Amway is one of the biggest network marketing companies in the world. They have been around for more than 50 years. If you've heard of Amway, then it's highly likely that at some point, someone has invited you to join their team.
Personally I can remember being recruited on 5 separate occasions. I usually went along and listened because I am interested enough to spend a couple of hours hearing why people think Amway is a good idea. I even joined once for a short time. Fortunately I did not stay long enough to lose a substantial sum of money, and I managed to avoid letting my up line recruit members of my friends and family.
This is a follow on from our recent post Can You Make Money With MLM, which was a generic overview of the network marketing industry. Now we will focus on Amway my time as an IBO gave me some interesting insights, which I will include in this streetonomic review of the business opportunity of Amway.
How Do You Make Money With Amway
Rather than explain it ourselves, here’s a short video explaining the Amway IBO opportunity
According to Amway Answers, Amway Business Owners (ABO’s), can make money in multiple ways.
- They can sell product for retail product
- They can recruit others to become ABO’s in their downline
- They can earn incentives through growing their Amway organisation
What Do Others Have to Say About Amway?
Our primary research tool is the internet. There is no shortage of webpages related to Amway. Most of the 'reviews' are actually attempts to recruit you into a home business. After some sifting, we thought we'd share some of the more useful source information and give you our take on it
This post is from Should I join that which focuses on providing 'Honest Reviews On Internet Marketing Stuff'. It either confirmed our suspicions or agreed with our opinions. This post is a good starting point if you have just been recruited and want a quick overview of how Amway works. The information we liked included:
Being in Amway Costs Money
If you want to be an 'active IBO' with Amway, then you need to meet your monthly minimum spend. As expected some distributors buy product they don't actually want for the sole purpose of remaining active. Some of them are now using things they never knew they wanted, others are building a stockpile of unused Amway product.
You Have to Know How to Sell and Very Few Distributors Turn a Profit
Despite what anyone in Amway tries to tell you, running your own Amway business is a sales job. You can not succeed if you don't have the sales skill to promote the products to consumers and the system to new distributors.
Motivational Materials Play play a Significant Part
Amway has a huge collection of 'success stories'. These are recordings by people who have made it big in Amway. They explain how Amway changed their lives and set them on the path to financial freedom. 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.
While I was being recruited, my sponsor loaned me some of his CDs so I got to listen to some of them. I got my friend in a lot of trouble when he told his upline that I had converted the CDs to MP3 so I could listen to them on my IPod (these were the years between IPods and smartphones).
At the time I didn’t understand what the big deal was. I thought if it’s promotional material, then they should be happy that I’m going to the effort. However they were very upset that we might try and give away the recordings for free. This gave me the impression that the Amway motivational material is a money maker for the upline, not a promotional tool.
I'm sure that the success stories I heard were all true. The problem is that they build an unrealistic expectation of what is possible. People hear these rags to riches tales and think 'hey that could be me'. Unfortunately very few of them will ever make any money at all. Even fewer will achieve financial freedom from Amway Joining Amway is extremely easy, making a profit in Amway is extremely difficult.
This post is from Botstwana based Consumer Watchdog. This post looks at the numbers because as they say the numbers don't lie. This post is from May 2014, they looked at the income disclosure statement for Amway in UK. The numbers tell a familiar story:
Most IBOs Make Very Little Money in Amway
In 2013 IBOs, people who qualified to be Business Consultants in the UK earned an average annual income of GBP21,048. This falls short of the UK average annual income of GBP 26,500. It is however substantially better than those Amway IBOs who were not business consultants, as their average income for 2013 was less than GBP 1,300 .We are not surprised, Amway has not made the 2013 Income Disclosure Statement publicly available on their website. However we did manage to find a copy
Remember Income is not profit. Even if an IBO earned $21,048 in commission for 2013, this figure does not include expenses. Promoting your Amway ’business’ will cost time and money. Remaining active is not cheap. Our own analysis of the numbers estimated that after expenses the average Amway IBO lost $1,176 per year. Our calculations used data provided by Amway USA in 2010
This is from a blog called Mikes Ramblings, this post takes a detailed look at Amway. Reading this confirmed for us that:
Amway Does Not Remove the Middle Man
A common myth with all network marketing companies, is that members are buying products at wholesale prices. It is true that Amway does not use supermarkets or traditional marketing and advertising methods. IBOs are buying directly from Amway, but they are not paying wholesale prices
If you buy product from Amway, then part of the price you pay, goes toward paying commission to people above you in the network. In our previous post, we estimated that this represented at least 25% of the price of Amway products. This post estimates that distributor mark up makes up 28% of the price.
