Is MLM Amway a pyramid scheme scam? And how much can you earn with them?
Is MLM Amway a pyramid scheme scam? And how much can you earn with them? We investigate the real earning potential of Amway, and find out what it’s like as an Amway rep.
Over the past two years we’ve researched a number of MLMs, and explored whether they are pyramid scheme scams. But there’s one we’ve yet to properly look into, and that’s Amway.
Amway was started in 1959. Today it’s the biggest MLM in the world, earning $8.80billion global revenue in 2017, and is currently #42 in Forbes list of America’s largest privately owned companies.
Amway also has powerful political ties.
The DeVos family who founded the company were good friends with US presidents George W Bush and Gerald Ford, a relationship that appeared to come in very handy when they fell foul of the Federal Trade Commission (FTC), as The Washington Post reported:
“In 1975, when Amway came under a Federal Trade Commission investigation as an alleged pyramid scheme–a charge that was later dropped–and for making misleading promises of riches to prospective distributors, Van Andel and DeVos had a 43-minute Oval Office visit with Ford.”
Amway ‘has donated as much as $200 million to the Republican Party’
The DeVos family are also donors to the Republican Party (the G.O.P.), as Vanity Fair reports: “Since the 1970s, members of the DeVos family had given as much as $200 million to the G.O.P.” Today Betsy DeVos, wife of former Amway CEO Dick DeVos, is the US Secretary of Education.
It’s not just in the US that Amway has managed to gain the support of politicians. In 2015 in the UK, Chris Heaton-Harris, Conservative MP for Daventry, and Nick Boles, then Minister for Skills and Equalities, even shared the ‘wonderful story’ of Amway in a debate in the House of Commons.
Heaton-Harris incredibly, and in our opinion irresponsibly, states on record that “pretty much everyone can succeed in the [MLM] industry if they put their mind to it” – a common MLM lie that their own income disclosure statements prove is not true. Funnily enough, Andy Smith, the general manager of Amway UK and Ireland (and current Director General of the DSA), is a constituent of Heaton-Harris.
So surely a company of this size, with this history, and with this amount of political clout must be vastly different from other MLMs? Amway can’t be a scam, right?
To find out, we investigated the incomes of Amway reps, and the testimonies of former Amway reps. Here’s what we found.
How does Amway work?
As an ‘independent business owner’ (IBO) in Amway, you make money when people buy products through you, from both the mark-up in price and through earning sales bonuses if you hit targets. You can also earn when you recruit people to sell products under you.
Amway makes a wide range of products, including beauty, nutrition, home care and energy and sport products. And, as Amway admits, they’re often more expensive than competitors’ products – as is common with multilevel marketing companies (MLMs), like doTERRA and MONAT.
As The Dream podcast discovered, the reason for this is often the real retail price in MLMs is the cost to the reps, as they’re the real customers. (It’s very common for MLMs like Amway to require reps to purchase a specific value of products themselves each month just to stay active.)
How much CAN you earn with Amway?
So how much can you earn with Amway? To find out let’s take a look at their 2017 income disclosure statement for UK and the Republic of Ireland. (Amway apparently does not produce income disclosure statements for the USA, so sadly we can’t investigate those.)
As of 31 August 2017, it says that Amway had 17,205 registered Retail Consultants. However, of these only 4,735 received a rebate from Amway. This means that 12,470 people – 72.5% – earned nothing.
And of the 27.5% who earned anything, the average monthly payment was just £41.82, giving them an annual income of just £501.84 before deducting expenses.
In the same time period, Amway had 19,669 Certified Retail Consultants. Of these, 62.3% (12,256 people) earned nothing. The average rebate of the 7,413 people who DID earn anything was just £100.43 a month (£1,205.16 a year – again before business expenses are deducted).
At the top of Amway’s pyramid-shaped earnings table are Business Consultants. In 2016-17 they had just 66 of these, and the average income for them was just £2,281 a month, or £27,372 a year.
Only 66 people earned more than £110 a month with Amway
This means that, of the 36,940 people in the UK and the Republic of Ireland who were with Amway in that year, only 66 people earned over £110 a month on average.
