Is Amway a Pyramid Scheme?
There has been a lot of controversy around Amway, some people claim it’s a pyramid scheme, others claim to have found success with it.
In this article, we’ll do our best to answer the question, “Is Amway a Pyramid Scheme?” as well as the possibilities to earn cash with Amway.
Amway Review Summary:
Product Name: The American Way Association or Amway.
Product Type: MLM/Network Marketing.
Creator: Jay Van Andel and Richard DeVos
Price: Registration Kit fee: $69 – one time fee, Plus Starter Kit – $99 – one time fee.
Best For: Those who like direct sales, recruiting new members.
Summary: Like all mlm’s, success with Amway is based on recruiting new members and building a team. Ultimately it’s important to have quality products, but the whole network marketing concept is out-dated and time consuming.
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Check Out Our Amway Video Review:
What is Amway?
The American Way Association, more affectionately known as Amway, began in 1959 and was founded by Jay Van Andel and Richard DeVos.
Amway promotes and sells products in the health, nutrition, beauty and home care niches.
Van Andel and Devos started out promoting a single line of food supplements: Nutrilite.
Once that venture took off, after a somewhat rocky start, they decided that they perhaps needed more products to market.
Aside from the Nutrilite brand, they also sell:
- Energy drinks
- Weight loss products
- Laundry and dish detergents
And various other household supplies and tools.
Amway utilizes the basic multi-level marketing system where people can join to promote the program for some cash.
Amway Compensation Plan:
As with any network marketing company, starting out as an independent business owner for that company means that you’ll be promoting their products directly to the public.
The physical products that Amway has can be sold to your friends, neighbors and relatives.
How much can you make?
The answer to this question is depends on the individual, their marketing skills, how much motivation you experience as a result of small successes, as well as how much “elbow grease” you’re willing and able to muster.
So there’s no set number.
There are two basic ways in which you can earn money with Amway products.
- Selling products for commissions.
- Recruiting new members and building a “Team” to earn team bonuses.
Typically, independent business owners with Amway receive anywhere from a 20% to 30% discount on products when purchasing products for resale.
In short, the idea is to buy from Amway on wholesale, sell full market price, and pocket the small profit.
In other words, you earn a profit as soon as you sell just even one product from your Amway store.
Second Way to Earn Money from Amway:
The second way to make money with Amway is through a sponsorship marketing structure, or MLM payment structure, which has both a width and depth to it.
Unfortunately, understanding the payment and earning structure and model is where many people get confused and often associate Amway with a typical pyramid scheme.
And they good reason for that too. Like many other multi-level marketing programs, Amway encourages you to scale your business by making referrals, and sponsoring other independent business owners.
The idea is to build a team so you can profit from everyone’s commissions and earn bonuses as well.
The company also offers “Performance Bonuses” based on you and your team’s performance. To earn performance bonuses you have to earn Point Volume. The more Point Volume you earn, the higher your commission rate will be.
So the more sales you make, the more money you make.
For example, if you earn between 600 and 999 PV a month, you’ll qualify for a 9% commission rate bracket.
The highest commission rate is only 25%! And that’s after grinding with the program and reaching the minimum monthly sale count on each designated level. Each product in the Amway business model has both a Point Value and a Bonus Value, which combine together to determine your gross performance bonus.
In short, the more people you have in your team and the more your team sells, the more you’ll earn.
Does That Sound Overly Complicated? IT IS.
How Much Does it Cost to Join Amway?
Amway promotes their own business opportunity by claiming that they have a “low startup cost.”
In order to begin your own business with the company, you’ll need to invest in the $67 Amway literature kit at a minimum.
(There’s also a Starter Kit that is recommended for new IBO’s but its not required)
Both these options come with step-by-step guides as well as product and training brochures and other Amway resources to help you get started.
Kits and Prices:
- Registration fee: $69 – one time.
- Starter Kit – $99 – one time.
One of the downsides to the Amway business model includes the myriad of hidden fees that you may incur along the way.
While the initial required startup costs might be low, there are certain necessities that you need to spend money on.
For example, you’ll need a functional website and also other incidental marketing materials, such as your own personal business cards. In addition, the Amway resources designed to help you learn how to grow your independent business all cost money. For instance, one of their recommended resources called Amway Inauguration Bundle, a kit that includes marketing materials, costs $338!
There are also fees associated with attending official Amway meetings and conferences that you’ll need to fit into your marketing budget.
In short, there are quite a few hidden fees that aren’t revealed until you create an account.
Another stumbling block may be the commission levels if you’re not used to running your own business and constantly generating sales of products.
According to Amway’s estimate, you’ll need to generate retail sales of about $2,000 in order to turn a profit of about $500.
That may be difficult for someone who is just getting started to achieve. Additionally, the commissions for beginners (members with low Point Volume/month) is really low!
On the other hand, some people have the talent and skills necessary to promote these businesses and move a lot of product.
The one thing I liked about Amway is there are over 450 products to promote.
There are some very niche products that don’t have a lot of competition and can be sold easily with a little online marketing campaign.
The real shift and jump in income comes from your inner circle of other Amway business owners that you’re able to effectively recruit, train and motivate to run their own businesses. This is the part of Amway’s MLM payment and bonus structure that many people mistake for a pyramid scheme. Of course, the main income will come from recruiting new people and building a team.
In the previous example, you profited about $500 on your own $2,000 of personal Amway product sales.
If you were to recruit, train and assist only four to five other independent business owners that each generated their own $2,000 in sales, your monthly profit would now double to $1,000 or more.
Conclusion: Is Amway a Pyramid Scheme?
While it is not for everyone, Amway is not a pyramid scheme, and there are many skeptics out there. There are ways to make the Amway business model work for you and there are real physical products you can sell.
Refunds are also – in most cases – offered in full within 180 days.
Interestingly, the FTC investigated Amway in 1979 amid the accusations of the organization being nothing but a pyramid scheme.
The FTC ruled that although Amway was not a pyramid scheme but actually a legitimate business opportunity, they found that the organization did tend to exaggerate the claims about how much income you can earn.
Overall, while Amway is a legitimate business opportunity, you are going to need a clear marketing plan. As well as the startup capital and assistance from other Amway business owners if you are going to succeed. The payment structure can also be quite confusing and complicated for most people.
Though Amway is Legit, Doesn’t Mean It’s the Best Choice:
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