Amway gives you the opportunity to become a middle man, but it does not remove them. Network marketing redirects the cost of marketing and distribution through it's members. Rather than pay a supermarket and advertising company, they will pay you, if you can promote their products.
Amway is Not a Source of Passive Income
Another big myth being spread by Amway promoters, is that it's a source of passive income. It's a business for Rich Dads, once you've got it up an running, you can relax and reap the ongoing rewards. This is at best a misconception, and at worst an outright lie. Amway requires ongoing work, and can not be done in just a few hours a week.
In one of my more recent encounters with Amway, I was asked by a friend to meet his sponsor after work at a coffee shop. Eventually the presentation got to the part where he told me that Amway would 'let me earn passive income, and give me both financial and time freedom to do whatever it is I want with my time' . At this point I decided to point out a few flaws in his logic
I asked him when he thought he'd reach the stage of ‘passive income’, himself. After all he was spending a Wednesday evening trying to sell the system to me, plus he was still working a normal job. Surely being home with his wife and kids would be a better use of his Wednesday evening.
I explained that according to Robert Kiyosaki, his income was not passive. He had not yet moved Amway into the ‘Rich Dad’ business owner quadrant. At best, he was in the self employed quadrant. He didn't have a boss and he could work his own hours, but his income was not passive. In the case of this meeting, and I'm sure many others, he put in hours of work for absolutely no income.
Small note of caution
Making reference to Rich Dads, and cash flow quadrants, may cause Amway distributors to become agitated. No matter how hard you try and explain to them that they are working, and their income is not passive, they've already been conditioned to believe their version of these things.
Is Amway an Illegal Pyramid Scam
While all MLMs closely resemble illegal pyramid schemes, they are in fact legal. The reason dates back to a 1979 FTC ruling vs Amway. Amway was charged with being an illegal pyramid scheme, but after 4 years in the court system, they managed to survive.
The FTC case did find that ‘Amway had made false and misleading earnings claims when recruiting new distributors’. The FTC found that Amway differed from Pyramid scams because they did not charge a large joining fee. The case also found that Amway did not promote inventory loading, which would leave distributors with a stockpile of product which could not be returned.
The FTC case did have some rulings against Amway. For example, distributors were banned from making false claims about their profits. Amway was also required to make certain disclosures available to distributors.
In our opinion, one of the most significant outcomes of this case was the ‘70% rule’. This rule legally requires distributors to consume or sell 70% of their product before they are allowed to place a new order. This ruling was designed to prevent hyper-consumption and stock piling. In other words, they didn’t want people to spend money on products they couldn’t use or sell
The most notable result of this case, was that Amway made some changes to their paperwork. If you read the fine print, there will be rules against making false income claims. There will also be something about a requirement to cancel future orders if you’re still holding 30% of your previous order.
Sadly the changes have mostly amounted to words on paper. When it is found that false income claims are made, they’ll claim ‘it was a rogue distributor’. If people are found to have put themselves in debt, they’ll claim, ‘we can’t monitor whether or not IBOs are in fact making retail sales’. It may be possible to return goods, but that doesn’t mean that it’s easy.
It’s true that it is possible to join Amway (or any MLM) for only a small ‘joining fee’. However the joining fee will probably not be your only upfront cost. If you decide to join, it’s more than likely that people in your upline, will encourage you to also spend a significant amount on product. They may even call it a ‘starter kit’. They may hype it up as a way to get you going and to help you learn about the product. In reality, they want you to spend money so they can earn commission.
Our Final Say
It is possible to make money in Amway, but it's very difficult and requires a lot of work. Before you sign up to become an IBO, bare in mind:
Very few people generate a profit - only 0.3% of MLM members will turn a profit. In the early years, it is unlikely that you will make any real money from Amway. You might earn a commission cheque or two, but chances are your income will be less than your expenses
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.
Amway is a job - Amway is not an investment for passive income, it's an opportunity to have your own business. Building your business will take time, and in the early years it is unlikely that you will see any profits. In fact until you have a large team it is more likely you will lose money with Amway
As always, we'd love to hear from you, please share your comments and feedback in the section below
For more posts like this, look at our list of mlm reviews.