some to question the viability of the business opportunity.
• High-pressure sales tactics and inflated promises of financial success have been reported by some former distributors.

Ultimately, while selling Amway products is legal, potential distributors should carefully consider the business model, success rates, and their own skills and circumstances before deciding if it’s a legitimate opportunity for them personally.