Here’s what the earnings were in summary. Of the 39,940 people who were signed up to Amway in 2016-17:
- 66.9% earned nothing.
- 12.8% earned £41.82 a month.
- 20% earned £100.43 a month.
- 0.17% earned £2,281 a month.
(Amway’s 2015-2016 income disclosure statement shows similar results.)
According to tax returns even top Amway reps make a loss
But even if you’re a top Amway rep (and remember, this is just 0.17% of all people who join), you’re still not out of the woods, because you need to deduct your expenses from your income. And when you do that, your ‘profits’ shrink considerably, if not disappear completely.
As research published by the FTC reveals:
“The average net income (after subtracting expenses) for the 200 top Amway distributors in Wisconsin was approximately minus $900.”
So, the top Amway reps in Wisconsin actually made a LOSS on average, based on their tax returns. (This information was taken from state tax returns obtained and used by the Office of Attorney General for the State of Wisconsin in a 1980 suit against Amway.)
The same research found that you were 286 times more likely to win from a single spin of a roulette wheel in Las Vegas than you were to profit as an Amway rep.
So how do you lose money working for Amway?
How is it possible to lose money in the Amway business model? To find out, we read the testimonies of a number of former Amway reps. And it was easy to see how the costs of running an Amway ‘business’ (MLMs say you have your own business, but actually you’re a glorified, unpaid sales rep with zero rights) add up.
One former Amway rep said that they showed the plan (the Amway sales pitch which involves giving potential recruits a kit to take away with them) between seven to 10 times a week, and and each kit they gave out when they showed the plan cost $35. About half of these they never got back. So that’s a loss of between $122.5 and $175 a week.
Annually, this loss alone adds up to between $6,370 and $9,100.
They also said they spent around $125 a month in subscription expenses, and purchased books and CDs to help them succeed. The Finance Guy reveals the pressure to buy these ‘motivational’ subscriptions:
“I was briefly a member of Amway and my sponsor’s upline became very upset when I refused to pay for a monthly subscription to their motivational CDs.”
And then there’s reps’ own required personal purchase of Amway products:
“If an Ambot is CORE and has no downline or no customers, a usual condition for Ambots, and they buy at least 100PV around $300/month in shitty overpriced Amway products then they’ll qualify to make a commission of $10.”
Amway reps ‘are expected to attend expensive events’
The biggest expenses, however, appear to be the events Amway reps were expected to attend. One former rep said that if they didn’t attend events, their Amway upline would withhold mentorship.
And these events weren’t cheap. One ex-rep said that the cheapest function cost 70$ per ticket for an evening, which included dinner. And the most expensive events were weekend trips, which cost around $250 a head for tickets and included breakfast and lunch (you were expected to buy your own dinner).
You also had to pay for your travel and accommodation costs for events. In the US this sometimes ran into thousands of dollars if you needed to fly across the country. (One rep estimated they spent $4-5,000 each for long distance events.)
MLM losses are reframed as ‘investments’
One former rep said their upline demanded they personally use 300pv of Amway products every month – much of which is still stored away in their cupboards, long after leaving.
She also estimated that she and her husband invested at least $50,000 over the three years they were in Amway, not including the cost of traveling to and expenses from their quarterly business trips.
Their income over three years? Just $10,000. That’s a $40,000 loss.
In order to keep reps in an MLM scheme, their uplines often reframe their financial losses as ‘investing’ in their business – dangling the carrot of future financial freedom. And Amway appears to be no different, as one ex-rep reveals:
“Our upline kept telling us that we were making money, we were just reinvesting in our business, like any other business does… Like, we were making a profit, it just didn’t look like it on paper… We lost all our savings, and everything of value we had (we literally sold our belongings to finance our business). It… seemed worth it for the long term goal of financial freedom.”
(This rep said they eventually quit Amway after acquiring significant debt in the pursuit of their ‘business’.)
Is Amway a cult?
So if Amway is apparently so terrible, why do people stay in the business? One thing we’ve noticed in every MLM we’ve investigated, is a cult-like company culture.
MLM reps are actively discouraged from critical thinking. They’re told any question that deviates from the ‘this company is a-mazing’ mentality is negative and are chastised and even isolated if they dare ask.
