Every time someone raises the question “Is Amway a pyramid scheme?” We ended up in a heated debate.
Supporters of Amway say NO, ‘Amway is not a pyramid scheme.’
Ex-Amway IBOs and those of us trying to save our friends and family members from financial disaster say YES, ‘Amway is a pyramid scheme.’
The truth is, this question should play a minimal role in the decision to invest or not invest in the Amway business.
We invest in a business for one reason, TO MAKE MONEY!
There are a lot of home-based business opportunities available to us, but we only invest in an opportunity that is profitable, the one making us money.
Multilevel network marketing (mlm) like Amway is losing popularity to the new business model called ‘Affiliate Marketing.
I suggest you read this MLM vs. Affiliate Marketing article to understand the differences.
We should not invest in Amway’s business opportunity unless it is profitable.
‘Can you make money with Amway?’ is the question we will try to answer in this Amway IBO Review.
If you know someone, or yourself, interest in becoming an Amway IBO? I suggest telling them to read this review before investing with Amway.
This Amway IBO review will discuss the issue regarding Amway a pyramid scheme.
However, our primary focus is to determine if Amway IBO is a good investment.
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What Is Amway?
Amway is the world’s largest Multilevel Marketing (mlm) company with Headquartered in Ada, Michigan.
Many online critics and consumer advocates consider Amway a pyramid scheme which forces the company to defend itself by creating a webpage responding to this allegation.
This privately-owned company was founded back in 1949 by two long-time friends and business partners Rich DeVos and Jay Van Andel under the name Ja-Ri Corporation to distribute the Nutrilite food supplements.
In 1963, Ja-Ri changed its name to “Amway” (American Way).
At one point in the late 1990s and early 2000s, Amway was considered the pioneer of online retail when it launched Quixtar, an eCommerce website, in North America.
Quixtar allowed Amway independent business owners and customers to order products directly online.
Quixtar business did not perform well. By 2009 Quixtar was quietly dissolved and merged into the Amway Global brand.
Today, Amway operates in more than 100 countries around the world with over 17,000 employees including 1,000 scientists, engineers, and technical professionals.
The Amway direct competitor is Avon which I have done a review on, Avon Home Business Opportunity.
What Is Amway IBO?
Amway business is a home-based business opportunity known as Amway Independent Business Owner (IBO).
Amway uses the IBO network to distribute its products through a direct-selling method known as Network Marketing.
Individuals are recruited into Amway business as an independent business owner, called ‘IBO’.
Amway IBOs are encouraged to recruit and build their own network of distributors to promote and sell exclusively Amway products.
Amway compensates its IBOs with commissions from the sales of their recruits or downlines. Because of this commission structure, many considered Amway’s business a pyramid scheme.
What Does Amway Sell?
Amway sells personal and household products in these categories:
- Beauty Products
- Nutrition Products
- Home Care Products
- Energy + Sport Products
As an Amway IBO, you have access to over 450 exclusive products to promote and sell to earn commissions.
The company top-selling brands are:
- Nutrilite: vitamin, mineral, and dietary supplements
- Artistry: skincare and color cosmetics
- eSpring: water treatment systems
- XS: energy drinks
There is nothing to dispute about Amway products. They are 100% legit.
However, product prices are too expensive compared to other brands in local retail stores.
If you want to become an Amway IBO, you should be concerned about the mlm-inflated prices.
Who can afford to buy your Amway products? These are not for your every day average customer.
With this Amway business, you must sell a lot of these high price products to earn a good commission.
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How Does Amway Work?
Since Amway is an mlm company, you have two ways to become an Amway IBO.
- If you know an Amway IBO, this person can sponsor you to become an IBO.
- If you don’t have a sponsor, you can contact Amway directly to request for a local Amway IBO.
The process to start an Amway business.
The sponsor will meet with you to go over the Amway business and registration process.
You have the following investment options to start your Amway IBO:
- $62 investment to purchase an Amway IBO Literature Starter Kit, which includes a step-by-step guide on owning an Amway business, product brochures, training resources, and literature explaining the Amway IBO Compensation Plan and Growth Incentives. You also have access to your own Personal Retail Website, free online training, and mobile apps to manage your business.
- $99.99 investment gets you an Amway IBO Product Starter Kit. This starter kit Includes everything found in the Literature Kit, in addition to $245 worth of full-size products for you can try and samples to share with customers.
Your sponsor will collect the startup fee, then submit them with your IBO application.
Congratulations, you are a new Amway IBO.
Besides the initial investment above, there are also operational expenses which must be added to your Amway IBO.
Most IBOs registered with Amway believing the startup cost is only $99.99 max. They never thought about the costs of running their own Amway IBO.
Operational expenses are the major cost of every Amway business. It is an important factor in determining profits and losses.
Amway (IBO) Cost
I will list a few major monthly operational expenses below.
Just remember, each IBO has different operational expenses, according to the size of their Amway business.
These expenses are just to give you an idea. Your actual monthly expenses might be different.
