Throughout its history, Amway has been derogatorily referred to as a “pyramid scheme,” and has often been accused of being an outright scam.
So is Amway a pyramid scheme or scam?
Although Amway isn’t an outright scam or scheme, some less-than-savoury elements of the company’s multi-level marketing (MLM) business model could turn off potential customers and employees.
Below, I’ll give you a comprehensive review of the company, explain how much money you could earn as an Amway seller, and go over some of the most prominent pros and cons so that you can see for yourself.
- allows its members to become Independent Business Owners (IBOs).
- IBOs can earn money by retailing Amway’s physical products.
- And can earn bonuses by recruiting other Amway sellers to their network.
- Amway IBOs can profit by retailing Amway products purchased at wholesale prices
- Amway products are fairly high-quality
- Amway offers fair wholesale pricing on its products
- Amway allows members to build residual income by recruiting other IBOs to their network
- Amway provides networking events for its members
- IBOs can return unsold products for a full refund
- Amway may encourage its IBOs to recruit new members in a common MLM fashion aggressively
- While success with an MLM like Amway is possible, it requires far more work than most members have time for
- As an Amway seller, your friends and family may come to see you as an annoying salesperson
- Amway often encourages its IBOs to pursue leads aggressively
Today, the company Amway is synonymous with the term “pyramid scheme.” But Amway is not a pyramid scheme, as those are illegal. A scheme would be something along the lines of the company taking your money and not giving you any products in return.
Amway is a legit business, and there’s no way it could have been operational for so long if it wasn’t. But where the controversy lies is with its MLM structure of recruitment. While MLM’s are intensely disliked by many (myself included), it is not illegal, and that is an important distinction.
I feel very similar about World Financial Group, a similar MLM company that I reviewed recently.
That being said, I can understand the sentiment, as many of the IBOs who sell Amway products and promote the company aren’t the most honest about the company’s structure or what to expect in terms of earnings.
It is technically not a scheme or scam. The concept of network marketing, by itself, is 100% legal. Technicality aside, though, the individuals promoting and recruiting for Amway aren’t always honest and straightforward. It’s not uncommon for Amway IBOs to:
- Pressure recruits into signing up for Amway
- Make exaggerated claims about how much their prospect can earn
- Not be honest about how much work is required
- Try to push products on their prospect that isn’t suited for the prospect’s sales demographic
It’s not always harmless, either. Amway IBOs have to pay a setup fee to become a seller. Then, they must purchase their wholesale products from Amway, spending even more money upfront.
When it’s all said and done, a new recruit could easily pay $200 – $300 just to get set up, all of which only benefits the individual who signed them up.
I’ll be 100% honest here – to me, the only salesperson who is more annoying than Amway IBOs are the sellers who work the kiosk stands at shopping malls in the holidays. I admire persistence in any form, but a good salesperson should also know when to take a hint and leave somebody alone.
What Is An Amway IBO?
Amway refers to its sellers as Independent Business Owners (IBOs). This term, while somewhat accurate, can be a bit misleading.
From a legal perspective, IBOs are considered subcontractors who are entitled to operate their “business” as they see fit, providing they follow Amway’s regulations. Officially, IBOs operate as a sole proprietorship.
In the U.S., sole proprietors aren’t entitled to the same tax protections as LLC owners, and Amway really doesn’t do a great job of educating its IBOs on the difference between the two.
As sole proprietorships, Amway IBOs must keep track of their profits and report any income earned on their taxes.
How Much Money Can You Earn As an Amway IBO Seller?
At least Amway is transparent about how much their members earn. Every year, they release an annual income disclosure report which is available for download online. Most first-time recruits never bother to read through it, though.
Here’s the average that the top Amway earns made in 2021:
- Top 1% of sellers: $87,901
- Top 10% of sellers: $14,537
- Top 50% of sellers: $3,414
Amway can pay off if you can work your way up to the top 1% of salespeople. Accomplishing that can take a lifetime, though. More realistically, the average Amway IBO who works part-time on their side hustle will fall into the top 50%, earning a few thousand extra bucks yearly.
It’s not bad, but for the effort you’re putting in, I’d argue that you could earn more elsewhere.
Many sellers sign up to be an Amway IBO, thinking that they will be earning big money with a limited amount of work. Then, they’re disappointed to find out that only a small percentage of Amway IBOs earn more than $1,000 in a year.
How to Earn Money as an Amway IBO Seller
There are two key ways that Amway IBOs can earn money with the company:
- Selling Amway products that they purchase at retail
- Scraping a percentage of their network’s sales
The first method is a relatively classic, straightforward method of earning money. It’s a simple retail sales method that’s been used since ancient times. The second method is what caused the company to be associated with a pyramid scheme.
The biggest Amway earners rarely (if ever) sell Amway’s physical products. Instead, they earn money from their vast network of Amazon IBOs, who they’ve recruited over their lifetime, by taking a small percentage of their sales.