MLMs also, very much like abusive partners, encourage you to cut from your life anyone close to you (who genuinely has your best interests at heart) who questions your involvement. And any people who leave an MLM are excommunicated; they’re painted as a failure or a terrible person/influence and reps are warned not to contact them.
Often this rejection from people MLM reps had formerly considered virtually family (having been isolated from their real family) is one of the most devastating losses ex-reps experience. It can be incredibly hard to recover from.
And Amway appears to take a similar approach. Here’s what a former rep said about their experience:
“We were encouraged to cut out negative people from our lives, and negative just meant anyone who didn’t support Amway. Just like a cult, they anticipate the negative feedback you will receive and preemptively dismiss it.”
To further embed them in the business, and distance them from their friends and family (again, a typical tactic of an abusive partner), MLMs often expect reps to prioritise their events and business over your personal life. Here’s what a former Amway rep says:
“We were counselled to never go on dates, never go on vacation, never attend family functions… Basically not do anything other than work our Amway business. I know people in the business who missed weddings to attend meetings… I lost all of my childhood friends over it.”
And like other MLMs, the amazing ‘family’ you build when you’re in disappears suddenly when you leave. Here’s what one Amway rep says of their treatment from their mentor, who was like a brother to them when they were in the business:
“I cried when he left us a message talking about how he didn’t realize we were quitters and he just couldn’t put this time into people who weren’t worth it.”
MLMs like Amway can destroy marriages
It’s not just MLM reps’ relationships with family and friends that often come under strain; they can also find themselves having to choose between their spouse and the business.
Which is ironic, given the family-friendly sales spiel MLMs often use.
MLMs frequently lure recruits in with the promises of a more family-friendly way to make money. They’ll ask: “Don’t you want to spend more time at home with your children?” And reps frequently boast about being fortunate enough to work from home when their children are sick on social media.
But the reality is that MLMs are far more likely to destroy family relationships than bolster them, in our experience. Especially when one partner sees the light and decides that they don’t wish to be part of it.
Here’s what one ex-wife says of her experience of being married to an Ambot (an Amway rep):
“That weekend I decide for my own sanity to quit Amway. My husband refuses. He says success is right around the corner. Is he kidding? We signed up two people during two years and that was just after we started. One quit after a few weeks because the shitheads in our upline insulted him and the other couple were friends of ours who only signed up to get us off their backs. They didn’t buy anything and didn’t renew their membership at the end of the year.”
We’re now in the process of getting divorced. He has moved out and is staying with one of the shitheads. The house is up for sale. My parents are helping out with the mortgage until its sold and have got a lawyer for me. My husband is using some idiot in Amway to represent him who has no legal training.
The only thing they’re concerned about is that I don’t get my hands on the Amway business. Half of nothing is still nothing shitheads! Besides I don’t need half the debt! I guess I can forget about alimony or child support because he has nothing. I want custody of our son. He can keep custody of the Amway shitheads.
This is not how I thought my life would turn out. I’m 32 and on my own and have a young son to raise. My beautiful house won’t be mine for much longer. I will have nothing when I get out of this marriage.
All I can say to anyone who gets approached by someone in Amway to sign up and sell their products and recruit others to sell Amway products is don’t do it! Nobody wants to buy the products because they’re too high priced. And no one wants to sign up. Its a waste of time and money.”
How can you spot an Amway pitch?
So how can you avoid being prospected by an Amway rep? The Married to an Ambot blog helpfully shares the FORM conversation that they’re trained to use. So if you find a conversation with someone taking this direction, you could be being warmed up for an MLM sales pitch!
Here’s how FORM works:
- Family – ask about their family and if they have enough time to spend with their family.
- Occupation – ask what they do for a living and if they are looking for a change.
- Recreation – ask what their hobbies are and what they do for fun and would they like more time to be able to do these things.
- Money – ask if they need more money to buy things, get out of debt, or to fund their dreams.
And here’s a copy of the Amway recruitment script.
Amway were taken to court by the British governmemt
In 2008 Amway were taken to court in the UK by the Secretary of State for Business Enterprise & Regulatory Reform. In order to prevent the company from being wound up, they were forced to agree to a series of conditions, including producing annual income disclosure statements.
