Is Amway a Pyramid Scheme or an MLM? Everything You Need to Know

If you’re considering becoming an independent business owner or expanding your income streams, you’ve probably looked into opportunities from a direct-selling company like Amway. Having done your research, you’re also probably wondering — is Amway a pyramid scheme or an MLM?

At Business2Community, our team of business experts has created this comprehensive guide to Amway, to give you the information you need about the Amway business model, including whether it is a pyramid scheme or not. Keep reading to find out if you should become part of this direct selling industry, or if it’s better to strike out on your own.

The Amway Business Model

Despite myriad horror stories from former Amway distributors and various lawsuits alleging illegal business practices and the promise of inflated incomes, by law, Amway is a legitimate direct-selling business and is not an illegal pyramid scheme (according to the FTC at least).

This decision was made in 1979 when the FTC decided that the Amway direct selling association model did not fall under the scope of pyramid schemes since Amway distributors were paid primarily for retail sales and not only for recruitment.

As such, Amway is not a pyramid scheme, but it does follow the same business model as other multi-level marketing companies. The Amway distributors are reimbursed with commission only and don’t receive any benefits.

Background of Amway

Amway was founded in 1959 by Jay Van Andel and Richard Devos, with headquarters in Ada, Michigan. Amway is an abbreviation of “American Way” and is an MLM company operating on a global level, specializing in the sales of quality products from the beauty and healthcare industries.

The founding partners based Amway on the MLM model, wherein independent business owners sell products directly to consumers. The sellers earn commissions on sales as well as making money on sales completed by the people they recruit underneath them.

What Does Amway Sell?

While Amway is largely known as a dietary supplements brand, they sell other exclusive products as well. Amway’s products include beauty products, water and air treatment systems, and cookware.

The major brands operating under Amway include:

• Nutrilite: Perhaps the best-known Amway products come from the Nutrilite brand. It’s thanks to Nutrilite that many consider Amway to be a dietary supplement brand.
• Artistry: The Artistry brand offers beauty products made with natural ingredients.
• eSpring: eSpring features water treatment systems for clean drinking water, used around the world.
• Atmosphere: Air treatment systems for your home or car, controlled via mobile phone.
• iCook: A range of pans, pots, and fryers with non-stick coating.

Where Does Amway Operate?

Amway is currently operational in over 100 countries and territories around the world. Its largest markets include China, Japan, and India. It has run into trouble in many countries but has managed to find loopholes for the most part.

In China, for example, it sold products from physical stores until China updated its direct selling policy, allowing Amway to resume its familiar business model. In the UK, it stopped its ad campaign but was still able to continue selling products.

Here’s Why Amway Is a Multi-Level Marketing Company

The basics of the Amway business model are as follows:

• Higher retail prices: Amway distributors buy products at the wholesale price and then sell them at the retail price.
• Bonuses and commissions: Distributors make their money based on how much they sell plus what their recruits sell.

Multi-level marketing (MLM) businesses don’t use traditional marketing methods in the same way that non-MLM companies do. Instead, or in addition to typical advertising, an MLM builds sales through independent business owners. An independent business owner, in this case, is someone who buys products from the company, and then sells them directly to consumers that they independently source — this direct line of sale is why an MLM is also a type of direct selling company.

With this model, Amway bypasses the typical costs of selling its products in stores, and thanks to the Amway distributors, instead sells products at much lower prices. The business partners who follow this multi-level marketing model can, in theory, make money with Amway as long as they build their network and market well.

Amway distributors are their own business owners, making money by selling products straight to consumers. Along with selling, they are also supposed to grow a team of other distributors under them. This downline makes even more money for the company and the person who recruited them. There is plenty of training provided through Amway Education and sellers are encouraged to work together to solve problems – according to the Amway website.

Network Marketing

Network marketing is a typical element of multi-level marketing; distributors use it to find more clients in their network and use those clients to convert additional clients. Social media platforms are a common place for people to promote Amway products and to look for more recruits.

@sstephaanieee

#amwaybusinessowner

♬ original sound – Stephanie

Distributors also connect on social media to encourage other recruits to persist, even if they face opposition at the beginning.

This Amway distributor has a clever way of marketing for the company. He begins by saying that the old Amway model no longer works. He then transitions into showing how by moving network marketing online, you can more effectively convert potential clients.

How Products are Sold

There are various parts of the Amway sales model, many of the same elements that make up other MLMs. The following is a breakdown of how products are sold under this model.

• Independent business owners (IBOs): As we’ve mentioned before, Amway makes sales through its IBOs, which are the people who sell products directly to consumers.
• Sales channels: There are two sales channels with Amway — direct sales and online sales. Amway IBOs sell products directly to consumers but they can also sell products through Amway websites.

Then there are the pricing and profit margins to consider — this is how Amway IBOs make their money:

• Wholesale price: The IBOs purchase Amway products directly from the company at the wholesale price, which is lower than the price you would find in a retail store (but likely still high enough for Amway to profit).
• Retail price: This is the price at which Amway IBOs sell the products to consumers, and how they earn the bulk of their profits.