That’s not where it stops, though.
As the second layer of affiliates begins to build their own network (creating a third layer), the original IBO at the top earns a percentage of their earnings as well, albeit slightly smaller. Once the third layer of IBOs starts recruiting IBOs, the head IBO at the top of the pyramid earns from them as well.
The layers extend deeper and deeper, depending on how many IBO recruits are in the network. The more that the network’s IBOs sell products, the more the person on top earns. This is also why multi-level marketing companies are professionally referred to as network marketing companies.
Here’s the thing – the seller who’s at the top of this pyramid is undoubtedly a second or third-level IBO in another seller’s pyramid. The entire MLM sales model relies on a pyramid-like network that makes those higher on the pyramid wealthier.
The sellers on the bottom, who don’t have their own networks are only able to earn money by selling products. When this does not make them a lot of money, they eventually quit and write Amway off as a “pyramid scheme.”
Personally, I could find far better ways to earn money in my free time than peddling Amway products and network marketing sign-ups.
I strongly suspect that most people who join Amway aren’t that passionate about sales. Instead, they’re just looking for a way to make some money on the side or at home.
If that’s the case for you, why not build a tangible skill instead? You can learn something like how to code or copywrite, become a virtual assistant, or learn some design skills, then freelance your services to clients. The possibilities are endless. Check out lists like these for ideas:
What Is Amway? A Brief History Of The Company
Regardless of my feelings about MLM companies, I must admit that the founders were quite intelligent and found a way to capitalize on the budding network marketing business model before it became over-saturated.
Amway was created in 1959 by businessmen Jay Van Andel and Richard DeVos. After seeing success with their initial business model in the United States, the pair decided to expand their operation into Canada in 1962.
Initially, Amway focused on selling good-quality products that were manufactured in the USA, which is why Amway stands for “American Way.” At first, Amway specialized in selling home cleaning products and later moved into selling vitamins and nutritional supplements.
Amway quickly became known for its multi-level-marketing (MLM) business model. Amway itself was not the primary retailer. Instead, the company hired salespeople to sell Amway products using an in-person or door-to-door sales model.
Amway sellers could purchase Amway’s products at a discounted wholesale price and could turn around and sell them to their friends, family, neighbourhood, and communities for a profit.
The idea was simple – people were already purchasing these products from the store, so why wouldn’t they purchase a similar product from their friend or neighbour?
Back in the late-50s and early-60s, door-to-door sales were quite common (at least, before the practice saw a rapid decline in the 1980s, thanks to the popularity of television advertising).
As a result, Amway flourished. Stay-at-home moms would invest in Amway products, stock their homes with reduced-priced cleaning products, and make side-money by selling the same products to their local community.
This wasn’t the only way for Amway sellers to earn money, though.
In addition to selling retail products, Amway sellers were also encouraged to recruit their friends and family to the cause. Sellers would then be able to earn a percentage of their network’s profit.
Whenever the people under them signed somebody else up, they would also earn a percentage, creating a pyramid-like network where the person on top earns the most.
And this is where the controversy with Amway lies.
Today, Amway still uses the same tried-and-tested MLM business model. The only difference is that the company now supports online sales and has expanded its product line to include over 450 products.
Amway was arguably one of the largest pioneers of multi-level marketing in the 20th century. Since then, several other large-scale MLMs have also been successful, including Herbalife and Avon, both of which follow the same network marketing business model.
Whether you’re interested in joining an MLM company, it’s still a good idea to understand the basics of multi-level marketing. Here’s a quick rundown.
You have sellers on the first level (base of the pyramid). These are the people who sell Amway’s physical products via door-to-door sales, online sales, or tapping into their personal network of sales prospects (undoubtedly friends and family).
Here, sellers can turn a profit based on how much they sell Amway products. For example, you could purchase an Amway Home brand cleaning spray for $5 wholesale and resell it for $7.50.
Amway doesn’t really offer a great return here. The most you’ll be able to earn is between a 30% and 50% markup. A typical retail sales model where you source your own wholesale products (using a site like Alibaba) would allow you to earn between 100% and 300% markup on each product sold.
After realizing that door-to-door sales aren’t the most profitable way to earn with Amway, most IBOs begin to recruit new members to their cause to take advantage of sign-up bonuses.
Most often, the seller’s first prospects are their friends and family. Of course, their friends and family don’t enjoy being treated like a sales prospect, which can often strain relationships.
Then again, a few smart sellers develop intuitive strategies for recruiting strangers into their network. This is preferable, as you won’t be damaging your personal relationship.
Few MLM sellers ever reach the level where they can generate real profits from their network. However, it is possible. Once you build your “pyramid,” you’ll be able to earn residual income as they continue selling and recruiting.