Is Amway a scam?
So, we return to the question we asked at the outset: is Amway a pyramid scheme scam? According to the Oxford Living Dictionary, the definition of a ‘scam’ is “A dishonest scheme; a fraud.”
We already know that 66.9% of all Amway reps from the UK and Republic of Ireland earned nothing from Amway in 2016-17, and that only 66 people earned more than $110 a month (before business expenses were deducted).
We also know that the 200 top Amway distributors in Wisconsin in circa 1980 made an average annual loss of $900.
Now compare this information to the current recruitment marketing messages on Amway’s UK website:
They also claim that: “Whoever you are, whatever your background, you can find your personal path to success with Amway. It’s easy to be successful if you believe in yourself.”
In our opinion, the marketing claims in these statements are disingenuous and irresponsible. Amway know from their own income disclosure statements that there is no genuine “Great earning potential”. Nor is it “easy to be successful if you believe in yourself”.
If there really was ‘great earning potential’, and it was ‘easy to be successful’, then 66.9% of their reps would not earn nothing. And out of 36,940 reps, more than 66 would make over £110 a month on average (again this is before expenses are deducted).
We’ll leave it to you to decide whether or not you believe this means Amway is a scam.
Is Amway a pyramid scheme?
Start typing “Is Amway…” into Google and its top predicted search request is “Is Amway a pyramid scheme?” If you have read any of our investigations into MLM companies and the industry in general (like this article) then you can probably take a pretty good guess at whether or not we believe Amway is a pyramid scheme! But let’s quickly examine the question anyway.
MLM companies like Amway often defend themselves against the accusation they are a pyramid scheme with the response that illegal pyramid schemes don’t have products, whereas their business actually has products that recruits sell.
Amway themselves defend the question they are a scam with this reply:
“No, Amway is not a scam. We are a direct selling business making and selling products through independent “Amway Business Owners” since 1959.”
However, we believe that the common explanation used by MLMs like Amway is simplistic at best, and at worst deceptive. The key significant difference between a legitimate sales opportunity and a pyramid scheme isn’t simply that there are products involved. Instead, it is this:
- In a pyramid scheme the key earning potential is in recruitment.
- In a legal MLM the key earning potential must be from selling product.
Investopedia defines a pyramid scheme as:
“A pyramid scheme is an illegal investment scam based on a hierarchical setup of network marketing… New recruits make up the base of the pyramid and provide the funding, or so-called returns, in the form of new money outlays to the earlier investors/recruits structured above them in the scheme.”
The same page also attempts to defend MLMs like Amway, saying “multilevel marketing schemes are not classified as pyramid schemes and are not necessarily fraudulent.” However, its own definition of pyramid schemes puts MLMs firmly in that category in our opinion.
Why? Because in every MLM we have investigated, including Amway, it is the money from the people at the bottom of the pyramid, usually the new recruits, that provides the earnings of the people above them – the people who invested in the scheme earlier. And much of this money, we have discovered comes from personal purchases.
Let’s also take a look at how the Federal Trade Commission (FTC) in the US defines says about pyramid schemes and MLMs:
“In multilevel or network marketing, individuals sell products to the public — often by word of mouth and direct sales. Typically, distributors earn commissions, not only for their own sales, but also for sales made by the people they recruit.
“Not all multilevel marketing plans are legitimate. If the money you make is based on your sales to the public, it may be a legitimate multilevel marketing plan. If the money you make is based on the number of people you recruit and your sales to them, it’s probably not. It could be a pyramid scheme. Pyramid schemes are illegal, and the vast majority of participants lose money.”
Notice that the definition doesn’t mention the presence of products. Instead it focuses on where the money comes from. So yes, a pyramid scheme can involve the sale of products. But if the majority of this products aren’t sold to people outside the business then it is, by the FTC’s definition a pyramid scheme.
The problem that many MLMs have is that their products are often overpriced when compared to high street alternatives (when price checking we’ve found MLM products more expensive than superior high street products).
That’s why so many adopt the mantra of ‘be your own best customer’. This way they encourage their own reps to purchase products for personal use – which also often enables them to reach their PV or active requirement, and masks the fact the business isn’t really working for them – in other words they’re not selling to legitimate customers.