Differences Between Company Employees and Independent Business Owners

If you’re a regular Amway employee, you work just as you would for any company — with a contract, a salary, and benefits like health insurance and a retirement plan.

If you’re an Amway distributor making money from the direct selling of Amway products, you’re treated as an independent contractor. That means you don’t have an employment contract and you receive no benefits. You are paid in commissions; yours and a percentage of those of the people you have recruited beneath you.

This sales model has both pros and cons. One of the advantages of being a distributor is that you can earn passive income — or income you’re not directly working for.

That’s because distributors earn commission made from sales by their downline — the people who they’ve recruited. If you recruit enough people, and they are successful at selling Amway products, then you could have a high earning potential.

Working as an independent business owner also has the advantage of flexibility. Distributors have their own schedules and can build their business at their own pace, making this especially appealing to stay-at-home moms who are looking to get back into the workforce, but may not have the time or experience for traditional jobs.

That being said, there are some important disadvantages to selling Amway products. One of the primary cons is the amount of time required to sell enough products to make money. And it’s important to remember that sellers still have to buy the products from Amway first, making it possible to very lose money if sales are poor. Distributors must properly promote their products — essentially conducting their own marketing campaigns.

Consumer Experiences with Amway

Some consumers claim that Amway’s distributors sell quality products and Amway claims that they use superior ingredients and undergo rigorous testing. However, Trustpilot reviews of Amway products average just 3.8 in the US and 3.3 in the UK.

Personal Experiences with Amway

People who have worked as distributors for Amway often caution that while it might be legally considered a legitimate direct-selling business, its business practices are questionable at best. Here’s one example from a Redditor u/katie-kaboom

Others have a much more negative experience, like the Reddit commenter below who describes how much they lost as a seller for Amway.

Former Distributors Call Amway Out

There are countless videos on TikTok and YouTube where previous Amway sellers describe their experiences with the direct-selling company. This former seller describes how she got recruited into Amway and how personal growth and self-help were used to recruit and keep people in the business. She also talks about how she invested time and money that she will never get back.

Is Amway an MLM or Pyramid Scheme?

Legally, Amway is not a pyramid scheme. The best way to explain the difference is that Amway sells actual products and its sellers can make real profits.

However, after going through the process of how Amway conducts business, sells products, and recruits other IBOs, it is safe to say that Amway is an MLM. MLMs typically have the following characteristics:

• Members are encouraged to sell products to other people, especially in their social network. They are also incentivized to recruit more sellers.
• Sellers earn a percentage of the sales made by the people they recruit.
• All participants are compensated at some level.
• The FTC keeps an eye on MLMs to make sure they aren’t pyramid schemes (ideally).

Amway follows the MLM model in the following ways:

• Recruitment emphasis: Amway IBOs recruit new distributors underneath them, and those distributors recruit more to work beneath them. This sales hierarchy is called a downline. In an MLM, the ability of one to make a profit depends largely on the scale and efficacy of their downline.
• Commission structure: IBOs earn passive income from the sales made by their recruits, which is an incentive for them to continue recruiting.
• Direct selling: This is another pillar of MLMs, and the Amway business model involves IBOs selling their products directly to consumers, whether through their own networks or online sites that the company provides.
• Training and support: Amway provides a comprehensive training program just like other MLMs, as well as mentorship opportunities.
• Incentives: Amway provides bonuses based on performance as motivational tools.
• Legal compliance: Like many MLMs, Amway has figured out how to navigate legal systems in order to sell its products around the world.

Is Amway Safe and Legit?

Amway is not a pyramid scheme, but it is an MLM. Does that make it unequivocally bad? Not necessarily, as some people do make money in MLMs, and just as you can find negative testimonials on TikTok and YouTube, you can also find positive ones.

Earnings for Amway distributors are all over the board — and what may seem like little money to some, could be worth it for others. However, even many of the most successful sellers make a fraction of the amount of money that they could make with a regular small business and it is almost never profitable enough to be a viable full-time job.

Here’s what Amway sellers make:

• Average Amway IBO earnings in the US in 2021 were $766.
• 33% of registered IBOs in the US didn’t have any earnings.
• 62% took over a month to receive a commission from Amway.
• The top 1% of Amway earners received $87,901, the top 10% got $14,537, and the top 50% earned $3,414 in 2021.

If we consider that there are 3 million direct sellers with Amway, that means that 30,000 sellers earned $87,901 in 2021. In an MLM model, these are typically the people who started early with the company. They also have dedicated a lot of time and money to building their part of the business.

Responding to the query “The few people who do make tons of money in MLMs, was it because they were just the first ones there?”, one person on Reddit sums up how the people at the top make money with Amway not so much because of the products they sell, but because of the size of their downline, since distributors earn a percentage for every sale from their downline.

However, just because Amway is not a pyramid scheme, doesn’t mean you should quit your day job and spend your savings on purchasing your Amway inventory. Many people lose money in MLMs and find it difficult to leave because of persuasive tactics and debts owed to the people on top.

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