At this point, high earners may take a coaching role, encouraging the lower members in their network to “keep up the good sales” or to try to find ten new prospects this week. After all, the guy at the top doesn’t get paid if the guys below aren’t putting in work.
On the one hand, MLM companies offer a clear path to achieving success. If you’re social, charismatic, enjoy selling, and are actually serious about building a network of hard-working salespeople, then you can eventually succeed by working with an MLM.
On the other hand, you could end up becoming a bit of a social outcast who everyone refers to as “that annoying pyramid scheme guy.”
It’s very difficult to climb to the top of an MLM company and actually start making really good money.
Any business model that places such a huge emphasis on recruiting new members rather than customer needs in order to make money is one to be cautious of.
Although Amway pioneered MLM marketing in the 20th century, it wasn’t the first of its kind. In 1932, an MLM company selling nutrition supplements called Wachter’s became massively successful during the Great Depression.
After that, another supplement company called Nutralite (not to be confused with Amway’s Nutrilite products) also found mainstream success. Of all of these companies, though, Amway has been around for the longest and has become one of the biggest network marketing companies in the world.
Amway offers a number of different products for its IBOs to sell. Most of them are focused on health, wellness, beauty, and sanitation. The most popular brands sold under Amway’s umbrella are:
- XS Energy Drinks
- Artistry Skincare & Cosmetics
- Amway Home
Let’s take a quick look at each.
Nutrilite is one of Amway’s oldest brands. Nutrilite specializes in selling organic vitamin and mineral supplements, including daily vitamin capsules, powdered drink mixes, and more. Overall, Nutrilite products are very high-quality, everything is certified organic, and the company uses real plants in the supplements.
XS is Amway’s line of energy drink products. They claim to be a “natural” energy drink, and the main selling point is that they’re supposed to be healthier than other mainstream energy drinks that you’d find at your local convenience store.
Artistry is Amway’s brand of makeup and skincare products. I’m really not an expert on makeup, but the brand seems to get decent reviews from its readers.
Last but not least, Amway Home is Amway’s line of home cleaning products. This includes everything from:
- Dish soap
- Surface cleaners
- Hand soap
- Laundry detergent
- And more…
Quality-wise, these products are comparable to name brands. The main marketing ploy here is that they’re more “natural” and contain “fewer chemicals.”
Amway products are sold by Amway IBOs. Traditionally, an IBO will identify one of Amway’s product brands that they like, invest in buying the products in bulk, and then start selling them.
Amway also allows IBOs to create online eCommerce stores, where their customers can order products without needing an in-person sale.
Amway doesn’t directly manufacture its own products. Instead, Amway closely oversees its product production, design, and manufacture through its network of manufacturing subsidiaries.
That being said, Amway does have exclusive rights to the manufactured products. Amway products aren’t being white-labelled and sold by other brands.
Without a decent-quality product, there’s no way that Amway would have been able to stay in business for as long as they have. One of the main selling points of Amway products is that they’re pretty high-quality products.
I don’t have a ton of personal experience here, but the reviews I’ve read all seem to be positive (at least regarding the products).
In my opinion, affordability is where Amway products fall short. While they may be good quality, they’re also out of most people’s price range. The price is comparable to purchasing a name-brand product at full cost. Often, Amway products cost even more.
At that point, the average consumer has to ask, “How is this better than taking a trip to my local grocery store and buying the same brands I normally purchase?”
Realistically, the main people who buy Amway products from IBOs are just doing so to support their friend or family member’s “business.”
Anybody can purchase Amway products. However, they must purchase them through an Amway IBO. Upon checkout, the customer typically provides their IBO’s affiliate code, which will allow them to complete the purchase and ensures that the IBO gets their fair percentage of the profits.
Although Amway does require an upfront investment from its sellers, there is one redeeming feature – Amway allows IBOs to return any unsold products for a full refund. Amway will even pay the shipping and handling fees, so your end has zero liability.
At the end of the day, Amway is a completely legitimate company. It manufactures good-quality products, is transparent about what its members make, and uses a tried-and-tested network marketing business model.
That being said, a lot of the IBOs I’ve encountered who work with Amway have left me with a bit of a bad taste in my mouth. More often than not, they’re pushy salespeople who only care about their profits and are selling a product that they neither care about nor believe in (regardless of its quality).
From a customer standpoint, all of this is palpable and turns me off as a buyer.
Personally, I’d say that you could earn far more money by developing a skill that you can apply to freelancing online. Writers, graphic designers, videographers, narrators, and more are all in high demand.
As a freelancer, you’ll be able to set your own schedule, work when you want, and get rewarded fairly for your time. It’s the perfect side hustle.
Interested in learning more? Keep on reading to see my list of the highest-paying freelance jobs in Canada!
Disclaimer: I am not affiliated with Amway Canada. The information and opinions shared in this article are for informational purposes only and are based on my independent research, as well as the word-of-mouth experiences shared with me by Amway customers and sellers.