And Amway appears to be no different. As this article notes: “As a new IBO, you’ll also be taught to “be your own best customer” by switching all of your current household items to Amway.”
Here’s an excerpt from Amway’s IBO (Independent Business Owner) reference guide connecting the personal purchase of their products with business success:
“Product experience is the best sales tool. When you become familiar with the high quality and surpassed performance of Amway products, you’ll be able to talk about them with confidence, making it easy to sell to customers.”
And while Amway doesn’t appear to have an official minimum sales requirement, anecdotally we have heard from many sources that once you are recruited you are under pressure from your upline to buy from the company to reach certain sales level – because in any MLM, the commission, bonuses and ranks of the people above you are partly dependent on what you sell (or buy).
“Most LOS [line of sponsorship] groups that I know of, use 100 PV as the benchmark when promoting the Amway business. Many groups also teach that you simply “change” your shopping habits and you can easily reach 100 PV.”
And indeed, Amway’s bonus performance scheme starts at 100 PV.
Here’s an example that demonstrates that the bonuses of people higher up the compensation plan depend on the sales (or purchases) of people below them:
So how easy are Amway products to sell? Probably quite hard, even that even Amway admits they are expensive! Here’s how they answer the question “Why are Amway products so expensive?”:
“Because they are made to a higher standard. Product quality, superior ingredients, design excellence and rigorous testing ensure our products are pure, safe, effective, and durable, which can sometimes result in a higher price than our competitor’s products.”
In our opinion, Amway is structured just like other MLMs we have investigated. And the result of its business structure means that the only way to make money from the business is to build a large team. And much of the money you will earn from that team will probably come not from people outside the business choosing to buy Amway products, but from the personal purchases of people in the business, trying to succeed.
And we’re not the only people to conclude this. Here’s what the Finance Guy says of the Amway business opportunity:
“You can not succeed unless you aggressively recruit new members – the only way to be make money in Amway or any MLM, is to have a large number of people beneath you in the system. You will need to approach as many people as possible, and try your luck at recruiting every one of them.”
In our opinion, this makes Amway look a lot like a pyramid scheme, based on the FTC definition.
We recommend avoiding ALL MLMS
Based on our research into several MLMs over the past two years, we believe that none of them offer a profitable business opportunity for the vast majority of people who join.
We have yet to research an MLM we’d ever consider buying from, let alone joining. And we would certainly warn any friends or family who were thinking of joining one to steer well clear.
Luckily, there’s an increasing awareness of how MLMs work. Podcasts like The Dream, as mentioned earlier, and documentaries like Betting on Zero are helping to bring the truth mainstream. And there are a growing number of resources and blogs committed to revealing the truth.
Our personal recommendation is that you don’t join any MLM. Nor do we recommend buying from them, even in sympathy for a friend (many MLM reps use emotional blackmail to force friends and family to buy from them: ‘If you’re a true friend you’ll support my small business’). Because every penny you spend only puts more money in the MLM’s pocket and enables the industry to continue existing.
Read more about MLMs like Amway
If you’d like to learn more about MLMs we have a number of articles on our own website:
- Is it REALLY possible to make money in an MLM? We do the sums
- Are MLMs really pyramid schemes? Why you can’t make money selling their products
- The 10 ugly truths MLMs don’t want you to know
- Fake it ’til you make it – how MLM reps lie to recruit and sell
- Why 80% of participants in an MLM will earn less than 70 cents an hour (before expenses)
- Seven lies an MLM rep will tell you – and the REAL truth you need to know
You can also read more of our income investigations into the following MLMs:
You can also learn more about MLMs on these websites:
- Elle Beau
- The Anti-MLM Coalition
- Timeless Vie
- Anti-MLM Reddit
- The Finance Guy
- Pyramid Scheme Alert
- ‘MLM’ The American Dream Made Nightmare
- Ethan Vanderbuilt
- MLM Lies Exposed
- Americans Against MLMs
As always, our calculations in this article are based on information publicly available online – in this case, Amway’s income disclosure statements. If Amway have further financial information that proves their reps are earning more, we’d be delighted to see it and will happily correct our article.
Photo by Caique Silva