Optional Tools & Training Materials
- Website fees $20
- Standing Order (Tape/CD subscription) $42
- Extra tapes/CDs $112
- Book of the Month $10
- Functions/Major functions (averaged out) $125
- Monthly Open Meeting $8
- KATE (voicemail) $20
The tools and materials above are offered as optional, but most IBOs are encouraged to purchase if they want to make money and grow their Amway business.
Hiding operational expenses
One important expense that most mlm opportunities tell their members is optional, but it’s a requirement.
This is the monthly personal sales volume requirement.
Amway refers to this as Point Value (PV). All Amway IBOs must generate a minimum of 150 PV a month to get paid.
Any Amway IBOs that fail to meet the monthly 150 PV will not receive commissions from downline sales.
To meet the monthly 150 PV, most Amway IBOs purchase their own products.
It is estimated that 150 PV costs between $300 – $400 each month depending on the type of products you purchased from Amway.
I considered this $400 as an additional monthly expense. This is a hiding cost because it’s rarely asked or disclosed to an Amway IBO.
This hiding expense is the #1 cause of many mlm business failures.
You must add this expense in your investment cost because a startup business takes at least 1 years to earn profits.
Your total cost to become an Amway IBO is: $4,899.99 {$99.99 + ($400×12)}.
You must invest money to make money. But the question is, can you recover your Amway IBO investment?
Amway Compensation Plan
The Amway compensation plan is the road map for every IBO’s earnings.
Understand your business earnings potential is important financial data in determining your business profits.
I’ll provide a quick overview of the Amway Compensation Plan below. If you want to see the detailed plan, click on the link to read the PDF file.
Amway IBOs income comes from different forms, but they are classified into two categories:
Immediate Commissions
Immediate commissions are earnings from the direct selling of products to IBO customers.
The IBO buys products at a wholesale price and resells them at retail price to make profits.
Most Amway startup IBOs make their income this way until they can build their own team of distributors.
Performance Bonus
This category covers commission earnings from Team Performance and Leadership Achievement.
As stated above in the Hiding Operational Cost, an Amway IBO must meet the minimum monthly 150 PV to earn this bonus.
Performance bonus is paid on a scale of 3% to 25% based on the BV (total group sales volume) and the PV (personal sale volumes).
An Amway IBO with a big team receives more performance bonuses.
To make money with Amway, you must recruit and build a large team. For this reason, people consider Amway as a pyramid scheme.
The Amway compensation plan only provides us a road map of an Amway IBO potential revenue.
We cannot use this as the actual earning of a startup IBO, which Amway uses to convince new recruits.
The best financial number to evaluate future Amway IBO profits is average earnings.
Amway IBO Average Earnings
The IBO average earnings normally report in the Amway earnings disclosure statement.
In recent years, Amway does not publish this earning disclosure to the public.
This statement is only provided to a recruit who is interested in becoming an Amway IBO.
Why using IBO average earnings (average income)?
Every Amway enthusiast argues that you cannot use the average earnings to determine profitability, because it includes those not promoting the Amway business full-time.
The argument above contradicts Amway promotion of its IBOs as a part-time home business opportunity.
Also, if this data is not important then why Amway no longer discloses to the public?
Every smart investor uses the average earnings as a benchmark to predict future earnings.
An Amway IBO startup is unlikely to make a profit for at least 6 months (6 months is the selling point for Amway).
When it makes profits, it is not going to be in the top 50%. Using the IBO average earnings already gave Amway business the benefit that it doesn’t deserve.
Amway’s earnings disclosure statement below reported the gross average income for an “active” Amway IBO in 2017 was $207 a month, about $2,484 a year.
This gross average monthly income does not deduct monthly operational expenses.
If taking out operational expenses, startup Amway IBOs do not make a profit for at least 1 year according to the earning disclosure statement above.
Amway business opportunity doesn’t look profitable.
Now, you understand why Amway tries hard to hide this number from the public.
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Is Amway A Pyramid Scheme?
Let say Amway is not a pyramid scheme, under the FTC Pyramid Scheme Ruling.
Whether Amway is a pyramid scheme or not, it is irrelevant to us after looking at the financial data.
Are you going to invest in a business that losing money? I wouldn’t!
I start a business to make money, not to lose money.
If I want to give money away, I donate to a non-profit agency, at least it’s tax deductible.
The best way to convince your friends or families not to invest in an mlm business is by showing them the numbers.
Arguing with someone about Amway is a pyramid scheme or not is useless.
Amway Alternatives?
Starting a home-based business is the best way to achieve financial freedom and break free from corporate life.
The internet has made mlm business opportunity something of the pass.
Think about it, how are you going to compete with giant discount retailers such as Amazon, Walmart, and Target?
The new way to make money from home is not mlm, but affiliate marketing.
Affiliate marketing is the preferred business because:
- You earn commission on every sale.
- You don’t have to deal with face-to-face selling.
- You don’t have to recruit.
- You work from the comfort of your home.
- It is the best way to make passive income.
Before investing in Amway IBO, I suggest you check out affiliate marketing. You should compare different business opportunities to find the best investment.
If you like to see how I make 4-figure monthly passive income, then I offer you these 10 Free Online Lessons to discover the true power of an affiliate marketing business.
You should follow the link above and take the 10 free lessons to start building your online business for free. What do you get to lose?
